Wall Street staged a strong rebound on Thursday after the previous session’s heavy sell-off, with Microsoft’s earnings report reviving confidence in AI-related spending and pulling money back into large-cap technology stocks. The Dow Jones Industrial Average rose 1.19%, the S&P 500 gained 1.66%, the Nasdaq climbed 2.78%, and the Nasdaq 100 advanced 3.36%, its third-largest one-day gain of the year. The VIX fell 17.33% to 17.08.
Middle East headlines and OPEC+ remain in focus
The market also digested new developments in the Middle East. Trump said Hamas had agreed in principle to full disarmament and that Israel would gradually withdraw troops as the agreement moved forward. If finalized, the deal would mark the most significant political breakthrough since the start of the Gaza conflict. It has not been formally signed, however, and major differences remain among Israel, Hamas, Iran and other parties, leaving execution risk on the table.
At the same time, Iran said it launched a drone attack on a U.S. air base in Bahrain and claimed damage to facilities there. Saudi Arabia, meanwhile, joined 43 countries in pushing for a maritime defense alliance aimed at improving shipping security in the Red Sea, the Bab el-Mandeb Strait and the Gulf of Aden. Diplomacy has moved, but military risk has not disappeared.
Oil prices softened. WTI crude fell about 2% to $80.5 a barrel as traders looked ahead to the upcoming OPEC+ meeting and stayed cautious about whether additional supply would actually be carried out. ING strategists said the biggest uncertainty for oil through 2027 remains the direction of OPEC+ policy and whether member states resist production quotas. The market expects the group may announce a September output increase of 188,000 barrels per day, a prospect that has kept bullish traders from chasing prices higher for now.
Dollar drops as yen and won jump
In foreign exchange, the U.S. dollar index fell 0.9% on Thursday, its largest one-day drop of the year so far, erasing all gains accumulated after Walsh’s first appearance.
Attention turned to possible coordinated currency intervention in Japan and South Korea. Nikkei reported that the Japanese government and the Bank of Japan may have intervened by buying yen and selling dollars, and that U.S. monetary authorities carried out a pre-intervention “rate check.” South Korea was also reported to have sold dollars in an unusual move. The won appreciated 2% against the dollar, reaching a nine-month high, while the yen at one point rose 3.3% intraday against the dollar, its biggest intraday gain since December 2023.
Microsoft earnings shift the AI spending debate
Microsoft became the day’s key turning point for the broader AI trade. Investors had been questioning whether the scale of spending tied to AI infrastructure would pressure cash flow and make returns harder to defend. This report eased part of that concern.
Azure revenue grew 43% at constant currency, well above analyst expectations of 39.6% to 40%. Full-year Azure revenue also crossed $100 billion for the first time, making Microsoft the second cloud provider after Amazon Web Services to reach that milestone.
Just as important, Microsoft reported capital expenditure below expectations and said it would maintain positive cash flow in fiscal 2027. That directly addressed worries that AI investment was becoming unsustainable. Microsoft shares surged 15.51%, their biggest one-day gain in 18 years, adding roughly $450 billion in market capitalization in one session. That topped Nvidia’s prior record of $440 billion and marked the largest single-day market value increase ever for an individual U.S. stock.
The Magnificent Seven index rose 2.28%. Nvidia gained 2.65%, Amazon added 3.90%, and Tesla rose 3.53%, while Meta fell 7.95%, Apple slipped 1.41%, and Alphabet Class A lost 0.91%.
Semiconductors and memory names lead the move
Chip and storage stocks posted the strongest upside beta in the rebound. The Philadelphia Semiconductor Index jumped 8.19%, its biggest one-day rise in months. The semiconductor ETF climbed 6.88%, while the Roundhill Memory ETF surged nearly 17% as traders leaned into the view that AI data center demand for HBM, NAND and DRAM will keep expanding.
Among individual names, Micron Technology rose 18.32%, SanDisk gained 25.99%, SK Hynix advanced 17.52%, Western Digital rose more than 15%, and Seagate climbed more than 11%. Equipment and chip-related names also rallied hard: Lam Research gained 18.36%, Astera Labs rose 20%, Applied Materials added 17.98%, AMD climbed 13%, Intel rose 11.3%, Arm gained more than 7%, TSMC ADR advanced 7.64%, and Marvell Technology rose more than 12%. The report also said TSMC is developing an advanced packaging technology similar to Intel’s EMIB.
Optical networking names followed the move higher. Applied Optoelectronics rose nearly 18%, Lumentum gained more than 15%, Credo rose more than 13%, Coherent added more than 12%, and Corning gained 9%.
Cloud-related stocks also climbed. New cloud provider NEBIUS surged 27.13%, CoreWeave rose 21.51%, Oracle gained 8.34%, and Amazon added 3.9%.
The report also said Leopold’s “situational awareness” fund, described as an AI-focused leveraged vehicle, was hit with margin calls and forced to sell about $16 billion in secondary-market holdings. Citadel reportedly stepped in within 24 hours, preventing a chain liquidation and helping trigger mechanical short covering that added fuel to the rebound.
Breadth stayed weak despite the index rebound
The headline move in equities masked weak breadth under the surface. Even with technology up more than 5%, more than 70% of S&P 500 components finished lower on the day. The equal-weighted S&P 500 fell instead, creating a rare reverse divergence of more than 75 basis points versus the benchmark index.
Bloomberg strategists said that kind of divergence has happened only twice since 1990. The other instance came on June 30, 2000, just before the top of the Nasdaq technology cycle.
SpotGamma also warned that the S&P 500 remains in a negative gamma setup, with resistance at 7,450 and support at 7,300. If the index breaks below 7,300, positive gamma support from 0DTE options is nearly absent down to 7,000. In that reading, the rally looks driven more by positioning pressure than by a broad return of risk appetite, leaving concentration risk in place.
Single-stock moves: Meta lags, Amazon rises after hours, Apple drops after the bell
Meta fell 7.95% against the broader rally. The report said the company has committed close to $700 billion in future spending, but investors remain uneasy about heavy capital expenditure, cash flow pressure and the still-unproven path to growth beyond advertising.
Amazon closed up 3.90% and rose more than 10% after hours. AWS revenue increased 37% in the quarter to $42.2 billion, the highest in 18 quarters. CEO Andy Jassy said AAWS is entering a new growth cycle, with AI services, in-house Trainium chips and enterprise AI applications as the main drivers ahead. Even so, the market is still watching whether higher AI-related capital spending can keep turning into profit growth after Amazon raised its full-year capex plan.
Apple fell 1.41% in regular trading and dropped nearly 7% after hours. Quarterly revenue was $109.417 billion, up 16% year over year, and earnings per share came in at $2.02, both above expectations. But the company’s CFO guided for fourth-quarter revenue growth of only 9% to 11% because of “supply constraints,” below the market expectation of 12.1%. Revenue from Greater China also missed expectations. On the earnings call, Tim Cook said rising memory chip costs and bottlenecks in advanced-node capacity were hurting gross margin and leaving the company under pressure from supply chain constraints.
Bloom Energy rose 26.49%. The company had previously been challenged by short seller Hunterbrook over supply chain and production capacity, especially its reliance on scandium and uncertainty around large order execution. Bloom said the report was false and misleading, and argued that its supply chain is diversified and its scandium use is very small.
What markets are watching next
- Aug. 1: completion deadline for the Trump administration’s AI regulatory framework. Drafts have already been sent to OpenAI, Google and Anthropic. Markets will watch whether Washington tightens large-model safety rules, export controls, compute oversight and government procurement standards. A stricter framework could pressure valuations for AI platform companies and cloud providers. A more innovation-first approach could preserve a risk premium for AI software and infrastructure names.
- Aug. 1: Microsoft’s Xbox price increase takes effect. The direct financial impact on Microsoft is limited, but investors will watch whether higher consumer hardware prices are absorbed by demand, with read-through implications for Apple, Sony and Nintendo.
- Aug. 1: South Korea’s July export growth data. Traders are focused on semiconductors, memory, autos and electronics exports. Another strong print would reinforce the AI hardware recovery narrative and support memory, foundry and broader Asian tech stocks. A weaker figure could recast the latest semiconductor rally in U.S. equities as short covering rather than a fundamental turn.
- Aug. 2: OPEC+ meeting. The market expects a possible September output increase of 188,000 barrels per day. If the hike is confirmed, upside pressure on oil prices may ease, helping inflation expectations. If output is delayed because of a worsening Middle East situation, the crude risk premium could return quickly and push up long-end Treasury yields and inflation trades again.