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Stocks fell on Thursday, dragged by Alphabet's lackluster earnings. Getty Images

Stocks fell on Thursday, breaking a three-day winning streak and dragged by Alphabet, which recorded its worst post-earning slump since going public more than 20 years ago after dropping more than 12%.

The Dow Jones Industrial Average fell 0.29%, while the S&P 500 did so 0.32%. The tech-heavy Nasdaq Composite, where Alphabet has a larger representation, plummeted 1.40%.

Alphabet wiped out some $500 billion in market value after reporting a larger negative free cash flow than analysts had expected. The figure stood at $9.07 billion for the third quarters, much higher than the $2.70 billion expected by analysts. The company kept its capital expenditures guidance for the next year unchanged: between $195 billion and $205 billion.

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The company is facing challenges from the rise of AI companies like OpenAI and Anthropic as their models take their queries outside Google. Gemini, the company's chatbot, has not been keeping up with ChatGPT and Claude.

Philipp Schindler, Alphabet's chief business officer, said the company's search business has been taking hits from lower monetization within the AI mode. He went on to say that Alphabet is "scaling" ads within the AI overviews and AI Mode products.

Elsewhere, odds of a rate hike by the Federal Reserve in December decreased slightly on Thursday after September's inflation rate was in line with expectations and the GDP grew at a robust pace, but still remains elevated.

Chances of a hike stood at 79.6% on Thursday, according to the CME Group's FedWatch tool. That stands in contrast with 84.2% from Wednesday, before the latest figures were released.

The personal consumption expenditures price index climbed a seasonally adjusted 0.5% last month. The annual rate stood at 3.6%, slightly below the Dow Jones consensus but well above the Federal Reserve's 2% goal.

The core PCE index, which excludes food an energy, gained 0.3% for the month and 3.1% for the year, in line with the consensus.

In the geopolitical area, Vice President JD Vance sent a letter to the Iranian leadership emphasizing that any path towards a new deal must include "discussions on the nuclear issue."

The letter in question was sent to top Iranian military leader Mohsen Rezaei, who has a direct line to Supreme Leader Mojtaba Khamenei. "The President was enthusiastic about the letter," a U.S. official told Axios.

The development comes after another report noted that Iranian leaders will take a proposal detailing nuclear concessions to the U.S. in exchange for sanctions relief to avoid a return to a full-fledged war to Khamenei.

However, at the same time Trump received a rare in-person briefing on military options for Iran, according to The Wall Street Journal. The president has repeatedly floated the possibility of returning to full-fledged hostilities after the midterm elections.