Nasdaq Drops as AI Earnings, Oil Surge and Middle East Tensions Weigh on Wall Street

U.S. stocks ended mixed on Wednesday as investors turned cautious ahead of key earnings from major technology companies while rising oil prices and escalating tensions in the Middle East added to inflation concerns.

The Nasdaq Composite led losses, falling 0.57% to 25,690.90 as weakness in several technology stocks offset gains in semiconductor shares. The S&P 500 slipped 0.14% to 7,498.96, while the Dow Jones Industrial Average finished nearly flat, edging down just 6.06 points to 52,218.58.

Market attention centered on second-quarter earnings from Alphabet and Tesla, the first members of the "Magnificent Seven" to report results. Investors are looking for signs that massive artificial intelligence investments are translating into stronger financial performance. Alphabet shares fell 1.5% before earnings, while Tesla closed down 1.3% and dropped another 3% in after-hours trading after reporting negative free cash flow for the first time in more than two years.

Technology stocks continued to show mixed performance. The Philadelphia Semiconductor Index rose 0.4%, extending its recovery after recent losses. Server maker Super Micro Computer surged 19.8% after announcing more than $60 billion in fourth-quarter orders, lifting peers Dell Technologies, which gained 9.3%, and Hewlett Packard Enterprise, up 3%.

Oil prices also remained a major market driver. Crude futures climbed roughly 3% to their highest settlement since June 11 after Yemen's Iran-backed Houthi militia threatened shipping in the Red Sea. Additional geopolitical risks emerged after U.S. President Donald Trump warned that the United States would target Iranian infrastructure if Iran attacked ships in the Strait of Hormuz, fueling concerns that higher energy prices could keep inflation elevated.

Meanwhile, investors continue to monitor the Federal Reserve's policy outlook. Economists expect the Fed to leave interest rates unchanged through the remainder of 2026, while CME FedWatch data indicates markets see about a 66% probability of no rate change at next week's meeting.

Elsewhere, AT&T gained 3.5% after stronger-than-expected wireless subscriber growth, while Philip Morris International rose 3.3% on better-than-expected quarterly earnings. Overall market breadth remained weak, with declining stocks outnumbering advancers on both the NYSE and Nasdaq despite relatively light trading volume.