Inflation Fears Hit Stocks Early Ahead of Alphabet

Published as of: July 22, 2026, 9:09 a.m. ET

(Wednesday market open) Today's post-game show looks action-packed thanks to late breaking results from Alphabet (GOOGL) and Tesla (TSLA). There's plenty to keep viewers alert now, however, as major indexes stumbled thanks to crude's relentless rise. Another night of strikes in the Middle East, new dangers to shipping, and signs of hesitation about resuming talks sent global crude prices to one-month highs above $94 per barrel. Treasury yields neared 2026 peaks and rate hike odds edged up on inflation fears.

While peace hopes remain hazy, investors could have a clearer sense by this afternoon on Alphabet's commitment to AI spending in coming quarters. Rosy capital expenditure guidance from the search giant could cast a warm glow on the chip sector, which sizzled early this week ahead of earnings from Alphabet and other hyperscalers before faltering early today. As mega caps report, investors also want evidence that AI spending sprees are paying off.

Major indexes climbed yesterday despite rising crude and yields, helped by solid earnings. Tech led by a mile. "Investor sentiment around chips and the AI infrastructure cohort became too pessimistic, or stretched to the downside," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR), speaking Tuesday. "It seems dip buyers are looking to get in before the first hyperscaler reports, since increased CapEx guidance could be a potential catalyst. The rebound in this cohort appears to be lifting market-wide sentiment."

1. Metrics to check for Alphabet and Tesla: Analysts expect Alphabet's second quarter earnings per share to climb 25% from a year ago to $2.89 on revenue of $116.9 billion, up 21% annually, according to estimates collected by Schwab. As for guidance, when Alphabet last reported in April, the company raised its 2026 capital expenditure estimate to as much as $190 billion and said it expects to significantly increase that in 2027. Any changes up or down would likely get a close look. So will second quarter capital spending, which analysts peg near $45 billion. Another metric is growth in Alphabet's cloud business. In the first quarter, Google Cloud revenue topped expectations by nearly $2 billion, rising 63% annually and contributing to Alphabet's overall top line beat. Investors likely want a repeat, though that may be harder over time. Checking Tesla, earnings arrive after it reported better-than-expected second quarter deliveries. In the first quarter, Tesla's overall revenue missed analysts' expectations, so another miss might raise eyebrows. Analysts see revenue up 14% to $25.7 billion. Gross automotive margin and spending are in focus.
    
2. Earnings reactions could be unpredictable: "Whisper numbers" from market participants often reverberate around Wall Street prior to results from the largest firms. These numbers—not widely available to the average investor—often are more optimistic than the "sell side" estimates from Wall Street analysts and relate not only to results but to company guidance. So even if Alphabet and Tesla surpass analysts' projections and raise their outlooks, it might not be enough to satisfy the market. That was often the case during first quarter earnings from mega-caps. The trouble for the average investor is understanding what whispers might be saying, since there's no official "whisper" estimate. That partly explains why traders expect large possible swings in either direction for the Magnificent Seven and companies like Intel (INTC) when they report, and why volatility could rebound. Despite earnings beats yesterday morning from nearly all the large companies reporting, shares of those firms mainly declined early in the session. Other names to watch this afternoon include ServiceNow (NOW) and IBM (IBM).
    
3. Government shutdown can't be ruled out: Though mid-summer heat baked the U.S. over the weekend, it's not too early to ponder autumn, when Capitol Hill and the government budget process are often on the front burner. "There may be a House vote to pre-emptively avoid a government shutdown this fall," said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. "With the government funding deadline looming on September 30 and Congress having made little headway on the annual funding bills, the House may try to pass a bill to temporarily fund government operations until after the November election." Other bills that may or may not go through before the House breaks for summer recess at the end of this week include $70 billion in defense spending to help pay for the war in Iran and legislation banning members of Congress and their families from trading individual stocks. There's no guarantee any of these will pass, and even if they do, they still need to get through the Senate.

• Super Micro Computer (SMCI) surged 12% early after it said late Tuesday it expects gross margins to nearly double thanks to a favorable customer and product mix. This was even as the company said coming quarterly revenue would be at the low end of the prior guidance range, Briefing.com noted.
   
• GE Vernova (GEV) tumbled 3.6% after the company missed consensus on earnings per share. Revenues topped analysts' estimates, however, and the company raised its fiscal 2026 revenue guidance and free cash flow. Tariffs are raising costs for GEV, Reuters reported.
   
• AT&T (T) climbed 4% early as earnings per share topped consensus and revenues came in as expected. The company reaffirmed annual guidance.
   
• Chip and AI infrastructure stocks sagged early today after the PHLX Semiconductor Index (SOX) rose 5% Tuesday, its best day in more than a month, including SK Hynix (SKHY), down nearly 7%, and Micron (MU), down 4%.
   
• Advanced Micro Devices (AMD) fell almost 3% despite a Wall Street Journal report that it's signed a major chips deal with Anthropic.
   
• Rocket Lab (RKLB) climbed nearly 3% early after being awarded a $266 million Space Force launch contract.
   
• Danaher (DHR) fell 11% Tuesday despite beating earnings expectations and raising guidance. Softness apparently stemmed from a narrower fiscal 2026 core revenue outlook and a more conservative bioprocessing view, Briefing.com noted.
   
• Nebius (NBIS) surged 19% Tuesday after Nvidia (NVDA) increased its stake.
   
• Crypto-related stocks fell today after rising Tuesday as Treasury Secretary Scott Bessent told Fox News the Clarity Act is making progress. The bill would establish a more precise regulatory framework for digitally traded assets.
   
• Defensive and rate-sensitive sectors including real estate, utilities, and staples slumped Tuesday in response to rising Treasury yields, which compete for investor demand with dividends.
   
• Technically, it looked constructive Tuesday that the S&P 500 Index clawed back above what had been technical support until recently at the 50-day moving average near 7,469.
   
• Chances of a rate hike at the Federal Reserve's meeting a week from today rose to 28% from just 11% a week ago, according to the CME FedWatch Tool. Odds of at least one hike by year-end are 87%.

AI ROI eyed: As "hyperscalers" report starting with Alphabet today, investors turn their focus to return on investment from AI, looking for signs all the spending is paying off with revenue growth, user adoption, or other measurable returns, Schwab reports in its tech earnings preview.

U.S. crude oil futures (/CL—candlesticks) are marching back up, rising 26% from the low below $70 earlier this month and approaching the 50-day moving average (blue line). This doesn't appear to be of concern for the PHLX Semiconductor Index (SOX—purple line), which popped 5% yesterday even as crude gained. As this three-month chart shows, the SOX performed quite well back in the April through June period when crude oil was priced higher than today.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

July 23: ECB rate decision and expected earnings from RTX (RTX), T-Mobile (TMUS), Thermo Fisher Scientific (TMO), Union Pacific (UNP), Blackstone (BX), Lockheed Martin (LMT), Freeport McMoRan (FCX), Comcast (CMCSA), Honeywell (HON), Intel (INTC), SAP (SAP), and Newmont (NEM).
July 24: June new home sales and expected earnings from American Express (AXP), NextEra Energy (NEE), Verizon Communications (VZ), and HCA Healthcare (HCA).
July 27: June durable orders, and expected earnings from Nucor (NUE).
July 28: June consumer confidence and expected earnings from Coca-Cola (KO), Boeing (BA), Corning (GLW), United Parcel Service (UPS), Sherwin-Williams (SHW), Illinois Tool Works (ITW), Royal Caribbean Cruises (RCL), Visa (V), Seagate (STX), Waste Management (WM), Mondelez (MDLZ), Ford (F), and Teradyne (TER).
July 29: Expected earnings from Procter & Gamble (PG), Vertiv (VRT), General Dynamics (GD), Aon (AON), Microsoft (MSFT), Meta Platforms (META), Lam Research (LRCX), Arm Holdings (ARM), Qualcomm (QCOM), and Starbucks (SBUX).