Alphabet Shows AI Striking Against Core Ad Revenue; GDP Up 3.4% in 3rd Quarter; PCE Index Hits 3.6%, Fueling Inflation and Rate Hike Expectations

With the Federal Reserve's FOMC deciding to keep the federal funds target interest rate at 3.75-4.00% on Wednesday, stocks traders took the non-event in stride, with stocks barely budging from levels seen before the 2:00 pm ET announcement.

With the market turning in another in a series of lackluster sessions, the real excitement of the day was reserved for after the close, when two Mag7 heavyweights - Alphabet and Microsoft - released third quarter results.

The results could not have been more starkly different.

Alphabet (GOOGL), parent company of Google, saw its stock slip more than 11% in post-market trading after the company missed targets on its key advertising segment as use of AI began to eat away at search and ad revenue. The reaction swift and pointed. Google's Adsense and Adwords products form the basis for the company's revenue and AI - promoted by Google itself - threatens to kill the golden-egg-laying goose.

Microsoft (MSFT) reported fiscal first-quarter revenue of $92.28 billion, up 19% year over year, beating Wall Street’s $90.62 billion consensus. Adjusted earnings reached $4.89 per share, excluding gains from OpenAI investments, compared with expectations of $4.71, according to Microsoft’s earnings release. Revenue from Azure, the company's AI tool, grew 48% year-over-year, surpassing estimates. Shares of Microsoft are up by 1-2% in pre-market trading.

As the opening bell for Thursday's session approached, the BEA released its first estimate of third quarter GDP, posting an increase of 3.4%, topping consensus estimates for 3.2%. Second quarter GDP was revised higher, from 1.5% to 2.2%. The numbers confirm the general economy is strong and gaining momentum, led by consumer spending and business investment and inventories.

While the GDP numbers are generally positive, the market saw it in a different way. a fast-paced economy is being interpreted as giving the Fed further rationale to hike rates at the December 7-8 FOMC meeting, just six weeks ahead. Google's results also shook the tech sector, sending NASDAQ futures down close to 400 points. With less than an hour to the opening bell, Dow futures are off 140 points and S&P futures are down 32.

Other companies reporting Wednesday after the close included:
Carvana (CVNA) - despite an EPS miss, a beat on revenue has shares higher by 9%
FedEx (FDX) - EPS miss, revenue beat, stock down 1%
T-Mobile (TMUS) - top and bottom beats, stock up 3%
Chipolte Mexican Grill (CMG) - EPS miss, revenue beat, shares higher by 8%

Thursday, before the open:
Caterpillar (CAT) - Dow component beat top and bottom, but tariff costs and rising inventories are sending shares down 12%
Carrier (CARR) - EPS, revenue beats, poor outlook, shares down 7%
Eli Lilly (LLY) - solid EPS, revenue beats, shares 4% higher
L3 Harris (LHX) - EPS, revenue beats, stock flat
Vulcan Materials (VMC) - EPS baat, revenue miss, stock down 2%

After the close Thursday, Amazon (AMZN), Intel (INTC), Reddit (RDDT), Twillo (TWLO), Rivian (RIVN), Starbucks (SBUX), Sandisk (SNDK), and Roblox (RBLX) will report third quarter results.

Rounding out the pre-market headlines, the PCE Index rose 0.5% for the month, pulling the price index up 3.6% year-over-year, adding more fuel to the growing inflation fire.

All indications are that Thursday is going to be a very bumpy, volatile session, with sentiment turning downright negative on AI spending, inflation, and the dual wars in Ukraine and Iran. This is not the narrative the Republican party envisaged.

At the Close, Wednesday, October 28, 2026:
Dow: 52,475.10, +97.53 (+0.19%)
NASDAQ: 26,549.85, +72.04 (+0.27%)
S&P 500: 7,743.98, +21.38 (+0.28%)
NYSE Composite: 24,261.28, +50.60 (+0.21%)