Alphabet Plunge Drags U.S. Stocks to Four-Day Losing Streak

Alphabet shares fell 13.4% on Thursday morning, tracking toward the company's worst single-day decline on record. The drop pulled the broader U.S. equity market lower as investors weighed the implications of the tech giant's latest financial results.

The S&P 500 index declined 0.6%, putting it on pace for its first loss in four sessions. The Dow Jones Industrial Average dropped 209 points, or 0.4%, at 9:35 a.m. Eastern time. The Nasdaq composite fell 1.9% during the same period.

Alphabet reported weaker growth for the summer quarter than analysts had projected. The company disclosed late Wednesday that it burned through more cash during the period, a metric known as free cash flow. Capital expenditures for property and equipment exceeded $51 billion, fueling concerns about the return on its massive artificial intelligence investments.

Market analysts noted that Alphabet faces pressure to meet growth expectations while managing high AI spending costs. The stock's influence on Wall Street is amplified by its status as one of the largest companies in the S&P 500.

Other corporate earnings provided some support to the market. KLA Corp., a semiconductor equipment maker, saw its shares rise 4.1% after posting stronger summer profits than expected. Eli Lilly stock climbed 7.2%, and eBay shares gained 3.3% on similar results.

DoorDash shares increased 4.2% after the company announced an agreement to acquire Instacart for $65 per share. This move followed a separate report where DoorDash's quarterly profit and revenue figures missed analyst forecasts.

In the bond market, Treasury yields eased following mixed economic data. The yield on the 10-year Treasury fell to 4.95% from 5.05% late Wednesday, reversing gains made earlier in the week. This shift occurred after traders interpreted Federal Reserve signals as potential cues that interest rate hikes might slow to control inflation.

Economic indicators showed a mixed picture, with preliminary data suggesting summer economic growth accelerated due to consumer spending and AI business investments. However, September income growth for Americans came in weaker than projected, and one inflation measure worsened. Fewer U.S. workers filed for unemployment benefits last week, suggesting a slowdown in layoffs.

International markets reacted to the shifting sentiment. European indexes rose after Asian markets finished mixed. South Korea's Kospi index fell 1.2%, dragged down by a 4.1% drop in Samsung Electronics shares. The decline occurred despite Samsung reporting a substantial jump in profits.

The volatility in Alphabet's stock reflects broader industry worries. Investors remain concerned that the rapid construction of data centers and purchase of AI chips may not generate sufficient profits or productivity to justify the capital outlay. Rising borrowing costs further pressure future spending plans for AI infrastructure.