Oil Rebound and Earnings Misses Pull Stocks Lower

U.S. stocks closed lower Thursday as a sharp rebound in oil revived inflation concerns and a wave of disappointing corporate forecasts pushed investors out of software, storage and aerospace shares ahead of Friday’s employment report.

The Dow Jones Industrial Average fell 464.02 points, or 0.85%, to 53,885.10. The S&P 500 declined 13.52 points, or 0.18%, to 7,710.03, while the Nasdaq Composite slipped 15.09 points, or 0.06%, to 26,348.35. The Dow’s decline ended a five-session advance, while the S&P 500 and Nasdaq recovered most of their earlier losses before the closing bell.

The broad indexes moved only modestly, but the damage beneath the surface was much heavier.

Declining stocks outnumbered advancing shares by 1.57 to 1 on the New York Stock Exchange and 1.38 to 1 on Nasdaq. Trading volume reached 17.09 billion shares, slightly below the 20-session average. The S&P 500 registered 29 new 52-week highs and four new lows, while Nasdaq recorded 131 new highs and 82 new lows.

Oil became the day’s dominant macroeconomic driver after Iran’s Fars news agency reported that a parliamentary committee was reviewing a preliminary bill that would bar American, Israeli and other designated “hostile” vessels from using the Strait of Hormuz.

West Texas Intermediate crude settled 2.75% higher at $77.29 a barrel, while Brent rose 3.83% to $82.49. The move reversed part of the sharp decline earlier in the week, when investors had begun pricing in progress toward an agreement that could improve shipping through the strait.

Higher oil prices matter beyond energy markets. They raise transportation and manufacturing costs, reduce household spending power and can keep inflation elevated long enough to delay relief in interest rates.

The bond market reflected that concern. The yield on the 10-year Treasury rose roughly five basis points to 4.67%, while the dollar strengthened against major currencies. Rising yields increased pressure on highly valued growth stocks and reinforced expectations that the Federal Reserve may keep monetary policy tight unless inflation and employment data weaken.

Earnings Punish Software and Storage Stocks

AppLovin plunged 19.7% after quarterly revenue missed Wall Street expectations. Datadog fell 19% after the cloud-monitoring company projected slower third-quarter revenue growth.

Both companies remained profitable and continued expanding, but investors treated any deceleration as unacceptable after the large valuation gains across software and artificial-intelligence-related stocks. Together, AppLovin and Datadog were among the biggest individual drags on the S&P 500.

Western Digital dropped 13%, while Sandisk lost 6.8%, after their forecasts failed to match the expectations embedded in their share prices. The declines came despite extraordinary year-to-date gains of roughly 160% for Western Digital and more than 400% for Sandisk.

The reaction showed how difficult the earnings environment has become for AI-linked suppliers. Strong current results are no longer sufficient when investors have already priced in years of exceptional growth.

Honeywell Aerospace Weighs on the Dow

Honeywell Aerospace suffered one of the market’s steepest declines after cutting its annual sales forecast and issuing profit guidance below analyst expectations.

The newly independent aerospace company now expects 2026 organic sales growth of 4% to 5%, down from its previous forecast of 7% to 9%. It projected adjusted earnings of $7.60 to $7.90 a share, well below the $8.86 analysts expected.

Supply shortages have forced Honeywell Aerospace to prioritize deliveries to Boeing and Airbus over its higher-margin aftermarket business. Shares fell more than 20% after dropping as much as 26% during the session.

The decline carried unusual weight because aerospace companies have benefited from strong airline demand and large aircraft backlogs. Honeywell’s warning showed that supply-chain constraints can still overwhelm favorable industry conditions.

SpaceX Defies Lockup Concerns

SpaceX rose 6.1%, reversing early losses as the expiration of its first post-IPO lockup period failed to trigger the wave of insider selling some investors had feared.

The expiration made hundreds of millions of shares held by early investors and employees eligible for sale. Instead of collapsing under the additional supply, the stock attracted buyers following its sharp post-earnings decline earlier in the week.

The rebound did not resolve investor concerns about SpaceX’s enormous capital requirements, but it suggested that demand for the shares remained strong even as more stock became available.

Earnings Remain Strong Overall

The day’s severe individual declines contrasted with a broadly successful earnings season.

Of the 382 S&P 500 companies that had reported through Wednesday morning, 84.8% exceeded analyst profit expectations, according to LSEG. That was well above the long-term average of 68%.

The market’s weakness therefore did not reflect a broad collapse in corporate profitability. Investors were instead distinguishing sharply between companies that raised expectations and those that warned of slower growth, weaker margins or execution problems.

Labor Data Keeps Friday’s Jobs Report in Focus

Initial unemployment claims increased only slightly last week, while announced layoffs fell to their lowest level in two years.

The figures suggested that the labor market remained stable, but they did little to resolve the larger question facing the Federal Reserve: whether hiring is slowing enough to offset inflation pressure from energy prices and higher business costs.

Friday’s July employment report is therefore positioned to determine the market’s next major move.

A stronger-than-expected payroll number could lift Treasury yields and increase expectations for another rate increase. A weak report could push yields lower but also raise concerns that economic growth is losing momentum.

For businesses, the most favorable outcome would be moderate hiring, contained wage growth and no renewed oil shock. Thursday’s market showed how quickly that balance can be disrupted.

— JBizNews Desk | Wall Street

Jooish