Wall Street Drops Sharply as Google's Alphabet Drags Down Stocks

NEW YORK – U.S. stocks tumbled on Thursday, deepening a week-long sell-off as a confluence of troubling economic signals and a spending shock from tech giant Alphabet unnerved investors. The broad-based decline saw major indices slide more than 1%, while bond yields sank and volatile assets like cryptocurrencies and precious metals extended their recent rout.

The market is now grappling with a complex narrative: while many companies are reporting stronger-than-expected profits, forward-looking indicators from the labor market to corporate spending forecasts are flashing warning signs, fueling fears of a potential economic slowdown.

Market Snapshot: A Sea of Red

The S&P 500 fell 1.2%, marking its sixth losing session in the seven days since it notched a record high. The Dow Jones Industrial Average shed 606 points, a 1.2% drop, while the tech-heavy Nasdaq Composite bore the brunt of the selling, falling 1.5% by mid-morning trade.

• The Trigger: The negative sentiment was ignited by a combination of factors, including discouraging U.S. jobs data, hawkish spending plans from a market heavyweight, and a general risk-off mood that rippled across global markets.

Alphabet's Spending Spree Spooks Investors

Google's parent company, Alphabet, emerged as the single heaviest weight on the S&P 500, with its shares plunging 4.3%. The drop came despite the company reporting quarterly profits that surpassed Wall Street's expectations.

The source of investor anxiety was not its past performance, but its future plans.

• Capital Expenditure Shock: Alphabet announced its capital expenditures on equipment and infrastructure could nearly double this year to approximately $180 billion (€152 billion). This figure dramatically overshot analyst consensus estimates, which stood below $119 billion (€100.5 billion), according to data from FactSet.
• Why It Matters: While investment in growth, particularly in the artificial intelligence arms race, is expected, the sheer scale of the planned spending raised concerns about shrinking profit margins and a more disciplined approach to capital allocation.

Labor Market Cracks Appear

Adding significant pressure to the market were several government and private reports suggesting the resilient U.S. job market may be losing steam.

A report on weekly unemployment claims showed a larger-than-expected jump in Americans applying for benefits, hinting at an accelerated pace of layoffs. While some economists cautioned this could be a temporary blip, other data painted a more worrying picture.

• Layoff Announcements Surge: Outplacement firm Challenger, Gray & Christmas reported that U.S. employers announced 108,435 planned job cuts last month. This represents the highest monthly total since October and the worst January for layoffs since the financial crisis in 2009.
• Job Openings Decline: A separate government report revealed that the number of available jobs fell in December to its lowest level in more than five years, indicating a slowdown in hiring demand from employers.

Bond Yields Retreat on Fed Speculation

The signs of weakness in the labor market sent investors flocking to the relative safety of government bonds, causing yields to fall.

The moves reflect a growing belief that a cooling economy could compel the Federal Reserve to pivot toward interest rate cuts sooner than anticipated to provide support.

• Treasury Movement: The yield on the benchmark 10-year Treasury note, a key indicator for mortgage rates and other borrowing costs, sank to 4.21% from 4.29% late Wednesday. Lower yields signal higher demand for bonds and heightened economic concern.

Volatility Grips Commodities and Crypto

The risk-off sentiment was even more pronounced in speculative and safe-haven assets, which have been on a wild ride.

Bitcoin, often touted as "digital gold," continued its sharp descent, falling below $68,000 (€57,432). The cryptocurrency is now down significantly from its record high above $124,000 (€104,730) set last October. The slide hammered stocks tied to the industry.

• Crypto-Related Stocks: Crypto exchange Coinbase Global dropped 8.3%, while MicroStrategy, a software company that has built a massive corporate treasury of bitcoin, tumbled 11.9%.
• Precious Metals Plunge: After a period of supercharged gains, silver prices cratered 13.3%. Gold also fell 2.3% to $4,838.80 (€4,087.50) an ounce, continuing a volatile pattern that saw it swing from near $5,600 to below $4,500 in the span of a week.

Earnings Season: A Mixed Bag

Even strong earnings reports failed to insulate some companies from the market's pessimistic mood.

• Qualcomm Falters: The chipmaker fell 7.2% despite beating profit and revenue estimates. Its forecast for the current quarter disappointed investors, citing an industry-wide memory chip shortage that is causing some handset makers to reduce orders.
• Estee Lauder Sinks: The cosmetics giant plunged 21.2%. While it topped Wall Street targets and raised its full-year forecast, it warned that tariff-related issues are expected to erase about $100 million (€84.5 million) in profits.
• AI-Fueled Winners: Bucking the trend were companies positioned to benefit from the AI infrastructure buildout. Chipmaker Broadcom rose 3.7%, providing a rare bright spot.
• Healthcare Shines: McKesson was the top performer in the S&P 500, jumping 16.8% after the healthcare distribution giant reported robust earnings and raised its full-year profit guidance.

The Global Outlook

The selling pressure was not confined to the U.S. European and Asian markets also closed lower. London's FTSE 100 fell 0.9% after the Bank of England held rates steady, a move mirrored by the European Central Bank, which sent France's CAC 40 and Germany's DAX down 0.7% and 0.9%, respectively. In Asia, South Korea’s Kospi tumbled 3.9% from its all-time high, dragged down by a 6% drop in Samsung Electronics.

What's Next

Investors are now caught in a tug-of-war between solid, backward-looking corporate profits and a deteriorating, forward-looking macroeconomic picture. The market's path forward will likely be determined by whether the AI-driven spending boom can outweigh growing fears of a broader economic slowdown. All eyes will now turn to upcoming inflation data and any subsequent commentary from Federal Reserve officials for clues on the future path of interest rates.