The US stock market went up on Thursday, mainly because of strong earnings from tech giants Microsoft and Meta (Facebook’s parent company). This pushed the Nasdaq index up by 0.8%, reaching a new record. The S&P 500 also increased slightly, while the Dow Jones remained mostly flat.
Big Tech Leads the Rally
- Meta’s stock jumped 11.2% after it reported better-than-expected profits and strong ad sales. Its heavy investment in artificial intelligence (AI) is also paying off.
- Microsoft rose 4.4% thanks to good earnings and strong growth in its Azure cloud service, which supports its AI plans.
- Apple and Amazon were expected to report earnings after the market closed. These companies have been major reasons for this year’s stock market gains due to investor excitement around AI.
Other companies also did well:
- CVS Health gained 3.3% after raising its yearly forecast following strong earnings.
Inflation Concerns Cloud Rate Cut Hopes
Even though the market is doing well, there are still concerns:
- The Personal Consumption Expenditures (PCE) index, which is the Fed’s favorite way to measure inflation, rose to 2.6% in June, up from 2.4% in May.
- The core PCE, which excludes food and energy, rose to 2.8%. This means inflation isn’t cooling as fast as hoped, making it less likely that the Federal Reserve will cut interest rates soon.
Tariff Trouble and Political Uncertainty
- President Donald Trump’s shifting tariff policies are also causing concern. He recently announced:
- A 50% tariff on Brazil, linked to politics involving former Brazilian President Jair Bolsonaro.
- A tariff agreement with South Korea.
- Threats of tariffs on other countries unless deals are made soon.
These unpredictable trade moves could push prices up further, adding to inflation and making it harder for the Fed to lower interest rates.
Fed Keeps Rates Steady – For Now
On Wednesday, the Federal Reserve kept interest rates unchanged for the fifth time in a row. Fed Chair Jerome Powell said inflation is near the target, but not low enough yet due to global uncertainties like tariffs.
Because of this, investors now believe there’s only a 39.2% chance the Fed will cut rates in September, compared to 58.4% last week and 75.4% last month.
Bond Market Reaction
- Government bond yields dropped slightly:
- 10-year Treasury fell to 4.34%
- 2-year Treasury slipped to 3.92%
