October 29, 2026: Fresh concerns over the returns from artificial intelligence weighed on US markets as Alphabet’s latest earnings raised questions about the profitability of its AI investments, while persistent inflation and stronger economic growth complicated the outlook for interest rates.
Nasdaq-100 futures fell after Alphabet, Google’s parent company, reported weaker-than-expected revenue from its core search business. The shortfall highlighted a growing challenge for technology companies: AI-powered search is changing how users access information, but the new format may not generate the same advertising revenue as conventional search. Alphabet also spent more cash than investors had anticipated, adding to concerns about the cost of competing in the AI market. Its shares declined sharply before the opening bell.
The market reaction reflects a shift in investor priorities. After pouring money into AI infrastructure and products, major technology companies are under increasing pressure to demonstrate that the spending can translate into sustained revenue and profits. Any sign that AI is disrupting established business models faster than companies can monetise new services risks putting further pressure on valuations.
Oil markets moved in the opposite direction, with Brent crude falling below $111 a barrel as hopes of a diplomatic breakthrough in the Persian Gulf eased some concerns about supply disruptions. Reports that US Vice President JD Vance had written to a senior Iranian hard-liner in an effort to revive peace talks added to expectations that tensions could de-escalate. However, the prospect of negotiations does not remove the risk of renewed disruption to energy supplies, leaving prices vulnerable to developments in the region.
Alphabet Earnings Rattle Markets as Oil Slips Below $111 a Barrel
Economic data offered little reassurance on inflation. The latest reading of the Federal Reserve’s preferred inflation measure showed that price pressures remained elevated, while gross domestic product figures pointed to a US economy that gained momentum over the summer. The combination presents a difficult policy challenge for the central bank: stronger growth supports economic activity, but persistent inflation limits its room to reduce borrowing costs.
For financial markets, the data complicate expectations for the timing and pace of future interest-rate cuts. If inflation remains stubborn while economic growth holds up, the Fed may have less reason to ease policy quickly. That prospect could keep bond yields elevated and increase pressure on growth-oriented technology stocks, whose valuations are particularly sensitive to borrowing costs and expectations of future earnings.
In Europe, the European Central Bank faced a separate challenge after President Christine Lagarde announced plans to leave the role before the end of her term, setting the stage for a succession contest. The timing adds uncertainty as the central bank deals with turbulence in France’s bond market and higher energy prices, both of which could influence inflation and financing conditions across the eurozone.
The ECB kept interest rates unchanged, leaving investors focused on Lagarde’s comments for clues about the outlook for monetary policy. Markets will be looking for indications of how policymakers assess the impact of energy costs, financial-market volatility and the broader economic outlook.
The day’s developments point to a market increasingly sensitive to the relationship between growth, inflation and corporate returns. AI remains a major investment theme, but Alphabet’s results show that investors are paying closer attention to the economics behind the technology. At the same time, resilient US growth and persistent inflation are keeping monetary policy uncertain, while geopolitical risks continue to shape energy prices. Together, these forces leave markets exposed to sharp swings as investors reassess both earnings prospects and the path of interest rates.
