U.S. stocks rallied sharply on Thursday, led by a record-breaking surge in Microsoft shares, even as investors remained cautious over rising Treasury yields and uncertainty surrounding the Federal Reserve’s interest rate outlook.
Microsoft’s stock jumped 15.5% after the company reported stronger-than-expected quarterly sales and cloud computing growth. It also reassured investors that future capital spending would be lower than previously anticipated while maintaining strong cash generation through fiscal 2027.
The rally added approximately $450 billion to Microsoft’s market value, marking the largest one-day dollar gain by any company in history.
The strong earnings helped lift technology and semiconductor stocks, easing concerns that had weighed on artificial intelligence-related companies following weaker cash flow reports from Alphabet and Tesla last week.
The Dow Jones Industrial Average gained 1.2% to close at 52,209.57, while the S&P 500 advanced 1.7% to 7,437.99. The Nasdaq Composite outperformed with a 2.8% rise to 25,122.18.
Global markets also strengthened, with the MSCI All Country World Index rising 1.6% after earlier touching its lowest level since June 11. Europe’s STOXX 600 and FTSEurofirst 300 each gained 0.8%, although South Korea’s KOSPI fell 1.2% for a third consecutive session.
Despite the equity rally, investors remained focused on the bond market after the Federal Reserve kept interest rates unchanged. Comments from Federal Reserve Chair Kevin Warsh heightened concerns that policymakers may not act aggressively enough to contain long-term inflation.
Long-term U.S. Treasury yields continued to climb, with the 30-year Treasury yield reaching 5.2444%, its highest level since 2007. The benchmark 10-year Treasury yield also rose to 4.667%, while the 2-year yield edged higher to 4.238%.
Market expectations for tighter monetary policy also increased, with futures traders pricing in a 64% probability of a Federal Reserve interest rate hike at its September meeting.
Meanwhile, oil prices ended lower after a volatile trading session, retreating following recent gains driven by renewed tensions between the United States and Iran.
Economic data showed that U.S. inflation continued to ease in June, with the Personal Consumption Expenditures (PCE) Price Index rising 3.7% year-on-year, down from 4.1% in May. The U.S. economy also slowed in the second quarter as a widening trade deficit weighed on growth, although consumer spending and investment in AI infrastructure remained resilient.
In the currency market, the Japanese yen strengthened sharply, rising 2.53% against the U.S. dollar to 159.34 per dollar, fuelling speculation that Japanese authorities had intervened to support the currency after it weakened to a four-decade low.
The U.S. dollar index fell 0.84% to 99.94, while the euro climbed to $1.153 and the British pound strengthened to $1.3466.
The Bank of England kept interest rates unchanged, although one additional policymaker voted in favour of a rate increase, citing renewed geopolitical tensions.
Gold prices also moved higher, with spot gold rising 1.11% to $4,110.19 per ounce.
