U.S. stock markets experienced a strong rebound Thursday, led by a significant surge in Microsoft shares following the technology giant’s better-than-expected quarterly earnings report. Meanwhile, concerns persisted in the bond market over the potential for inflation to remain elevated in the long term.
The Standard & Poor’s 500 index gained 1.7%, recovering losses from the previous day, which had marked its steepest decline in seven weeks. The Dow Jones Industrial Average rose 613 points, or 1.2%, while the Nasdaq composite, heavily weighted with artificial intelligence (AI) stocks, advanced 2.8% after its substantial drop last week.
Microsoft’s stock climbed 15.5%, the company’s best single-day gain in nearly 18 years, following strong growth in its Azure cloud business. CEO Satya Nadella attributed the performance to customers increasingly adopting Microsoft’s AI services. Notably, Microsoft did not announce any major increase in AI-related spending, a contrast to several of its Big Tech peers. Investors have expressed concerns that escalating investments in AI by some companies might pressure cash flows without guaranteeing proportional productivity or profits.
Meta Platforms, the parent company of Facebook and Instagram, saw its stock decline 8% after reporting a weaker-than-expected profit despite slightly higher revenue. Meta also raised the lower end of its forecast for investment spending this year, heightening worries about the impact of heavy expenditure on earnings.
Stocks of companies producing semiconductors and memory chips used by large cloud providers to support AI workloads recovered some recent losses. Micron Technology’s shares jumped 18.4%, narrowing its weekly decline, while semiconductor equipment supplier Lam Research soared 18% after beating profit and revenue expectations. Chipmaker Advanced Micro Devices also rallied 13%.
On the other end of the market, Jersey Mike’s Subs fell 6% on its first day of trading on the New York Stock Exchange.
In fixed income markets, Treasury yields stabilized following a sharp rise from the previous session. The yield on the 10-year Treasury note held steady at 4.67%, while the 30-year yield edged up slightly to 5.22%. These levels reflect investor expectations about inflation and economic growth over the coming years. The Federal Reserve’s chair, Kevin Warsh, recently gave few indications regarding future interest rate moves, leaving uncertainty about the central bank’s approach to controlling persistent inflation.
Warsh reiterated the Fed’s commitment to reducing inflation to its 2% target but suggested that financial markets might be assuming some of the burden in restraining price pressures. Analysts have noted that if investors believe the Fed is relying heavily on market forces rather than policy actions, it could challenge the credibility of the central bank’s inflation-fighting resolve.
Recent economic data indicated slower-than-expected growth in the U.S. economy during the spring and a slight easing in inflation rates compared to May, though inflation remains above the Fed’s target.
Oil prices declined modestly, with Brent crude settling at $86.88 per barrel, down 1.4%, as markets digest the mixed economic signals.