Cooling U.S. inflation data and a blowout Microsoft earnings report drove a sharp rebound in stocks on July 31, even as fresh GDP and savings data pointed to slower economic momentum.
Microsoft leads the rally as tech stocks rebound
Microsoft was the clear center of the move. Its shares rose more than 15% in one session, marking the stock’s biggest daily gain since October 2008. The company added $450 billion in market value in a single day, setting a new record for one-day market cap growth in U.S. stock market history.
The earnings report showed cloud revenue growth above 40%, the fastest pace in four years. Capital spending also came in below market expectations, giving investors a combination of stronger growth and less spending pressure than many had feared.
Major U.S. indexes all closed higher. The Nasdaq gained 2.78%, the S&P 500 rose 1.66%, and the Dow Jones Industrial Average added 1.19%.
The Philadelphia Semiconductor Index climbed more than 8%, ending a five-session losing streak. Storage-related names rallied across the board. The Roundhill Memory ETF jumped 16.7% in a single day, Kioxia ADRs rose nearly 32%, SanDisk gained about 26%, Micron Technology advanced more than 18%, SK Hynix rose more than 17%, and both Lumentum and Western Digital gained more than 15%.
The Livermore Chinese concept leaders index closed up 3.02%. Most major European indexes also finished higher, with Germany’s DAX30 up 0.45%.
PCE cools, but GDP and savings data weaken
U.S. June PCE inflation rose 3.7% from a year earlier, down noticeably from 4.1% in May. On a monthly basis, it fell 0.1%, the first negative monthly reading in more than six years. Core PCE, which excludes food and energy, rose 3.3% year over year, in line with expectations, and increased 0.1% month over month, below the 0.2% expected by the market.
That eased concern over whether the Federal Reserve would need to keep a more hawkish stance. But the same report carried weaker growth signals. The advance estimate for second-quarter real GDP showed annualized growth of just 1.5%, well below the 2.1% market expectation. The personal saving rate fell to 2.7%, its lowest level since June 2007.
The combination left markets weighing softer inflation against signs that household demand may be losing steam. After the data, gold moved higher briefly before giving back gains, the U.S. dollar index dipped and then rebounded, and futures on the three main U.S. stock indexes continued to rise.
Commodities and crypto prices
WTI crude settled down 1.03% at $83.59 a barrel, while Brent crude settled down 1.88% at $89.03 a barrel.
COMEX gold rose 1.68% to $4,166 an ounce, and COMEX silver gained 2.12% to $59.32 an ounce.
In crypto, Bitcoin opened at $63,902.90, unchanged from the previous day, and briefly climbed to $64,838.92 in early trading. Ether opened at $1,908.34, down 0.6%, and later reached $1,923.23 in early trading.
Apple and Amazon report after the close
Apple reported third-quarter revenue of $109.42 billion, up 16% from a year earlier and above the $108.85 billion expected by the market. Earnings per share came in at $2.02, up 29% year over year and also ahead of expectations. Still, the company guided fourth-quarter revenue growth to 9% to 11%, below the market’s 12.1% expectation, and its after-hours share reaction was muted.
Amazon posted second-quarter net sales of $200.6 billion, up 20% from a year earlier and above the $197.01 billion expected by the market. AWS revenue grew 37% year over year, the fastest pace since 2021, while backlog reached $496 billion.
The company also raised its full-year capital spending forecast to $220 billion from $200 billion. CEO Andy Jassy said the current investment wave is unlikely to slow in the near term and said AI demand is expected to remain very significant through 2028. Amazon shares rose nearly 10% in after-hours trading following the report.
Meta details nearly $700 billion in future spending commitments
Meta said the same day that it has committed nearly $700 billion in future spending through long-term and short-term agreements, with the bulk directed to AI data centers and cloud computing.
Separately, the market also circulated news that a data center developer working with Anthropic is planning a $15 billion financing deal to build a large data center and supporting power generation facilities in Texas. Google is expected to provide financial guarantees and chip support for that transaction.
Markets face a split macro signal
The rebound was fueled by Microsoft’s earnings and reinforced by continued AI spending from other large technology companies. Amazon lifted its capex forecast to $220 billion, and Meta disclosed nearly $700 billion in future commitments, adding to evidence that major companies are still increasing AI infrastructure investment rather than pulling back.
But the macro backdrop remains divided. Lower PCE inflation gave the Federal Reserve more room, while weaker GDP growth and a falling savings rate pointed to pressure on the consumer side of the economy. The next round of data will matter for whether that slowdown proves temporary or becomes a more sustained trend.
This article was written by Chaoxiang Research.
