US stock markets are trading strong on Thursday, with the Nasdaq and S&P 500 hitting new heights, fueled by positive earnings reports from Meta and Microsoft, as well as optimism around trade deals. The Nasdaq climbed 1.1% while the S&P 500 gained 0.6%, with both indices pushing toward fresh record highs. Meanwhile, the Dow Jones Industrial Average lagged, showing a modest increase of just 0.1%.
The surge in Big Tech stocks, especially Meta and Microsoft, drove the rally as investors cheered their earnings beat and strong guidance. Meta, in particular, saw its stock jump 12%, while Microsoft climbed 4.6%, pushing its market capitalization over $4 trillion. These results reinforced the bullish sentiment surrounding the tech sector, especially with the growing importance of artificial intelligence (AI).
Market Movers:
- Meta (META): +12.26%: Meta soared after the company reported impressive quarterly earnings, fueled by its robust growth in digital advertising. Investors were also encouraged by the company’s aggressive AI investments. Meta’s performance exceeded Wall Street’s expectations, with its forecasted growth driving confidence in the stock’s future.
- Microsoft (MSFT): +4.59%: Microsoft's earnings beat expectations, pushing its market cap to a massive $4 trillion. The company’s strong performance was driven by growing demand for its cloud and AI services. Microsoft's commitment to AI and cloud technologies has solidified its position among the world’s most valuable companies.
- Roblox (RBLX): +12.45%: Roblox surged 20% in premarket trading after the company reported record daily active users, exceeding 100 million for the first time. With a sharp increase in engagement, Roblox raised its bookings forecast for the third quarter, prompting a positive market reaction.
- Kohl’s (KSS): -3.65%: Shares of Kohl's fell as investors reacted negatively to the ongoing retail sector struggles. Despite some enthusiasm surrounding meme stock momentum earlier in the month, Kohl's failed to maintain its market rally, reflecting broader challenges facing traditional retail.
Trade Deal Developments
Markets have also been buoyed by trade news, as President Trump granted Mexico a 90-day tariff reprieve, providing more time for negotiations. The announcement, which came ahead of the August 1 deadline for trade agreements, alleviated concerns of imminent tariff hikes and provided a window for discussions. The news follows a series of trade agreements, including one with South Korea, which has strengthened investor confidence. The US goods trade deficit also fell to a two-year low in June, signaling some positive developments in global trade.
Federal Reserve and Inflation
The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, showed a slight acceleration in price increases for June. This data, released Thursday morning, underscored that inflation remains above the Fed’s 2% target. The report comes just one day after the Fed opted to keep interest rates unchanged, although two governors dissented. Investors are closely watching for any indications of future rate cuts, with some concerns that rising inflation may delay these moves.
Fed Chair Jerome Powell made it clear that no decisions had been made regarding a September rate cut, dampening expectations that the Fed would act imminently. This has led to a reduction in the probability of a September rate cut, which fell below 40% on Thursday.
Meme Stocks Cooling Off
The enthusiasm for meme stocks appears to be fading as investors shift their focus back to established players like Microsoft and Meta. A report from Vanda Research showed that daily turnover in meme stocks, such as Kohl’s and Krispy Kreme, has dropped significantly, with some stocks seeing a 90% decrease in trading volume. This shift signals that retail investors are moving away from speculative stocks in favor of solid earnings reports from tech giants.
Looking Ahead
The market will be closely watching after-hours results from Apple and Amazon, with investors eager to see if the momentum in Big Tech can continue. Earnings from other major players in the "Magnificent Seven" tech stocks are expected to further influence the market’s direction. On the economic front, the Personal Consumption Expenditures (PCE) data will continue to be a focal point for market participants, particularly as the Federal Reserve looks for signs of slowing inflation. Trade discussions also remain in focus, with ongoing negotiations expected to provide clarity on future tariffs and trade policies.
As the market inches closer to record highs, the key question will be whether Big Tech’s robust earnings can carry the broader market forward or if concerns over inflation and trade uncertainties will weigh on investor sentiment in the coming weeks.