The Standard & Poor's 500 index declined 0.5% this week, closing at 7,623.68, as investors reacted to elevated capital expenditures tied to artificial intelligence initiatives. The drop was concentrated in the communication services sector, which fell 6.2%, while the broader market remains up 11% for the year despite a 0.4% loss for October.
Corporate earnings reports have intensified concerns about the cost of maintaining AI infrastructure. Meta Platforms Inc. (META) reported third-quarter results that exceeded expectations but raised the lower bound of its 2026 capital expenditure guidance. This move contributed to a 9.4% weekly decline in the stock, as investors weighed the financial impact of increasing AI-related spending.
Tesla Inc. (TSLA) also posted better-than-expected third-quarter earnings, yet Truist Securities noted in a client report that elevated operating expenses for AI projects "dragged meaningfully" on the company's operating profit margin. The telecommunications sector faced similar pressure, with AT&T Inc. (T) falling 11% for the week. Although AT&T raised its full-year earnings outlook following strong third-quarter results, its postpaid phone subscriber growth missed projections.
Industrials were the second-largest decliner among S&P 500 sectors, dropping 1.9%. Comfort Systems USA Inc. (FIX) led the sector and the overall index downward with a 19% decline. The company reported third-quarter earnings and revenue above year-earlier figures and analyst estimates, but the stock fell after it announced plans for Chief Financial Officer Bill George to retire.
Gains were limited to energy and health care, which rose 1.55% and 1.45%, respectively. Real estate, utilities, financials, consumer discretionary, and consumer staples also posted modest increases. The energy sector advanced as crude futures climbed amid geopolitical tensions. SLB Corp. (SLB) was the top performer in energy, gaining 7.2% after reporting third-quarter results that beat expectations. A surge in North American revenue and growth in its data center business helped offset weakness in Middle East operations.
In health care, Intuitive Surgical Inc. (ISRG) rose 6%. The company reported third-quarter adjusted earnings and revenue above analyst consensus views but adjusted its global da Vinci procedure growth target range for 2026. Additionally, Intuitive Surgical recorded a $450 million settlement charge that outweighed its third-quarter earnings beat.
Next week's earnings calendar includes releases from Verizon Communications Inc., Visa Inc., Coca-Cola Co., Boeing Co., Alphabet Inc., Microsoft Corp., GE Vernova Inc., Amazon.com Inc., Eli Lilly and Co., Mastercard Inc., Intel Corp., Merck & Co., Caterpillar Inc., ExxonMobil Corp., Chevron Corp., and AbbVie Inc. Economic data releases will feature September personal consumption expenditures and the advance estimate of third-quarter gross domestic product. The Federal Reserve's Federal Open Market Committee will hold a two-day meeting concluding Wednesday.