Key Highlights

● Tesla and Amazon dragged the consumer discretionary sector lower in Thursday's AI selloff.

● Tesla cut its 2026 capital spending plan to about $20 billion from over $25 billion.

● Pool Corp. was the S&P 500's top gainer after beating third-quarter earnings estimates.

● Consumer staples had their best day since April 2025 and closed at a record.

Consumer discretionary stocks slipped on Thursday, October 22, dragged lower by Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN), two of the sector's biggest members in the S&P 500.

The sector was one of five S&P 500 sectors to finish lower, according to market data. The S&P 500 fell 93.74 points to 7,663.43, its worst day since July, and the Nasdaq Composite sank 694 points to 26,008.86.

Tesla's mixed quarter

Tesla fell to $374.58 after reporting third-quarter results on Wednesday evening. Adjusted earnings of $0.48 a share topped estimates, but revenue of $28.05 billion was flat from a year earlier. Net income dropped to $787 million.

The company cut its 2026 capital spending plan to about $20 billion from more than $25 billion, but said it plans heavier spending in 2027 and 2028 on Optimus robots, the Cybercab and its Terafab project. Elon Musk said Optimus could ship to external customers by the end of 2027.

The stock was weaker before the bell, trading around $365.77, then recovered some ground during the session before closing lower. Several analysts raised price targets: one firm upgraded Tesla to Hold from Underperform with a $400 target, and another lifted its target to $475 from $450 with an Overweight rating.

Amazon caught in the AI crossfire

Amazon tumbled to $250.38, making it one of the three worst performers in the Dow Jones Industrial Average. The stock was swept up in the selloff after Meta Platforms (NASDAQ:META) reported 2026 capital spending of $135 billion to $145 billion and negative free cash flow, raising questions about how much the largest tech companies are spending on AI infrastructure.

Amazon reports its own results next week. "Investors are starting to realize that there are some holes in the AI story," one strategist said.

Bright spots within the sector

Beneath the two giants, the sector showed plenty of strength. Pool Corp. (NASDAQ:POOL) soared to $197.21 and was the top gainer in the S&P 500 after third-quarter adjusted earnings of $3.40 a share beat estimates and it reiterated annual guidance.

Homebuilders, which sit in the consumer discretionary sector, rallied as Treasury yields slid. Lennar (NYSE:LEN) was trading at $84.45 after jumping, and PulteGroup (NYSE:PHM) climbed despite missing revenue estimates. Home Depot (NYSE:HD) jumped to $327.73.

Ulta Beauty (NASDAQ:ULTA) rose to $635.01, and Kohl's (NYSE:KSS) soared to $24.78 after a brokerage upgraded it to Buy from Hold with a $27 target, citing holiday-season optimism.

Not all reports were warmly received. Las Vegas Sands (NYSE:LVS) missed estimates in Macau and Singapore. After the closing bell, Deckers Outdoor (NYSE:DECK) slid in after-hours trading on a revenue miss of $1.48 billion against $1.51 billion expected and full-year guidance below consensus.

Defensive tilt

The weakness in discretionary contrasted with strength in consumer staples, which posted their best day since April 2025 and a record high. Investors appeared to favor companies selling everyday essentials over those reliant on discretionary spending, as oil climbed to a five-month high with Brent at $113.17.

Amazon's Results and Tesla's SpaceX Talks

Amazon reports third-quarter results on October 29, and investors will look closely at its spending plans and cloud growth. The University of Michigan's final consumer sentiment reading arrives on Friday, October 23.

Investors will also watch for any follow-up on Tesla's spending plans and the special committees Musk said Tesla and SpaceX have formed to discuss a possible combination.