Wall Street advances as Microsoft outlook lifts tech and eases AI spending concerns

Traders Union
All News
Financial News
Wall Street rises on Microsoft

Highlights

Microsoft jumps about 15% after forecasting cloud sales and capital expenditure ahead of expectations, easing investor concerns over high AI infrastructure costs.
Meta Platforms drops nearly 9% on a 91% plunge in Q2 free cash flow from AI investment, while Qualcomm falls 3.2% on weak guidance and faster Apple-driven revenue declines.
S&P 500 rises 1.12% and Nasdaq Composite gains 2.22% by 09:50 a.m. ET as tech leads sector gains, despite U.S. Q2 GDP growth slowing to 1.5% and 30-year Treasury yields hitting a 19-year high.

Microsoft forecast drives tech rebound

As reported by Reuters, Microsoft jumps about 15% after forecasting current-quarter sales and cloud growth above expectations, capital expenditure below estimates and continued cash generation through its fiscal 2027, helping calm investor concern over the cost of the AI buildout.

That reassurance supports a broad rally in technology shares after recent volatility tied to rising spending at major tech groups. Investors have been unsettled by AI-related costs even as earnings remain strong, and negative cash-flow reports from Alphabet and Tesla last week trigger a selloff in AI-linked stocks. The tech-heavy Nasdaq-100 drops 10% from its early June peak on Wednesday.

Concerns about AI spending remain in focus. Meta Platforms falls nearly 9% after reporting a 91% drop in second-quarter free cash flow, highlighting the financial pressure from its AI expansion, while Qualcomm loses 3.2% after forecasting fourth-quarter profit below estimates and saying Apple-related revenue declines faster than expected.

Apple and Amazon are due to report earnings after the bell. In early trading, Amazon rises about 3%, while Apple slips 1.6%.

Rates, data and sector moves shape market outlook

Fresh economic data adds another layer for markets, with U.S. growth slowing to a 1.5% rate in the second quarter as the trade deficit widens, below estimates for 2.1% growth. A separate reading also shows U.S. inflation slows in June, giving investors more to assess after the Fed’s latest policy decision.

At 09:50 a.m. ET, the Dow Jones Industrial Average rises 290.48 points, or 0.56%, to 51,884.62, the S&P 500 gains 81.98 points, or 1.12%, to 7,398.13 and the Nasdaq Composite adds 542.32 points, or 2.22%, to 24,985.26. Technology leads the major S&P sectors with a 4.2% gain, while the Philadelphia chip index climbs 6.7% and is set to end a five-day losing streak.

Markets close sharply lower on Wednesday after the Fed keeps interest rates unchanged in the 3.50% to 3.75% range, while mixed messages from Fed Chair Kevin Warsh leave traders uncertain about the direction of borrowing costs. Anna Rathbun, CEO and founder of Grenadilla Advisory, says the concern is no longer only how much companies are spending, but that higher rates may not slow AI investment because companies view it as a competitive necessity.

Bond markets remain tense, with the 30-year Treasury yield surging to its highest level in 19 years as investors seek more protection against future inflation. Traders now see a 57% chance that the U.S. central bank raises rates by 25 basis points at its September meeting, according to LSEG data.

Elsewhere, Carvana tumbles 9.9% after forecasting full-year adjusted core profit below Wall Street expectations, while Starbucks rises 3.5% after lifting its annual sales and profit forecasts. Advancing issues outnumber decliners by a 1.21-to-1 ratio on the NYSE and by a 1.68-to-1 ratio on the Nasdaq, as the S&P 500 posts two new 52-week highs and two new lows and the Nasdaq Composite records 30 new highs and 72 new lows.

Our earlier coverage of the diverging market response to Big Tech’s AI spending explained how investors are rewarding companies showing clear near-term returns while punishing signs of strain on cash generation. We highlighted Microsoft’s Azure- and Copilot-driven momentum versus Meta’s weaker guidance and steep free-cash-flow drop, underscoring the market’s growing demand for measurable AI monetization.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.