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Microsoft Leads US Stocks Higher 07/30 15:29
A monster day for Microsoft's stock following signals that its big spending
on AI is translating into profits led a powerful rebound on Wall Street
Thursday, while computer-chip companies regained some of their sharp recent
losses.
NEW YORK (AP) -- A monster day for Microsoft's stock following signals that
its big spending on AI is translating into profits led a powerful rebound on
Wall Street Thursday, while computer-chip companies regained some of their
sharp recent losses. In the bond market, though, worries remained about
inflation potentially remaining high for years.
The S&P 500 rallied 1.7% and more than recovered its drop from the day
before, which was its worst in seven weeks. The Dow Jones Industrial Average
jumped 613 points, or 1.2%. The Nasdaq composite, which is full of
artificial-intelligence stocks, rallied 2.8% a day after it fell 9.8% below its
record set last month.
Microsoft led the way and leaped 15.5% for its best day in nearly 18 years
after reporting a stronger profit for the latest quarter than analysts
expected. Growth was strong for its Azure cloud business, and CEO Satya Nadella
said it reflects how customers are using Microsoft to move into AI.
Perhaps just as importantly for Wall Street, Microsoft did not announce a
big increase in how much it plans to spend on AI investments, something that
several other Big Tech rivals have done. Worries are high that such spending is
eating into companies' cash flows and may not ultimately be worth it if AI does
not produce as much productivity and profits as promised.
Meta Platforms helped demonstrate such fears after falling 8%. The parent
company of Facebook and Instagram reported a weaker profit for the latest
quarter than analysts expected, even though it made slightly more in revenue
than expected. It also raised the lower end of its forecasted range for
spending on investments this year.
Companies involved in the making of the computer memory and processors that
such "hyperscalers" are buying to power their AI efforts rose Thursday,
recovering some of the big losses they've taken on worries their stock prices
shot too high in the euphoria around AI.
Micron Technology jumped 18.4%, for example, to trim its loss for the week
to 5%. It was the strongest force lifting the S&P 500 after Microsoft.
Lam Research, a supplier to the semiconductor industry, soared 18% after
reporting stronger profit and revenue for the latest quarter than analysts
expected. Chip giant Advanced Micro Devices rallied 13%.
On the losing end of Wall Street was Jersey Mike's Subs. The sandwich
chain's stock fell 6% in its first day of trading on the New York Stock
Exchange.
All told, the S&P 500 rose 121.48 to 7,437.63. The Dow Jones Industrial
Average climbed 613.92 to 52,208.06, and the Nasdaq composite leaped 679.24 to
25,122.18.
In the bond market, longer-term Treasury yields held steadier following
their sharp accelerations Wednesday. They had jumped after the chairman of the
Federal Reserve, Kevin Warsh, gave few clues about what the central bank will
do with interest rates to combat the painfully high inflation that continues to
hurt the country.
Higher rates could keep a lid on inflation, but they can also slow the
economy and undercut prices for stocks and other investments.
The yield on the 10-year Treasury was 4.67%, the same as late Wednesday. The
30-year Treasury yield ticked up to 5.22% from 5.20%, a day after it shot up
from 5.09%. Those yields move with investors' expectations for inflation and
economic growth in upcoming years.
Warsh reaffirmed on Wednesday the Fed wants to get inflation back to 2%,
even though the central bank decided not to raise interest rates despite
inflation remaining higher than that. He also implied the bond market may
already be doing some of the Fed's work to restrain inflation, and he pointed
to how yields have climbed since the central bank's last meeting six weeks
earlier.
That leaves investors questioning whether the Fed is prepared to act if
inflation worsens, or whether it is relying on financial markets to achieve the
same outcome, according to Seema Shah, chief global strategist at Principal
Asset Management.
"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."
President Donald Trump, who nominated Warsh to lead the Fed, has lobbied for
lower interest rates even though they could cause inflation to accelerate.
Reports released Thursday suggested the U.S. economy's growth slowed by more
during the spring than economists expected. A measure of Inflation, meanwhile,
remained worse last month than the Federal Reserve's target, but it slowed from
May's level.
In the oil market, prices eased. Brent crude, the international standard,
fell 1.4% to settle at $86.88 per barrel.
It had swung as low as $72 early this month and as high as $102 last week on
uncertainty about whether the United States and Iran could reach a deal to
allow oil tankers to move freely again from the Middle East to customers
worldwide.
In stock markets worldwide, indexes were mixed in Europe and Asia. South
Korea's Kospi fell 1.2%, and France's CAC 40 rose 0.9% for two of the world's
bigger moves.
Seoul's market has been at the center of AI's huge swings because it's
dominated by two tech titans, Samsung Electronics and SK Hynix. After more than
doubling through this year's first six months, the Kospi has plunged 34% so far
in July.
Its drop on Thursday came as Samsung Electronics dipped 0.7%. The tech giant
reported a record profit for the spring and said demand for its chips continues
to outpace supply, but its earnings nevertheless fell shy of analysts' high
expectations.
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