The S&P 500 and Nasdaq surged to fresh record highs on Thursday, powered by outsized gains in heavyweight tech stocks riding a new wave of investor confidence in artificial intelligence.
Microsoft, which reported better-than-expected quarterly results, became the second publicly traded company in history to surpass a $4 trillion market capitalisation.
The rally was mirrored across Wall Street, with the tech and communication sectors hitting all-time highs, and investors recalibrating interest rate expectations after a stronger-than-expected inflation reading.
Microsoft’s valuation hits $4 trillion after earnings
Microsoft (MSFT.O) crossed the $4 trillion valuation threshold following a blowout earnings report that beat Wall Street expectations.
The milestone makes it the second publicly traded firm after Nvidia (NVDA.O) to reach that level.
Shares of Microsoft rose sharply in early trading, reinforcing investor faith in the long-term value of its AI investments.
Meta Platforms (META.O) also posted significant gains, climbing 12.1% to an all-time high. Its Q3 revenue forecast exceeded estimates, driven by AI-enhanced performance in its core advertising business.
Meanwhile, Nvidia added over 1%, continuing its meteoric rise on the back of soaring demand for AI chips.
The S&P 500 tech index (.SPLRCT) gained 1.2%, while the communication services index (.SPLRCL) rose more than 3%, both reaching record levels.
Stronger inflation, steady jobs data keep Fed cautious
A Commerce Department report released Thursday showed that inflation in the US rose in June, partly due to tariffs raising import costs.
This pushed the Personal Consumption Expenditures (PCE) price index above expectations and weakened the case for near-term interest rate cuts.
The Federal Reserve kept its policy rate unchanged at its Wednesday meeting. Fed Chair Jerome Powell said that it was “too early” to discuss a rate cut in September, adding that current policy was not restraining economic activity.
Traders using CME’s FedWatch tool now see a 58.8% probability that the Fed will leave rates unchanged in September as well.
Labour market data was relatively stable. Weekly jobless claims saw a minor increase, indicating a still-strong employment environment.
Attention is now shifting to Friday’s non-farm payrolls report for a clearer outlook on wage and hiring trends.
AI optimism fuels third monthly gain across indices
The rally in major indices was further bolstered by easing global trade tensions and sustained optimism about AI’s economic potential.
The S&P 500 (SPX) rose 45.18 points to 6,408.08, and the Nasdaq Composite (.IXIC) jumped 245.09 points to 21,374.76. The Dow Jones Industrial Average (DJI) added 88.73 points to 44,550.01.
All three indices are on track for monthly gains, with the S&P 500 and Dow poised for their third consecutive positive month, marking the longest winning streak in nearly a year.
The Nasdaq is set for its best monthly performance since March 2024.
Tariff tensions and political uncertainty resurface
Trade tensions remain in focus ahead of a looming deadline. President Donald Trump reiterated his stance on not extending trade negotiations with underperforming partners.
EU officials warned that European liquor could face 15% tariffs from 1 August unless a new deal is reached. Trump’s agreement with South Korea, reached Wednesday, reduced import tariffs to 15% from a threatened 25%.
Meanwhile, Trump continued to criticise Fed Chair Powell following the central bank’s decision to hold rates steady. Treasury Secretary Scott Bessent indicated that Powell’s replacement may be announced before year-end.
Among individual stocks, Applied Digital (APLD.O) rallied 32.7% after reporting quarterly revenue that exceeded estimates.
Despite the day’s gains, declining stocks slightly outnumbered advancers on both the NYSE and Nasdaq, with ratios of 1.17-to-1 and 1.16-to-1, respectively.
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