Two of the three main equity indexes opened lower on Wednesday as escalation of the war in the Middle East cast a “risk-off” pall on markets. Investors, traders and speculators eased back into “risk-on” names as the trading session evolved, with focus on the first two Magnificent 7 revelations of the earnings season. Midday momentum ebbed, though, and all three indexes closed lower.
“From this point forward,” President Donald Trump posted on Truth Social before the opening bell, “any time the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz, whether it be by Missile, Rocket, Drone, or any other device or weapon, the United States will bomb and destroy ONE BRIDGE OR POWER PLANT, including those located next to, or in, the Capital City of Tehran.”
The front-month West Texas Intermediate crude oil futures contract was up another 2.8% to $86.66 per barrel. WTI has risen 29.3% since hitting an intraday “ceasefire” low of $67.04 on July 2. Crude oil closed at $67.02 on February 27, the day before the war in the Middle East began.
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The 2-year Treasury yield hit another new 52-week high on the way to closing at 4.304% vs 4.261% on Tuesday, and the 10-year yield was up to 4.659% from 4.628%. As Bloomberg calculates, the 30-year yield, which ticked up to 5.149% from 5.131%, has now been above 5% for more days in 2026 than in any other year since 2007.
Technology opened lower a day after a big bounce led by semiconductor stocks including Micron Technology (MU, -1.2%) and SK Hynix (SKHY, -3.9%) before rallying through midday. At the same time, Nvidia (NVDA, +2.3%) posted the biggest gain among Dow Jones stocks.
By the closing bell, the tech-heavy Nasdaq Composite was down 0.6% at 25,690, the broad-based S&P 500 was off 0.1% at 7,498, and the blue-chip Dow Jones Industrial Average had ceded six points, or 0.01%, to 52,218.
“This volatility is due primarily due to rising interest rates driven by the escalating conflict in Iran and rising energy prices,” writes Louis Navellier of Navellier & Associates.
What you need to know about Alphabet earnings
Alphabet (GOOGL, -1.5%), which replaced Verizon Communications (VZ, +1.1%) in the Dow on June 29, posted earnings for the first time as a member of the 30-stock index after today’s closing bell.
Electric vehicle maker Tesla (TSLA, -1.3%) and the Google parent are the first two of the Magnificent 7 stocks to report this season.
The big number to track here is second-quarter capital expenditures. Alphabet said it would spend $180 billion to $190 billion this year to build out its artificial intelligence (AI) infrastructure.
According to FactSet, Wall Street forecast capex of $45.1 billion for the three months through June 30, an estimated increase of 101.3% from the $22.4 billion Alphabet laid out a year ago, and a full-year run rate of $180.4 billion.
How GOOGL is trading right now is probably a function of where its second-quarter capex came in relative to its guidance and Wall Street’s estimate, as well as whether management has revised its outlook.
Constellation has the power
Energy stocks, including Chevron (CVX, +1.0%) and Exxon Mobil (XOM, +1.8%), were boosted again by crude oil’s rise. CVX was up 12.9% and XOM 10.7% from July 2 through July 21 vs a gain of 0.4% for the S&P 500.
The vertically integrated supermajors, with upstream, midstream and downstream exposure, will update the market on how the energy shock is affecting their operations before the opening bell next Friday, July 31.
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Utility stocks, well positioned to serve power-hungry hyperscalers but also relatively stable vs AI stocks, were tops among the 11 market sectors recognized by S&P Global Market Intelligence.
Constellation Energy (CEG, +4.8%), as Morgan Stanley analyst David Arcaro noted when he picked up coverage of the sector leader in March, is also getting a lift from the biggest carbon-free nuclear generation capacity in the U.S.
Indeed, Constellation’s 21 reactors across 12 facilities in Illinois, New York, Pennsylvania, Maryland, New Jersey and Texas can power a lot of data centers.
Arcaro recently reiterated his Overweight (Buy) rating on CEG and raised his 12-month target price from $364 to $366. Constellation Energy is scheduled to release its second-quarter earnings report on Thursday, August 6.
Meanwhile, according to The Wall Street Journal, President Trump has approved a 30-year agreement to provide Saudi Arabia with a civilian nuclear power program “estimated to be worth tens of billions of dollars.”