U.S. stocks rebounded sharply on Thursday, July 30, led by a 17% surge in Microsoft shares after the tech giant reported stronger-than-expected cloud growth and steady capital expenditures, easing investor anxieties surrounding heavy artificial intelligence spending.
Microsoft Leads Wall Street Rebound as AI Spending Fears Eased
A monster day for Microsoft’s stock powered a robust recovery across major U.S. indexes, helping the market claw back losses from the prior session’s sharp sell-off. The S&P 500 gained 1.44% to close at 7,421.41, recovering more than its drop from the day before, which marked its worst single-session decline in seven weeks. The Dow Jones Industrial Average climbed to 52,127.62, or 1.03%. Meanwhile, the technology-heavy Nasdaq composite jumped 2.55% to 25,065.84, rebounding after falling 9.8% below its record high set the previous month.
At the center of the market turnaround was Microsoft, which leaped 17%. The company reported a stronger profit for the latest quarter than Wall Street analysts expected, driven by robust growth in its Azure cloud business. Chief Executive Satya Nadella said it reflects how customers are using Microsoft to move into AI.
Equally critical for anxious investors, Microsoft did not announce a massive escalation in its planned capital expenditures for artificial intelligence investments. That restraint set the company apart from other Big Tech rivals whose aggressive spending has recently unnerved markets.
Concerns remain high across the sector that outsized spending is eating into corporate cash flows. Those fears were underscored when Meta Platforms fell 9% after reporting weaker-than-expected quarterly profit and raising the lower end of its forecasted capital expenditure range for the year.
Semiconductor Suppliers and Market Laggards
The positive momentum at Microsoft spilled over into the semiconductor and hardware supply chain. Companies manufacturing the computer memory and processors powering hyperscaler data centers recovered ground following recent steep pullbacks driven by valuation concerns.
Memory maker Micron Technology jumped 17.6%, trimming its weekly loss to 5.6%. Lam Research, a key supplier to the semiconductor manufacturing industry, soared 17.6% after posting quarterly profit and revenue figures that beat analyst projections. Chip giant Advanced Micro Devices also rallied 13.5%.
In contrast, Jersey Mike’s Subs experienced a downward move during its public market debut. The sandwich chain’s stock fell 4.4% after its initial public offering was priced at $23.
Bond Market Focus and Federal Reserve Credibility
In the fixed-income market, longer-term Treasury yields held relatively steady following sharp accelerations earlier in the week. The Federal Reserve opted to leave interest rates unchanged on Wednesday, a decision that included dissents from three of the 12 FOMC members who favored a quarter-percentage-point rate hike.
The yield on the benchmark 10-year Treasury held steady at 4.67%. Meanwhile, the 30-year Treasury yield edged up to 5.21% from 5.20%, hovering near a 19-year peak after touching 5.2444% earlier in the week—its highest level since mid-2007. Federal Reserve Chairman Kevin Warsh offered few specific clues regarding future rate cuts during his post-meeting commentary, emphasizing a pullback in forward guidance.
Warsh pointed out that bond yields had climbed significantly since the central bank’s previous meeting, reflecting market pricing for future rate adjustments. Analysts noted that leaning on the bond market to help tighten financial conditions carries distinct risks for monetary policy credibility.
“If investors conclude that the latter is true, the credibility of the Fed’s inflation-fighting commitment could come under increasing scrutiny. Arguably, it already is.”
Seema Shah, chief global strategist at Principal Asset Management via Associated Press
Economic Data, Oil Prices, and Global Markets
Economic releases on Thursday showed that U.S. economic growth slowed during the second quarter. At the same time, inflation gauges remained above the Federal Reserve’s target, with the Personal Consumption Expenditures Price Index rising 3.7% in the 12 months through June, slowing from an unrevised 4.1% gain in May.
In the energy sector, Brent crude oil prices eased 1.2% to $87.01 per barrel. Prices experienced high volatility recently, swinging from a low of $72 early this month to $102 last week amid geopolitical uncertainty surrounding maritime transport in the Middle East.
International equity markets finished mixed. Europe’s STOXX 600 rose 0.77% and France’s CAC 40 gained 0.9%, while Asian markets experienced regional pullbacks. South Korea’s Kospi index fell 1.23%, marking its third consecutive negative session as investors weighed volatility across semiconductor-heavy technology conglomerates.
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