Wall Street ended higher on Thursday, with the S&P 500 climbing after a surge in Microsoft shares reinforced investor confidence that artificial-intelligence spending is starting to translate into stronger cloud revenue. The Nasdaq 100 outperformed, while the Dow Jones Industrial Average also posted gains as chipmakers rallied alongside megacap tech ahead of additional earnings from Amazon.com and Apple later in the session.
At the same time, bond yields rose for a second day as markets weighed fresh inflation risk and expectations for the Federal Reserve’s next move. In the background, U.S. economic data came in mixed, and developments in the Middle East continued to influence commodity sentiment.
Key takeaways
- Indexes rose: The S&P 500 closed up 1.66%, the Dow gained 1.19%, and the Nasdaq 100 added 3.36%, with tech and semiconductors leading.
- Catalyst: Microsoft’s results lifted sentiment across AI infrastructure, after Azure and other cloud services revenue ex-forex increased 43%.
- Rates in focus: The 10-year Treasury yield rose 3 basis points to 4.67%, weighing on the bond-sensitive backdrop despite an earnings-driven equity rally.
- Next megacap reports: Investors are set to digest earnings from Amazon.com and Apple after Thursday’s close, with more company results feeding the market narrative around AI spending.
What drove the move
Microsoft’s quarterly performance was the dominant driver of Thursday’s risk-on tone. Shares jumped more than 15% after the company reported that Q4 Azure and other cloud services revenue ex-forex rose 43%, exceeding the consensus estimate of 39.3% and representing the fastest quarterly growth in four years. Market participants interpreted the beat as evidence that AI-related capacity buildout is improving monetization rather than merely inflating costs.
The upside in megacap technology rippled into semiconductors and AI infrastructure. The Philadelphia Semiconductor Index closed up more than 8%, reflecting broad strength across the chip supply chain and supporting the Nasdaq’s outperformance.
Other earnings also shaped the tape. On the downside, Meta Platforms fell more than 7% after issuing a revenue forecast investors found disappointing, a reminder that even within megacap tech, guidance remains a key differentiator. Still, the day’s benchmark performance was largely anchored by Microsoft’s upbeat cloud read-through into AI demand.
Market reaction and rates backdrop
Despite the rally, the bond market moved against investors’ hopes for a quick easing in inflation pressure. According to the report, U.S. Treasury yields rose on Thursday for a second consecutive day as markets continued to focus on the likelihood that Fed Chair Warsh will struggle to contain inflation that has been above target for an extended period. The 10-year T-note yield rose 3 basis points to 4.67%.
From a trading perspective, the equity strength partially reduced safe-haven demand, helping T-notes fall earlier in the day. However, the report also noted that rates were pressured by carryover concerns from the prior day’s FOMC decision to keep interest rates unchanged, with investors worried the Fed could be “behind the curve” on inflation.
Still, Thursday’s data included some dovish signals. The report said the core PCE price index eased to 3.3% year over year, matching expectations. Q2 GDP growth came in below forecasts, while weekly jobless claims rose less than expected, keeping the overall picture mixed rather than decisively inflationary or growth-negative.
Economic data, oil, and global markets
U.S. releases were mixed for markets. Initial unemployment claims rose by 9,000 to 197,000, according to the report, indicating labor conditions remained firmer than economists had expected. Personal spending increased 0.3% month over month, weaker than the 0.4% expected pace, while personal income rose 0.2%, also below expectations.
Inflation tracking was a central swing factor. The report cited the Fed’s preferred inflation gauge—core PCE—easing to 3.3% year over year from 3.4% in May.
Oil traded lower. WTI crude prices gave up an overnight advance and fell more than 1%, with the report linking the move to hopes for progress toward a diplomatic solution in the Middle East. At the same time, geopolitical risks remained elevated: the report referenced U.S. airstrikes targeting military targets in Iran and Iranian retaliation via drones and missiles launched into Kuwait and Jordan. It also noted that attempts to reopen the Strait of Hormuz appeared to face an impasse.
Overseas markets finished mixed. The report said the Euro Stoxx 50 rose 1.53%, China’s Shanghai Composite fell to a one-week low and closed down 0.62%, and Japan’s Nikkei-225 gained 0.71%.
What to watch next
With megacap earnings still unfolding, investors will be focused on whether Amazon.com and Apple can sustain the positive momentum seen in Microsoft, particularly around AI-driven demand and cloud spending. On the macro front, markets will also continue to monitor inflation data and Treasury yield trends as traders assess the odds for the next Fed decision on September 15–16, while geopolitical developments tied to the Strait of Hormuz could keep pressure on energy prices.
