U. S.
stock index futures rose on Thursday, recovering from a sharp selloff triggered by uncertainty over Federal Reserve policy.
Microsoft's stronger-than-expected quarterly forecast helped reassure investors concerned about rising AI costs.
Microsoft shares surged 9% in premarket trading after the company forecast current-quarter sales and cloud growth above expectations.
Its capital expenditure outlook came in below Wall Street estimates, and it plans to continue generating cash in fiscal 2027.
Investors have been unsettled by increasing AI-related expenses among major tech firms despite strong earnings.
Last week, negative cash-flow results from Alphabet and Tesla led to selling pressure on AI-linked stocks and chip manufacturers, contributing to a 10% drop in the Nasdaq from its early June peak by Wednesday.
Meta Platforms' stock fell 8.5% after reporting a 91% decline in second-quarter free cash flow, highlighting the financial impact of its costly AI developments.
Apple and Amazon are scheduled to release earnings after markets close on Thursday.
Wednesday's market decline was the largest since June 10 for the S&P 500, following the Fed's decision to keep interest rates steady between 3.50% and 3.75%.
Mixed signals from new Fed Chair Kevin Warsh left investors uncertain about future rate movements.
"Despite the divided vote, there was nothing really in Warsh's remarks that made it clear that a September hike was in the offing," said Matthew Ryan, head of market strategy at Ebury.
Bond markets reacted nervously, with the 30-year Treasury yield reaching its highest level in 19 years as concerns about the Fed's monetary policy outlook and inflation protection grew.
According to CME Group's FedWatch tool, traders assign a 63% probability to a 25 basis point rate hike at the Fed's September meeting.
At 7:26 a. m.
ET, Dow E-minis were up 209 points (0.4%), S&P 500 E-minis rose 45.5 points (0.62%), and Nasdaq 100 E-minis gained 365.5 points (1.34%), signaling early market optimism.
Other notable stock movements included Qualcomm dropping 4.2% after forecasting fourth-quarter profits below estimates and expecting faster-than-anticipated revenue declines from Apple products.
Cybersecurity firm Fortinet's shares rose 11.3% after raising its annual revenue forecast, reflecting strong enterprise spending amid increasing data security concerns.
Starbucks climbed 6.5% following an upward revision of its annual sales and profit forecasts.
Nearly half of S&P 500 companies have reported second-quarter results, with 85.2% beating analysts' profit estimates, exceeding the average 68% beat rate, according to LSEG IBES data.
Market conditions remain fragile as significant declines in leading AI beneficiaries have unsettled investors. South Korea's KOSPI fell 1.23%, marking its third consecutive day of losses.
"We don't think the AI story is over by any means, but clearly there's scope for bumps along the way," said Sanjiv Tumkur, head of equity research at Rathbones.
Europe's STOXX 600 benchmark gained 0.48%, while the MSCI All Country World Price Index edged up 0.11% after two sessions of losses.
Renewed tensions in the Middle East complicate market outlooks, raising concerns about the inflationary impact of rising oil prices, which have climbed above US$92 per barrel after a recent decline helped contain June inflation.
Three Fed policymakers dissented in favor of a rate hike on Wednesday, fueling speculation about internal debate as inflation pressures persist.
RBC Economics strategists wrote, "As the Fed heads into the second half of the year...
we expect (it) will be faced with the reality of inflation as a persistent issue."
The rate hold offers the Fed time to review inflation data before the next meeting, but the likelihood of a hike in September has risen to 65.2% from 57.3% a week ago, per CME FedWatch.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, commented, "It is folly to hike rates in the face of a supply-shock-bout of inflation."
He noted that rate hikes typically address demand-driven inflation, but current inflation is driven mainly by potential oil supply constraints due to disruptions in the Strait of Hormuz and attacks on alternative shipping routes.
