Stocks Rebound as Microsoft Earnings Ease AI Spending Concerns

The S&P 500 Index ($SPX) (SPY) today is up +1.12%, the Dow Jones Industrial Average ($DOWI) (DIA) is up +0.64%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +2.69%.  September E-mini S&P futures (ESU26) are up +1.09%, and September E-mini Nasdaq futures (NQU26) are up +2.61%.

Stock indexes are climbing today as strong growth at Microsoft has reassured investors that massive spending on artificial intelligence is starting to pay off.  Microsoft is up more than +15% after reporting late Wednesday that Q4 Azure and other cloud services revenue ex-forex rose +43%, better than the consensus of +39.3% and the fastest quarterly growth in four years.  The markets will get another look at megacap earnings when Amazon.com and Apple report after today’s close.

On the negative side, Meta Platforms is down more than -9% after a disappointing revenue forecast.  Also, bond yields are rising on concerns that Fed Chair Warsh won’t manage to curb inflation that has run above target for five straight years after the FOMC kept interest rates unchanged on Wednesday.  The 10-year T-note yield is up +2 bp to 4.66%.

Today’s US economic news was mixed for stocks with Q2 GDP growth below expectations despite strong consumer spending, but weekly jobless claims rising less than expected and the core PCE price index easing as expected.

US weekly initial unemployment claims rose +9,000 to 197,000, showing a stronger labor market than expectations of 200,000.

US Jun personal spending rose +0.3% m/m, weaker than expectations of +0.4% m/m, although May personal spending was revised upward to +0.9% m/m from the previously reported +0.7% m/m.  Jun personal income rose +0.2% m/m, weaker than expectations of +0.3% m/m.

The US Jun core PCE price index, the Fed's preferred inflation gauge, eased to +3.3% y/y from +3.4% y/y in May, right on expectations.

US Q2 GDP rose +1.5% (q/q annualized), weaker than expectations of +2.0%, despite Q2 personal consumption rising +3.2%, stronger than expectations of +2.3%.  The Q2 core PCE price index eased to +3.4% from +4.4% in Q1, a slower pace of increase than expectations of +3.5%.

Sep WTI crude oil prices (CLU26) gave up an overnight advance and are down more than -1% amid hopes for progress toward a diplomatic solution to the war in the Middle East.  Pakistan's Foreign Ministry said today that negotiations between the US and Iran are "ongoing" to restore stability, particularly in the Strait of Hormuz.   Shipping through the strait has picked up in recent days, with the US claiming its navy escorted some tankers across the waterway.

Tensions remain high in the Middle East as the US maintains its blockade of Iranian oil shipments in the Persian Gulf.  US Central Command said today that the US launched airstrikes against dozens of military targets in Iran aimed at degrading Iran's ability to threaten US troops.  Iran retaliated by launching drones and missiles into Kuwait and Jordan.  Also, diplomatic attempts to reopen the Strait of Hormuz appear to be at an impasse.  Iranian Deputy Foreign Minister Gharibabadi said Oman's proposal for a route through the Strait of Hormuz, with 50% under Iran's control and 50% under Oman's, would not address Iran's concerns and that the inbound passage and part of the outbound channel must be entirely under Iran's control.

The outlook for strong Q2 earnings, which continue this week, is a bullish factor for stocks.  The markets are awaiting results from a raft of megacap technology companies this week, including Microsoft and Meta Platforms today, and Amazon.com and Apple on Thursday.  Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2. So far, earnings results have been positive, with 86% of the 243 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 59% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is up +1.20%.  China's Shanghai Composite fell to a 1-week low and closed down -0.62%.  Japan's Nikkei-225 Stock Average closed up +0.71%.

Interest Rates

September 10-year T-notes (ZNU6) today are down -9 ticks.  The 10-year T-note yield is up +1.7 bp to 4.657%.  T-notes are sliding today on negative carryover from Wednesday when the FOMC kept interest rates unchanged, fueling concern the Fed is behind the curve in addressing inflation, which has been above the Fed’s target for more than five years.  T-notes recovered from their worst level after today’s US economic news showed Q2 GDP growing less than expected and the Jun core PCE price index easing as expected, dovish factors for Fed policy.

European government bond yields are mixed today.  The 10-year German bund yield is up +1.3 bp to 3.173%. The 10-year UK gilt yield is down -3.3 bp to 5.003%.

Eurozone Q2 GDP rose +0.4% q/q and +1.0% y/y, stronger than expectations of +0.2% q/q and +0.7% y/y.

The Eurozone Jul economic confidence indicator rose +1.5 to a 5-month high of 96.9, stronger than expectations of 96.0.

The Eurozone Jun unemployment rate was unchanged at 6.3%, showing a slightly weaker labor market than expectations of 6.2%.

German Jul CPI (EU harmonized) rose to +2.8% y/y from +2.4% y/y in Jun, right on expectations. 

As expected, the BOE kept its benchmark rate unchanged at 3.75% in a 6-3 vote and said there were "clear signs" that domestic inflationary pressures are easing and "little evidence" so far that the energy shock has stoked wage demands and higher prices elsewhere.

The markets are discounting an 85% chance of a +25 bp ECB rate hike at their next policy meeting on September 10.

US Stock Movers

Chipmakers and AI-infrastructure stocks are rallying today on better-than-expected earnings from Lam Research.  The Philadelphia Stock Exchange Semiconductor Index ($SOX) is up more than +5%.  Nebius Group NV (NBIS) is up more than +20% to lead gainers in the Nasdaq 100, and Lam Research (LRCX) is up more than +18%.  Also, Sandisk (SNDK) is up more than +16%, and Seagate Technology Holdings Plc (STX) is up more than +15%.  In addition, Applied Materials (AMAT) and Western Digital (WDC) are up more than +13%, and Advanced Micro Devices (AMD), Marvell Technology (MRVL), Micron Technology (MU), and Intel (INTC) are up more than +9%.  Finally, KLA Corp (KLAC) and ARM Holdings (ARM) are up by more than +7%. 

Corcept Therapeutics (CORT) is up more than +23% after raising its full-year revenue forecast to $1.1 billion to $1.2 billion from a previous estimate of $950 million to $1.05 billion, stronger than the consensus of $999.6 million.

Baxter International (BAX) is up more than +19% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of 56 cents, above the consensus of 37 cents, and forecasting full-year adjusted EPS of $1.95 to $2.15, stronger than the consensus of $1.92.

Microsoft (MSFT) is up more than +15% to lead gainers in the Dow Jones Industrials after reporting Q4 Azure and other cloud services revenue ex-forex rose +43%, better than the consensus of +39.3% and the fastest quarterly growth in four years. 

Quanta Services (PWR) is up more than +15% after reporting Q2 revenue of $9.56 billion, well above the consensus of $8.52 billion, and raising its full-year revenue forecast to $39.3 billion to $39.7 billion from a previous forecast of $34.7 billion to $35.2 billion, stronger than the consensus of $35.02 billion. 

Huntington Ingalls (HII) is up more than +8% after reporting Q2 sales and service revenue of $3.42 billion, well above the consensus of $3.15 billion. 

Fortinet (FTNT) is up more than +3% after reporting Q2 billings of $2.37 billion, better than the consensus of $2.13 billion, and boosting its full-year adjusted EPS forecast to $3.41 to $3.47 from a previous forecast of $3.16. 

Starbucks (SBUX) is up more than +2% after reporting Q3 EPS of 85 cents, well above the consensus of 65 cents, and raising its full-year adjusted EPS forecast to $2.55 to $2.65 from a previous forecast of $2.25 to $2.45, better than the consensus of $2.39.

Alnylam Pharmaceuticals (ALNY) is down more than -25% to lead losers in the Nasdaq 100 after reporting Q2 revenue of $1.29 billion, below the consensus of $1.31 billion, and cutting its full-year product revenue forecast to $4.7 billion to $5.1 billion from a previous forecast of $4.9 billion to $5.3 billion, weaker than the consensus of $5.1 billion.

Fair Isaac (FICO) is down more than -13% to lead losers in the S&P 500 after reporting Q3 revenue of $674.2 million, weaker than the consensus of $681.8 million, and forecasting full-year revenue of $2.53 billion, below the consensus of $2.56 billion.

Crocs (CROX) is down more than -13% after forecasting Q3 adjusted EPS of $3.20 to $3.30, weaker than the consensus of $3.53. 

Carvana (CVNA) is down more than -10% after forecasting full-year adjusted Ebitda of $2.7 billion to $3.0 billion, the midpoint below the consensus of $2.99 billion.

Meta Platforms (META) is down more than -9% after forecasting Q3 revenue of $61 billion to $64 billion, the midpoint below the consensus of $63.17 billion.

Norwegian Cruise Line Holdings Ltd (NCLH) is down more than -8% after cutting its annual forecasts and said bookings for the next 12 months are weak.

Earnings Reports (7/30/2026)

A O Smith Corp (AOS), Air Products and Chemicals Inc (APD), Alliant Energy Corp (LNT), Altria Group Inc (MO), Amazon.com Inc (AMZN), American Electric Power Co Inc (AEP), Apple Inc (AAPL), Arthur J Gallagher & Co (AJG), Avery Dennison Corp (AVY), Baxter International Inc (BAX), Bristol-Myers Squibb Co (BMY), Builders FirstSource Inc (BLDR), Camden Property Trust (CPT), Cigna Group/The (CI), Coinbase Global Inc (COIN), Corteva Inc (CTVA), CRH PLC (CRH), Dexcom Inc (DXCM), Edison International (EIX), EMCOR Group Inc (EME), Erie Indemnity Co (ERIE), Eversource Energy (ES), Exelon Corp (EXC), First Solar Inc (FSLR), GoDaddy Inc (GDDY), Hershey Co/The (HSY), Huntington Ingalls Industries (HII), Ingersoll Rand Inc (IR), Intercontinental Exchange Inc (ICE), International Paper Co (IP), KKR & Co Inc (KKR), Labcorp Holdings Inc (LH), Live Nation Entertainment Inc (LYV), Martin Marietta Materials Inc (MLM), Mastercard Inc (MA), Mettler-Toledo International Inc (MTD), Monolithic Power Systems Inc (MPWR), Norwegian Cruise Line Holdings (NCLH), Quanta Services Inc (PWR), Regeneron Pharmaceuticals Inc (REGN), Southern Co/The (SO), Stryker Corp (SYK), Trane Technologies PLC (TT), Valero Energy Corp (VLO), Weyerhaeuser Co (WY), Willis Towers Watson PLC (WTW), Xcel Energy Inc (XEL), Yum!  Brands Inc (YUM).