Twenty-four hours after the Federal Reserve spooked Wall Street into its worst day since April 2025, the market did a complete about-face. Strong earnings - led by a monster quarter from Microsoft - sent stocks roaring back. But look under the rally and the bond market is still flashing a warning.
Microsoft powers the comeback
The star of the day was Microsoft (MSFT), which surged about 17% after its cloud business blew past expectations - Azure crossed $100 billion in annual revenue for the first time. That single move did a lot of the heavy lifting:
- Dow: +1.1%
- S&P 500: +1.5%
- Nasdaq: +2.5% - the leader, clawing back after the Nasdaq-100 briefly entered a correction on Wednesday
The chip snapback
The semiconductors that led Wednesday's rout led Thursday's rebound. A gauge of chip giants rallied about 8%, lifting Nvidia (NVDA), Micron (MU) and AMD (AMD). Equipment maker Lam Research (LRCX) jumped 14% on record quarterly revenue and earnings. After days of pain (see Wednesday's recap), the AI trade found its footing again.
Meta was the odd one out
Not everyone joined the party. Meta (META) slipped on disappointing guidance and its eye-watering AI capex outlook of $125-145 billion. When a market is nervous about spending, "we'll spend even more" isn't the message investors want.
The warning under the rally
Here's the part the green screen hides: the 30-year Treasury yield spiked to a multidecade high near 5.24%. The stock market cheered earnings, but the bond market is still uneasy about the Fed's hawkish hold and stubborn inflation. Rising long-term yields are a headwind that doesn't disappear just because tech had a good day.
Deals and other movers
- MarketAxess (MKTX) soared roughly 30% after Intercontinental Exchange (ICE) agreed to buy the bond-trading platform in a $5.7 billion all-cash deal.
- EMCOR climbed about 14% on a blowout earnings beat.
After the bell: Apple and Amazon
The week's biggest test comes tonight. Apple (AAPL) - fresh off its $5 trillion milestone this week - and Amazon (AMZN) both report after the close. Their results, and their AI spending plans, will set the tone into August.
The Takeaway
Thursday was a relief rally with a caveat. Microsoft proved that real earnings can still power the market higher, and the chip snapback showed the AI trade isn't dead. But the 30-year yield at a multidecade high is a reminder that the Fed's inflation problem hasn't gone anywhere. Constructive, but stay alert - with Apple and Amazon due tonight and yields climbing, this rebound still has to prove it's more than a bounce. Want to see which names look cheap after the whipsaw? Screen them in the stock screener.
This article is for informational purposes only and is not financial advice. Always do your own research before investing.
