Markets
Nasdaq Slides at Midday as Alphabet Heads for Worst Day Ever While Small Caps Rally
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Software and AI-linked names lead declines after earnings, while the Russell 2000 gains and Treasury yields ease from 5%.
By Emma Cruz ·
Technology shares weighed on Wall Street through the middle of Thursday's session, as a steep drop in Alphabet after its quarterly results revived concerns about the cost of the artificial intelligence buildout, while smaller companies moved higher.
Shortly after noon ET, the Nasdaq Composite was down 1.2% at 26,238.73, the S&P 500 had slipped 0.3% to 7,724.15 and the Dow Jones Industrial Average was off 0.3% at 52,346.15 [1]. The small-cap Russell 2000 bucked the trend, rising 1.1% to 2,862.31 [1]. Losses were deeper at the open, when the Nasdaq fell 1.4% and the S&P 500 dropped 0.5% [1].
Alphabet was the session's biggest drag. The Google parent's shares were down about 13% by late morning, putting the stock on track for its worst day on record and erasing close to $500 billion in market value [1]. The company's third-quarter revenue and profit missed expectations, growth in core search advertising slowed sharply and free cash flow was negative [2]. Microsoft, which reported at the same time on Wednesday, had a more mixed reception: it beat earnings forecasts and posted 48% growth in its Azure cloud business, but its shares had turned lower by midday after rising earlier in the morning [1][2].
The reaction captured a shift in how investors are treating heavy AI spending. Capital.com analyst Daniela Hathorn said "markets are no longer rewarding companies simply for investing heavily in AI" [2].
Software stocks were hit especially hard. ServiceNow fell 25% after its earnings report, and Fortinet dropped 21% after lowering its forecast for service revenue, helping push the iShares Expanded Tech-Software ETF down about 4% [1]. Caterpillar fell as much as 12% before paring losses, leaving the machinery maker nearly 40% below its June peak [1]. Marvell Technology slid 11% on reports of a possible deal involving Lumentum, whose shares rose 5% [1].
Some names moved the other way. Carvana jumped 15% after reporting record quarterly revenue, and Eli Lilly gained 4% [1]. DoorDash rose more than 5% in premarket trading after agreeing to acquire Instacart for $17 billion [1].
The morning's economic data gave investors a mixed picture. The Bureau of Economic Analysis said real gross domestic product grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second quarter [3]. Separately, the personal consumption expenditures price index rose 3.6% in September from a year earlier, up from 3.4% in August, while the core measure that excludes food and energy rose 3.1% [1].
In other markets, the 10-year Treasury yield eased to about 4.997%, down roughly 5 basis points, and December West Texas Intermediate crude fell about 2% to $100.78 a barrel around midday [1]. The moves come a day after the Federal Reserve held its benchmark rate in a 3.75% to 4.00% range [2], with two officials dissenting in favor of an increase [1].
What to watch next: Amazon is scheduled to report results after the close [2], adding another test of investor appetite for AI-related capital spending. Traders will also be watching whether the rotation into small caps holds as long as the largest technology stocks stay under pressure, and whether Treasury yields remain near the 5% level after the hotter September inflation reading.
Sources:
[1] Yahoo Finance, "Stock market today: Dow, S&P 500, Nasdaq fall as Alphabet stock sell-off drags on tech, AI jitters return", October 29, 2026. https://finance.yahoo.com/markets/live/stock-market-today-thursday-october-29-dow-sp-500-nasdaq-alphabet-microsoft-earnings-130305714.html
[2] TheStreet via Yahoo Finance, "Stock Market Today (Oct. 29, 2026): S&P 500 falls on Alphabet earnings miss", October 29, 2026. https://finance.yahoo.com/markets/stocks/articles/stock-market-today-oct-29-134623155.html
[3] U.S. Bureau of Economic Analysis, "GDP (Advance Estimate), 3rd Quarter 2026", October 29, 2026. https://www.bea.gov/news/2026/gdp-advance-estimate-3rd-quarter-2026
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.