U.S. equities ended Thursday’s session essentially unchanged, but beneath the surface, market internals told a more cautious story. The S&P 500 slipped 0.07% to 7,718.05, while the Nasdaq Composite managed a marginal 0.04% gain to 26,374.92. The Dow Jones Industrial Average underperformed, falling 0.71% to 53,961.45.
Despite the index-level stability, breadth was firmly negative. Declining issues outnumbered advancers by a 1.46-to-1 ratio on the NYSE and 1.35-to-1 on the Nasdaq, with roughly 59% of NYSE-listed stocks and 57% of Nasdaq stocks closing lower. The number of 52-week highs on the Nasdaq stood at 119, compared to 34 lows, a narrower margin than recent sessions.
The divergence between headline indices and underlying weakness was most pronounced in the technology sector, where four major names—AppLovin (NASDAQ:APP), Datadog (NASDAQ:DDOG), Western Digital (NASDAQ:WDC), and Sandisk (NASDAQ:SNDK)—reported earnings that beat on the top line but disappointed on forward guidance. Their shares fell an average of 12.5% on Thursday, erasing roughly $68 billion in combined market value.
AppLovin tumbled over 18% despite a 53% revenue surge to $1.924 billion, as the figure came in below Wall Street’s forecast. Datadog slipped about 17% after its full-year sales outlook of $4.45–$4.47 billion missed the $4.69 billion analysts expected, even as revenue climbed 36% to $1.12 billion. Western Digital dropped nearly 11% after its guidance topped consensus but fell short of elevated market hopes, while Sandisk lost more than 4% despite preliminary quarterly revenue jumping 51% sequentially to $8.97 billion.
“Investors are rewarding strong results only when accompanied by equally strong forward outlooks,” said Divya Mathur, portfolio manager at ClearBridge Investments. “The market is reacting more sharply to the trajectory than to the absolute numbers.” This sentiment was echoed in a spate of downgrades: Wells Fargo cut AppLovin to Equal Weight, Piper Sandler lowered its rating on the stock, and Summit Insights reduced Western Digital to Hold. HubSpot (NYSE:HUBS) and Capital One (NYSE:COF) also saw analyst actions, reflecting a broader reassessment of growth sustainability.
Despite the Thursday pullback, August has started on a strong note. The S&P 500 is up 3.05% since July 31, the Nasdaq has gained 3.95%, and the Dow has risen 2.81%. Corporate earnings remain robust—about 85% of S&P 500 companies have reported, with profit growth at its fastest pace since 2021—but the market’s reaction suggests investors are increasingly focused on what lies ahead rather than past performance.
Economic data released Thursday provided some support. Productivity rose at a 1.4% annual rate in the second quarter, well above the 0.6% expected, while unit labor costs increased just 1.3%, below the 2.1% forecast. These figures are favorable for corporate margins and could bolster the case for sustained earnings growth.
Oil prices climbed, with U.S. crude up 2.75% to $77.29 and Brent advancing 3.65% to $82.35, as geopolitical tensions in the Middle East remained in focus. The yield on 10-year Treasury notes hovered near 4.67%. Investors now look ahead to Friday’s July payrolls report, with economists forecasting 80,000 new jobs and an unemployment rate of 4.2%. Next week brings the CPI and PPI inflation readings, which will provide further clues on the Federal Reserve’s policy path.
The key risk is that a stronger-than-expected jobs number could push yields higher, pressuring high-valuation growth stocks. Conversely, a weak print might reignite recession fears. With oil prices rising and earnings guidance under scrutiny, the market’s near-term direction remains uncertain. Thursday’s action underscores that even in a strong earnings season, the bar for forward-looking performance is high.
