Key Highlights

● The Dow, S&P 500 and Nasdaq all fell on October 29 after three straight gains.

● Alphabet's miss and negative free Cash Flow revived worries over mounting AI costs.

● Over 400 S&P 500 members still rose, so the pullback looked shallow.

● Volume of 17.05 billion shares matched the 20-day average, with the VIX near 17.20.

After three straight days of gains, the Dow, the S&P 500 and the Nasdaq all retreated on Thursday, as a historic plunge in Alphabet (NASDAQ:GOOGL) and a fresh round of AI-cost worries interrupted the rally.

The streak snaps

The winning run is over, at least for now. On Thursday, October 29, the large-cap benchmarks posted their first decline in four sessions, according to media reports. The Dow lost 132.54 points to close at 52,342.56, the S&P 500 slipped 23.59 points to 7,720.39, and the Nasdaq Composite sank 365.13 points to 26,184.72.

The run-up had been meaningful. A week earlier, on October 23, the Dow had closed at 52,215.16, the S&P 500 at 7,623.68 and the Nasdaq at 25,955.34, according to market data. Even after Thursday's drop, all three remained above those levels.

One report broke the rhythm

The streak's end can be traced to Wednesday evening, when Alphabet's third-quarter numbers landed. The company missed on revenue, at $127.58 billion versus $128.22 billion expected, and on adjusted EPS, at $2.67 versus $3.02, and it reported negative free cash flow of $9.07 billion as it poured money into AI infrastructure. The shares closed Thursday at $283.82, their worst day since the company went public in 2004.

One report said the results "reignited concerns over mounting AI costs," and those concerns quickly reached enterprise software, where ServiceNow (NYSE:NOW) and Fortinet (NASDAQ:FTNT) were already tumbling on their own disappointing outlooks.

A busy week for macro news

The pause also came in the middle of an unusually crowded calendar. On Wednesday, the Federal Reserve under Chair Kevin Warsh held interest rates steady in a 10 to 2 vote, with two officials dissenting in favor of a hike. Then at 8:30 a.m. ET Thursday, data showed the economy grew faster than expected in the third quarter while September's PCE Inflation gauge ran hot.

That combination kept bets on a December rate hike alive. One Wealth adviser said, "Today's data strengthens the case for another rate increase in December."

A shallow pullback, not a rout

For all the drama around Alphabet, the S&P 500 and Dow losses were modest, and the rest of the market was buoyant. More than 400 S&P 500 members rose, eight of 11 sectors gained and the Russell 2000 jumped 28.71 points to 2,859.22. Health care, real estate, consumer staples and utilities led.

There was no sign of an all-time closing high in any of the three big benchmarks on Thursday, but the S&P 500 still logged 19 new 52-week highs among its members against just six new lows.

Why streaks matter

Winning streaks often end on a single bad headline, and traders watch what happens next to gauge whether a rally has real staying power. A one-day dip on modest volume, which is what Thursday delivered, tends to look different from a sustained reversal. Volume of 17.05 billion shares was almost exactly the 20-day average. The Cboe Volatility Index, Wall Street's fear gauge, ticked up only slightly to around 17.20, according to a market data snapshot, hardly the reading of a market in distress.

What to watch

The next two sessions will show whether Thursday was a speed bump or a turning point. Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) both slid in after-hours trading on their results, and Nasdaq-100 and S&P 500 futures fell in extended trading while Dow futures edged up. Friday's Employment Cost index and Chevron (NYSE:CVX) and AbbVie (NYSE:ABBV) Earnings close out October, and the midterm elections arrive on November 3.