US Stocks Rise as Microsoft Counters Bond Rout: Markets Wrap

(Bloomberg) — US stocks rose as strong growth at Microsoft Corp. reassured investors that expensive bets on AI are starting to pay off, outweighing resurgent worries about inflation that are pummeling long-dated bonds.

S&P 500 futures climbed 0.2%. Nasdaq 100 contracts bounced 0.4% after the index slipped into a technical correction. Microsoft jumped 8% in premarket trading as its cloud unit grew at the fastest clip in four years while the company held the line on spending. Yields on 30-year Treasuries rose two basis points, extending their run at the highest level since 2007.

Traders are navigating a complex backdrop as they factor in volatility in the artificial-intelligence trade after a strong rally, sharp swings in oil prices and a Federal Reserve that’s offering little guidance on policy.

Bond investors are growing increasingly concerned that Fed Chair Kevin Warsh won’t manage to rein in inflation that has run above target for five straight years. Amid a slate of earnings from the biggest AI spenders, they are also looking for signs that those vast outlays will pay off.

While Microsoft’s results were well received, Meta Platforms Inc. dropped 8.3% after a disappointing revenue forecast. Investors will get another look at the health of Big Tech when Amazon.com Inc. and Apple Inc. report after the close.

“We’ve seen the hyperscalers that have been wanting to spend more without backing up with profits getting penalized,” said Rory McPherson at Magnus Financial Discretionary Management. “But then you have Microsoft, which isn’t spending any more than it forecast and is growing its cloud business. That’ll remain key, particularly for Amazon.”

Oil continued its advance as the US retaliated against Iranian strikes on American forces with a fresh wave of attacks, escalating a conflict that is spreading wider across the Middle East. Brent rose 1.3% to $91.87 a barrel, while West Texas Intermediate was above $85.

Attention now turns to the Bank of England’s policy decision on Thursday, as well as an updated look at the Fed’s preferred inflation gauge.

Corporate Highlights:

Samsung Electronics Co. posted a 250-fold surge in chip profits and now expects memory shortages to worsen next year, reflecting the relentless pace of a global AI infrastructure buildout. Meta Platforms Inc. gave a disappointing quarterly revenue forecast, stepping up pressure on Chief Executive Officer Mark Zuckerberg to allay investor concerns that the company isn’t swiftly benefiting from its massive outlay on artificial intelligence. Microsoft Corp.’s cloud unit grew at the fastest clip in four years and the pace is accelerating, suggesting the company’s AI and computing services are making inroads with customers. European earnings: BMW’s carmaking profit Beats expectations; Societe Generale SA raised its profitability target for the year and announced a €1.5 billion ($1.7 billion) share buyback; Sanofi reported better-than-expected profit growth and nudged its guidance higher; BBVA second-quarter net income beat estimates; Schneider Electric SE raised its sales and profit guidance; ING Groep NV profit for the second quarter topped analysts’ estimates; Anheuser-Busch InBev posted volume growth that narrowly missed expectations; Adidas missed; Shell Plc second-quarter profit jumped on the back of an oil-refining boom. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.4% as of 9:16 a.m. London time S&P 500 futures rose 0.2% Nasdaq 100 futures rose 0.3% Futures on the Dow Jones Industrial Average rose 0.2% The MSCI Asia Pacific Index fell 0.3% The MSCI Emerging Markets Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1448 The Japanese yen fell 0.1% to 163.65 per dollar The offshore yuan was little changed at 6.7555 per dollar The British pound fell 0.1% to $1.3352 Cryptocurrencies

Bitcoin rose 0.8% to $63,947.09 Ether rose 1.1% to $1,902.48 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.69% Germany’s 10-year yield advanced two basis points to 3.18% Britain’s 10-year yield was little changed at 5.04% Commodities

Brent crude rose 1% to $91.68 a barrel Spot gold fell 0.3% to $4,054.30 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling.

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