Global stock markets experienced a significant rally, driven primarily by Microsoft's stellar earnings report. The Dow Jones Industrial Average rose 1.2% to 52,209.57, the S&P 500 gained 1.7% to 7,437.99, and the Nasdaq Composite was up 2.8% at 25,122.18. This surge marked the best day in a month for the S&P 500 and Nasdaq. Microsoft's stock alone jumped over 15%, resulting in a historic $450 billion increase in its market value, the largest single-day dollar gain ever for a company on Wall Street. This boost was fueled by better-than-expected quarterly sales and cloud growth, and a forecast of capital expenditures below estimates, indicating continued cash generation through fiscal 2027.
Microsoft's positive report also lifted the broader chip sector, assuaging investor concerns about the return on investment for massive AI infrastructure spending. The PHLX chip index surged 8.2%, with Micron Technology jumping 18.4%, Sandisk soaring 26%, and Advanced Micro Devices (AMD) rising 13%. This rebound for chip stocks followed recent losses. Jed Ellerbroek, a portfolio manager, noted that Microsoft's performance might shift the company from a "battleground" stock, where investors are undecided on AI spending ROI, into a more favorably viewed category.
Despite the stock market rally, the bond market continued to show worries about inflation. The yield on the 30-year Treasury bond ticked up to 5.22% from 5.20%, reaching a 19-year peak. This reflects investors' expectations for potentially persistent inflation and economic growth. Microsoft's robust performance, particularly its Azure cloud business growth, was attributed to customers adopting its AI offerings. Notably, Microsoft did not announce a significant increase in its AI investment plans, unlike some other Big Tech rivals, which helped ease concerns about such spending eating into cash flows without guaranteed profits.
