Stocks Get Tech Lift As Microsoft Hits $4 Trillion: Markets Wrap

A rally in big tech drove stocks higher, with traders parsing the latest inflation and spending data illustrating the tug and pull that has Federal Reserve officials split over the course of monetary policy. Bond yields fell. The dollar rose for a sixth straight day.

Equities extended their July advance, with the S&P 500 set for its longest streak of monthly gains since September. The Nasdaq 100 rose about 1% as Microsoft Corp. briefly topped $4 trillion amid AI optimism. Meta Platforms Inc. jumped 12% after strong earnings. Fellow megacaps Apple Inc. and Amazon.com Inc.’s results are due after the close.

“The two tech giants didn’t merely beat expectations — they smashed them,” said Fawad Razaqzada at City Index and Forex.com.

Treasury 10-year yields fell two basis points to 4.35%. The dollar headed toward its best month in 2025. The yen slid as investors took comments from Bank of Japan Governor Kazuo Ueda to be less hawkish than expected.

The Federal Reserve’s preferred measure of underlying inflation accelerated in June to one of the fastest paces this year while consumer spending barely rose, underscoring the dueling forces dividing policymakers over the path of rates.

Markets have persevered through elevated interest rates several years now, and despite a bumpy start to 2025, the S&P 500 has jumped year to date, noted Bret Kenwell at eToro.

“Rate cuts are nice, but they are not necessary for US stocks to continue higher,” Kenwell said. “Instead, earnings continue to drive the narrative — and today that narrative is focused on Microsoft and Meta’s results — while forward expectations for S&P 500 earnings are back to record highs.”

On the trade front, Treasury Secretary Scott Bessent said that he’s set to discuss with President Donald Trump Thursday an extension of the tariff-hike truce with China, expressing confidence a settlement will be reached.

The core personal consumption expenditures price index rose 0.3% from May. It advanced 2.8% on an annual basis, a pickup from June 2024 that underscores limited progress on taming inflation in the past year.

“Inflation remains sticky and justifies the Fed’s decision to keep interest rates unchanged at Wednesday’s meeting,” said Clark Bellin at Bellwether Wealth. “The stock market doesn’t need rate cuts in order to move higher and has already posted strong gains so far this year without any rate cuts.”

As with so many things in the economy, the situation is very fluid and we have yet to see the full impact of tariffs flowing through to inflation, according to Chris Zaccarelli at Northlight Asset Management.

“The Fed is on hold (but has a bias to cut rates) and tech firms blowing out their earnings reports, so the market is poised to keep climbing,” he said. We are priced for perfection as they say, and that is a risk, but one that will likely be ignored by the market as long as corporate profits are still growing.”

Separate data Thursday showed initial jobless claims were little changed last week. Another report showed labor cost growth rose 3.6% from a year ago, matching the lowest since 2021, reassuring Fed officials that the job market isn’t a source of inflationary pressure.

The market’s attention will soon turn to Friday’s jobs report for July, which is forecast to show companies are becoming more deliberate in their hiring. Employment likely moderated after a June increase, while the unemployment rate is seen ticking up to 4.2%.

Private payrolls are projected to rise by 100,000 after the smallest advance in eight months.

President Trump resumed his criticism of Fed Chair Jerome Powell after the central bank declined to cut interest rates, ending a short-lived détente.

Trump’s comments come after Fed officials left interest rates unchanged on Wednesday but downgraded their view of the US economy, signaling that policymakers could be edging closer to lowering borrowing costs.