Wall Street rebounded sharply Thursday morning as Microsoft’s cloud-driven earnings surge pulled technology and semiconductor shares out of their recent selloff, while new federal data showed slower economic growth, cooling inflation and continued strength in the labor market.

Shortly before 10:00 a.m. ET, the major indexes were trading approximately at:

• Dow Jones Industrial Average: 51,865, up about 270 points, or 0.5%
• S&P 500: 7,360, up about 44 points, or 0.6%
• Nasdaq Composite: 24,834, up about 391 points, or 1.6%

Those figures reflect regular-session trading near publication time rather than stale futures or 9:30 a.m. opening prints. The rebound recovered part of Wednesday’s selloff, when the Dow dropped 1,152 points, the S&P 500 lost 1.52% and the Nasdaq fell 1.74%. 

Microsoft Pulls the AI Trade Off the Mat

Microsoft traded roughly 15% higher near 10:00 a.m., adding hundreds of billions of dollars in market value after reporting stronger cloud growth and better-than-expected earnings.

Revenue rose 17% from a year earlier in constant currency, while adjusted earnings reached $4.74 per share, above Wall Street expectations near $4.25. Azure delivered its fastest growth in four years, giving investors clearer evidence that Microsoft’s enormous spending on artificial-intelligence infrastructure is producing revenue rather than merely increasing costs.

The result also helped stabilize the broader semiconductor industry after several sessions of heavy selling. Lam Research surged about 21% after reporting record quarterly revenue of $6.72 billion and adjusted earnings of $1.82 per share. The iShares Semiconductor ETF gained more than 7%, reversing part of the decline that pushed the Nasdaq-100 into correction territory Wednesday. 

Meta Platforms moved in the opposite direction, falling more than 9% after reporting a 91% decline in quarterly free cash flow and issuing a softer revenue outlook. Rising infrastructure costs left investors questioning how quickly Meta can convert its AI spending into sustainable cash generation.

The diverging reactions show that Wall Street is not abandoning artificial intelligence. Investors are instead becoming more selective, rewarding companies that can connect capital spending to accelerating cloud revenue while punishing those whose investment is consuming cash without a sufficiently visible return.

Morning Economic Recap

The Bureau of Economic Analysis reported Thursday that the U.S. economy expanded at a 1.5% annualized rate during the second quarter, slowing from 2.1% during the first three months of the year and missing the 1.8% consensus estimate.

Consumer spending and business investment continued to grow, but higher imports and reduced government spending weighed on the headline figure. Because imports are subtracted when gross domestic product is calculated, part of the slowdown reflected the accounting impact of Americans purchasing more foreign goods rather than a collapse in domestic demand.

Inflation provided some relief. June’s Personal Consumption Expenditures price index declined 0.1% from May, lowering the annual rate to 3.7% from 4.1%. Core PCE, which excludes volatile food and energy costs, rose 0.1% for the month and 3.3% from a year earlier.

Personal spending increased 0.3% before inflation and 0.4% in real terms, while personal income advanced 0.2%. The saving rate fell to 2.7%, indicating that households are using more of their available income to maintain consumption.

Separately, the Labor Department said initial unemployment claims increased by 9,000 to 197,000 during the week ended July 25, remaining below the 200,000 economists expected. Continuing claims declined to 1.782 million, showing that layoffs remain historically low despite slower hiring and a growing number of corporate workforce reductions.

Taken together, the reports present a complicated Federal Reserve backdrop: growth is slowing and inflation is cooling, but price increases remain well above the central bank’s 2% target while the labor market is still firm.

Fed Dissents Keep Treasury Yields Elevated

The Federal Reserve left its benchmark rate unchanged Wednesday at 3.5% to 3.75%, but three policymakers dissented in favor of a quarter-point increase.

Chair Kevin Warsh cautioned that holding rates steady should not be interpreted as policy inertia and said higher rates could become appropriate if inflation remains elevated throughout the forecast period.

Bond investors responded by pushing long-term borrowing costs higher. The 10-year Treasury yield held near 4.68% Thursday morning, while the 30-year yield remained near its highest level since 2007.

Those rates matter beyond Wall Street. Persistently elevated long-term yields increase the cost of mortgages, commercial-property financing, corporate borrowing and business expansion even when the Federal Reserve does not formally raise its short-term policy rate.

MarketAxess Surges on ICE Takeover

MarketAxess jumped nearly 30% after Intercontinental Exchange agreed to acquire the electronic bond-trading platform for $167 per share in cash.

The price represents a 33% premium to MarketAxess’s Wednesday closing level and values the company at roughly $6 billion in equity value, or about $5.7 billion in enterprise value. The transaction is expected to close during the first half of 2027, subject to regulatory and shareholder approvals. 

ICE, which owns the New York Stock Exchange, is seeking to combine MarketAxess’s institutional bond-trading network with its pricing, data, clearing and compliance operations. The deal would give ICE a larger position in the gradual shift of corporate-bond trading from telephone-based transactions to electronic platforms.

Elsewhere, EMCOR Group rose about 19% after stronger quarterly results, while XPO reversed an earlier premarket gain and traded approximately 1.7% lower despite reporting revenue and earnings above forecasts.

Oil Eases but Supply Risks Remain

Brent crude eased after surging nearly 8% Wednesday, while West Texas Intermediate pulled back following a gain of more than 6%.

Energy markets remain highly exposed to further escalation involving Iran and the Strait of Hormuz. Loadings were suspended at a Black Sea terminal operated by the Caspian Pipeline Consortium after attacks on associated tankers, while Egypt reported a fire aboard ships at the Mediterranean port of Damietta following a drone strike.

Any sustained disruption to shipping routes would threaten to reverse June’s inflation improvement by raising the cost of oil, gasoline, aviation fuel, freight and manufacturing inputs.

Gold held near $4,080 an ounce, supported by geopolitical uncertainty and concern that persistent inflation could keep interest rates elevated even as economic growth slows.

What to Watch Next

Apple and Amazon report after Thursday’s closing bell, creating the next major test for the technology rally. Investors will be looking at consumer demand, cloud growth, profit margins and how much additional capital each company plans to commit to AI infrastructure.

Treasury yields remain the immediate risk to the morning rebound. A renewed move higher could pressure housing, banks, commercial real estate and richly valued technology companies.

Oil will also remain central. Thursday’s decline offers some relief, but another supply disruption or military escalation could quickly revive inflation concerns and undermine expectations that the Federal Reserve’s next move will eventually be a rate cut.

JBizNews Desk | Wall Street | New York

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