Business Report: Alphabet Sinks as GDP Hits 3.4%, Oct. 29, 2026

This business report for October 29, 2026 covers a Thursday when the U.S. economy turned in its strongest quarter in a year, inflation picked up again, and Wall Street punished Big Tech for spending heavily on artificial intelligence. Alphabet had the worst session in its history, Eli Lilly lifted health care stocks to a record, and Amazon and Intel slid after the closing bell.

The Economy: 3.4% Growth Meets Hotter Inflation

The Commerce Department said gross domestic product grew at a seasonally adjusted annual pace of 3.4% in the third quarter, ahead of the 3.1% economists expected and up from 2.2% in the spring, CNBC reported. Business investment did the heavy lifting. Gross private domestic investment jumped 19.4%, led by a 20.9% surge in equipment spending tied to the AI build-out, while consumer spending grew 3.8% for a second straight quarter.

The same release showed prices moving the wrong way. The personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, rose 0.5% in September, its biggest monthly gain since March, putting the annual rate at 3.6%. Core PCE, which strips out food and energy, ran at 3.1% over the year. Energy was the main culprit: gasoline and other energy goods climbed 9.2% in the month. Weekly jobless claims fell to 194,000, a level CNBC said was near lows last seen in the late 1960s.

The numbers land one day after the Fed held its benchmark rate at 3.75% to 4%, a decision we covered in our report on Chair Kevin Warsh’s case for holding rates. Across the Atlantic, the European Central Bank also stood pat, keeping its deposit rate at 2.5% even as euro-zone inflation reached 3.8%, its highest since September 2023, according to CNBC. Money markets priced a 67% chance of an ECB hike in December.

By the Numbers: What the Data Shows

Put in context, the third quarter was a sharp rebound. Growth of 3.4% was 1.2 percentage points faster than the second quarter’s 2.2%, and it was the strongest reading since the third quarter of 2025, when the economy grew 3.9%, according to Bureau of Economic Analysis data. Over the last 11 quarters, growth has swung from as low as 0.1% to as high as 4.0%.

Inflation tells a less comfortable story. By The Boston Report’s calculation from the BEA price index, the 12-month PCE rate has risen by roughly nine-tenths of a percentage point from a year earlier, when it ran near 2.8%. It climbed above 3% in March 2026, peaked near 3.8% in May, eased over the summer and turned back up in September. It has now been above the Fed’s 2% goal for every month shown.

Markets: Big Tech Sinks as Health Care Hits a Record

The major U.S. indexes all finished lower, according to CNBC’s market coverage. The S&P 500 fell 0.3% to 7,720.39, ending a three-day winning streak. The Nasdaq Composite dropped 1.38% to 26,184.72, and the Dow Jones Industrial Average lost 132.54 points, or 0.25%, to 52,342.56. Treasury yields fell after the morning data.

The damage was concentrated in a few giant stocks. Alphabet plunged about 13%, erasing roughly $500 billion in market value and topping its previous worst day, an 11.63% drop in March 2020, CNBC reported. The Google parent posted negative free cash flow of $9.07 billion for the quarter, far deeper than the $2.7 billion analysts expected, a shortfall we broke down in our Alphabet earnings analysis. Communication services, Alphabet’s sector, fell more than 6%. Caterpillar slid more than 9%, its worst day since March 2020, and software maker ServiceNow had its worst day ever, losing 27%.

Beneath the surface, most of the market rose. Seven of the 11 S&P 500 sectors gained, with real estate up 2.1% and health care up 1.9% after the health care group hit an all-time high early in the session. Eli Lilly gained about 8% after raising its 2026 revenue forecast to $91 billion to $92 billion, from $85 billion to $87 billion, on demand for its Zepbound and Mounjaro drugs. Merck rose 4.5% after topping estimates. The small-cap Russell 2000 was up about 1% in afternoon trading, on pace for a third straight gain.

After the Bell: Amazon and Intel Slide

Two more tech reports hit late in the day. Amazon fell more than 7% in extended trading after third-quarter earnings of $1.89 a share and revenue of $201.94 billion both missed estimates, CNBC reported. Its cloud unit, Amazon Web Services, was a bright spot, with sales up 39% to $45.98 billion. But heavy AI spending pushed trailing 12-month free cash flow to an outflow of $42.4 billion, and the company held its 2026 capital spending plan at $220 billion.

Intel sank about 16% after forecasting fourth-quarter revenue of $15 billion to $16 billion, well short of the $17.1 billion analysts expected, CNBC reported. Data center and AI revenue jumped 78% to $7.3 billion, but PC chip sales fell 5%. “We see the PC slowdown continuing at least through the first half of next year,” finance chief David Zinsner said in the company’s release.

The Boston Angle: Chip Supplier and Biotech Report Records

Two Massachusetts companies posted strong quarters on the same day. Billerica-based Entegris, which supplies materials to chipmakers, reported record quarterly sales of $1.006 billion, up about 25% from a year earlier, as detailed in our Entegris earnings story. In Cambridge, Alnylam Pharmaceuticals said product sales rose 52% to $1.29 billion, powered by its heart drug Amvuttra, according to our Alnylam report.

The Bigger Picture: An Older Affordability Problem

Strong growth figures don’t settle the cost-of-living debate, argues Robert Kuttner in The American Prospect. Kuttner writes that White House economic adviser Kevin Hassett called the affordability crisis “a myth” on Fox News, and he counters that housing, health care, college and child care have outrun paychecks for years. He cites the Urban Institute’s affordability tracker, which found that since 2017 average earnings grew about 43% while home sale prices rose 81% and rents 54%. His central point is that these pressures predate the current administration and will outlast any single election, which puts September’s energy-driven price jump in a longer frame.

Sources

• CNBC: Third-quarter U.S. GDP increases a better-than-expected 3.4% as September inflation accelerates
• CNBC: Stock market live updates, Oct. 29, 2026
• CNBC: Alphabet tanks nearly 13% for worst day ever
• CNBC: Amazon posts negative free cash flow of $42.4 billion
• CNBC: Intel stock plunges as chipmaker blames PC slowdown
• CNBC: ServiceNow shares plunge 27% to worst day ever
• CNBC: European Central Bank keeps key interest rate on hold at 2.5%
• The American Prospect: The Deeper Affordability Crisis (Robert Kuttner)
• U.S. Bureau of Economic Analysis via FRED: Real GDP, percent change
• U.S. Bureau of Economic Analysis via FRED: PCE price index