Dow futures surged on Thursday, driven in part by impressive tech earnings that mitigated signals from the Federal Reserve suggesting a September interest rate cut may be unlikely.  The Dow futures contract increased by 171 points, or 0.4%, while S&P 500 futures rose by 64 points, or 1.0%, and Nasdaq 100 futures experienced a surge of 330 points, or 1.4%.  The principal indices on Wall Street exhibited a mixed performance at the conclusion of trading on Thursday, as investors evaluated the Federal Reserve’s decision to maintain interest rates at their current levels following its most recent meeting and the accompanying commentary regarding prospective policy measures. Sentiment was strengthened ahead of the Fed’s announcement by a better-than-expected reading of second-quarter U.S. economic activity, primarily due to a decline in imports. Nevertheless, final sales to private domestic purchasers, a metric regarded by economists and policymakers as an indicator of fundamental economic growth, increased by 1.2% — marking the slowest rise in domestic demand since the fourth quarter of 2022. Nonetheless, an alternative gauge of private payrolls exceeded forecasts, indicating a degree of robustness in the labor market. This week will see the release of additional labor data, highlighted by the crucial nonfarm payrolls report for July, scheduled for Friday. Robust returns from a range of consumer-oriented firms further emphasized the comparative resilience of the American consumer.

The U.S. and South Korea have reached a trade agreement whereby Washington will impose a 15% tariff on imports from South Korea, a reduction from the previously threatened 25% rate, as stated by President Trump. The recent announcement marks the latest in a series of trade agreements put forth by the White House in the past few days, coinciding with an approaching self-imposed deadline of August 1 for the enforcement of increased “reciprocal” tariffs. Trump announced the decision after a meeting with officials from South Korea, a significant trading partner of the U.S. that exports essential goods such as semiconductor technology and automobiles. Seoul has committed to investing $350 billion in designated U.S. projects as chosen by Trump, along with an additional $100 billion for energy products, as stated by Trump, reflecting a previous agreement reached with the European Union last weekend. However, similar to numerous recent trade agreements, many specifics of the arrangement with South Korea remain ambiguous — particularly regarding the framework of Seoul’s financing, the timeline for fund disbursement, and the extent to which the terms are obligatory. In a note, analysts at Capital Economics highlighted that there are also uncertainties regarding the treatment of electronics and pharmaceuticals exports from South Korea once sector-specific tariffs are disclosed.

The Federal Reserve maintained its key policy rate within the range of 4.25% to 4.5%, aligning with prevailing expectations. The central bank referenced a “low” unemployment rate, “solid” labor market conditions, and “somewhat elevated” inflation as contributing factors to its decision. Wednesday’s decision was influenced by the mounting pressure on Fed Chair Jerome Powell from Trump to significantly and swiftly reduce borrowing costs in order to stimulate economic activity. Despite Trump’s ongoing criticism of his leadership and suggestions of potential dismissal before the conclusion of his term next year, Powell has maintained a largely consistent stance favoring a cautious, wait-and-see approach to policy actions. This is influenced in part by the uncertainty surrounding the unclear consequences of Trump’s aggressive tariff measures. Powell maintained a consistent position in his recent remarks, indicating that it remains premature to determine whether the Fed will lower rates at its upcoming meeting in September. He stated that the policy is somewhat restrictive and does not constrain the broader economy. However, there was disagreement among the Federal Reserve’s rate-setting officials regarding Powell’s stance, as Governors Christopher Waller and Michelle Bowman — both appointed by Trump — cast their votes in favor of a 25-basis point rate cut this month. Officials highlighted concerns regarding a decelerating labor market as justification for a reduction. Beyond the borders of the United States, the Federal Reserve was not isolated in its choice to maintain rates at their current levels in recent hours. The Bank of Canada maintained its policy rate on Wednesday, mirroring the decision of the Bank of Japan on Thursday.

Meta Platforms experienced a significant increase in its share price during after-hours trading, driven by robust performance in its essential advertising sector, which led to sales that exceeded expectations for the April-to-June timeframe. This development has heightened optimism regarding the potential returns on the company’s investments in artificial intelligence. Sales increased by 22% in the second quarter, reaching $47.5 billion, while net income was reported at $18.3 billion, exceeding Wall Street expectations. Analysts at Vital Knowledge noted that Meta’s top-line results were supported by an 11% rise in ad impressions alongside a 9% increase in ad pricing. For the current quarter, Meta projects a revenue increase of 17% to 24% compared to the same period last year, while noting that a challenging year-over-year comparison may result in decelerated sales growth in the fourth quarter. Meta, similar to several of its Big Tech counterparts, has outlined intentions to invest significantly in AI, maintaining its capital expenditures forecast at $66 billion to $72 billion, a slight adjustment from the previous range of $64 billion to $72 billion, while suggesting that capex for 2026 will approach $100 billion. Analysts have projected that next year’s figure will reach $80 billion. Meta executives cautioned that a surge in depreciation alongside increased compensation may lead to “meaningful upward pressure” on operating expenses for 2026. “The Meta report presents a notably strong performance, with the sole adverse observation being management’s caution regarding costs projected for 2026,” stated the analysts from Vital Knowledge.

AI significantly influenced the outcomes at Microsoft, with the emerging technology enhancing performance within the software giant’s cloud computing division. In the fiscal fourth quarter, revenue from the unit referred to as Azure surged by 39%, exceeding projections and contributing to total sales of $76.4 billion across the group. On a net basis, profit amounted to $27.2 billion, translating to $3.65 per diluted share, which also exceeded expectations. Executives indicated that Microsoft anticipates an ongoing increase in expenditures on AI, as it aims to swiftly expand the data centers that support these models. CFO Amy Hood indicated that Microsoft anticipates capital expenditures exceeding $30 billion in its first quarter, following a 27% year-over-year increase in capex to $24.2 billion in the previous period. Microsoft’s shares, having already increased by more than 22% this year, experienced an additional rise of over 8% in after-hours trading. Meta and Microsoft have recently joined the ranks of the “Magnificent Seven,” a designation for a select group of mega-cap tech stocks that have disclosed their quarterly earnings. Further results are due out after the closing bell on Thursday from iPhone-maker Apple and e-commerce titan Amazon.