Stocks are under pressure this Thursday as global crude prices jump and Google’s parent company, Alphabet, announces a big increase in its spending plans.
Alphabet beat Wall Street’s earnings forecasts, reporting revenue just under $120 billion. However, the company said it plans to spend $205 billion on capital expenses in 2026, more than twice last year’s amount. This big jump in spending has renewed worries among investors about how quickly AI investments will pay off, especially as tech companies spend more than ever before.
Alphabet shares, with a market value over $4.1 trillion, are expected to open lower. Tesla, another large tech company, is also set to drop after reporting its first negative free cash flow in more than two years.
Global oil prices have also jumped, reaching over $98 a barrel for the first time since early June after Houthi rebels in Yemen attacked Saudi ships in the Red Sea. Crude oil is up 36% since the start of the month. This has raised worries about inflation, increased the chances of a Federal Reserve rate hike in September to about 80%, and pushed Treasury yields to their highest levels in years.
With more Big Tech earnings reports coming next week, a Federal Reserve rate decision ahead, and new July inflation data on the way, the stock market outlook for late summer is becoming more uncertain.
