'Surprise Earnings' Push Microsoft Up 5%... Meta Jumps 11%
Microsoft Joins '4 Trillion Dollar Club' After Nvidia
Apple and Amazon to Announce Earnings After Market Close
June PCE Price Index Up 2.6% Year-on-Year, Exceeds Expectations
Probability of Rate Hold in September Rises to Over 60%
The three major indices of the US New York stock market are rising in early trading on the 31st (local time). The market is being driven by the surprise earnings reports released the previous day by Microsoft (MS) and Meta Platforms, the parent company of Facebook. During the session, MS surpassed a market capitalization of $4 trillion, becoming the second company in the world after Nvidia to join the '4 Trillion Dollar Club' among publicly listed firms.
As of 10:34 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average (Dow) is up 70.69 points (0.16%) from the previous trading day at 44,531.97. The large-cap S&P 500 index has risen 42.49 points (0.67%) to 6,405.39, while the tech-heavy Nasdaq index is trading up 214.92 points (1.02%) at 21,344.59.
By stock, MS is up 5.01% on strong earnings. During the session, MS reached $538.97 per share, surpassing a $4 trillion market cap. MS is the second company in the world to exceed a $4 trillion market cap, following Nvidia earlier this month. Meta is also soaring 11.87% on its own strong earnings. Nvidia is showing a solid gain of 1.06%.
The strong earnings from Big Tech are creating a positive atmosphere in the market. MS announced that its second quarter revenue this year was $76.44 billion and net profit was $27.23 billion, up 18% and 23% year-on-year, respectively. Earnings per share (EPS) was $3.65, beating market research firm LSEG's estimate of $3.37. Meta also posted second quarter revenue of $47.52 billion and EPS of $7.14, both exceeding estimates ($44.8 billion and $5.92, respectively). As investments in artificial intelligence (AI) are translating into improved results, investor sentiment is improving.
Investors are waiting for the earnings reports of Apple and Amazon, which will be released after the market closes today.
The fact that the United States is rapidly reaching trade agreements with major trading partners, including Korea, just one day before the expiration of the mutual tariff suspension (August 1), is also easing concerns over tariff policy. The United States and Korea concluded tariff negotiations the previous day. Korea pledged a total of $450 billion in investment and energy purchases in the United States, while the US agreed to lower mutual tariffs and automobile tariffs from 25% to 15%, respectively. As a result, the number of countries with which the US has reached trade agreements before the tariffs take effect the next day has expanded to include Korea, the United Kingdom, the European Union (EU), Japan, Vietnam, Indonesia, the Philippines, Thailand, and Cambodia.
The 'tariff truce' between the United States and China is also expected to be extended. US Treasury Secretary Scott Besant stated that "the framework for an agreement is being established" as a result of negotiations with China. The two countries held their third high-level trade talks in Stockholm, Sweden, on July 28-29 and reached a tentative agreement to further extend mutual tariff reduction measures. Currently, the US and China have each reduced tariffs on the other by 115%, with the US applying a temporary rate of 30% and China 10%, but this measure is set to expire on August 11.
The June Personal Consumption Expenditures (PCE) price index, released this morning, exceeded market expectations. According to the US Department of Commerce, last month's PCE price index rose 2.6% year-on-year. This exceeds the expert forecast of 2.4% and represents a larger increase than in May (2.5%). The core PCE price index, which excludes volatile energy and food prices, rose 2.8% year-on-year, beating the market expectation of 2.7%. This is the same level as in May. It is analyzed that the tariff hike policy has led to higher goods prices, accelerating the rise in inflation.
This inflation data was released just one day after the US Federal Reserve (Fed) kept its benchmark interest rate unchanged at 4.25-4.5% per year. Fed Chair Jerome Powell said at a press conference following the Federal Open Market Committee (FOMC) meeting the previous day that, regarding inflation expectations due to tariff policy, "The impact of tariffs is starting to be reflected more clearly in the prices of some goods," adding, "We need to wait and see the overall effects on economic activity and inflation."
In the market, expectations for a rate cut are rapidly fading. According to the CME FedWatch tool, the probability of a rate hold in September stands at 61% as of today. This is up from 39.2% a week ago and 52.4% the previous day, and rose again after the release of the PCE price index.
The labor market remained solid. According to the US Department of Labor, new unemployment claims for the week of July 20-26 totaled 218,000. This is an increase of 1,000 from the previous week (217,000), marking the first uptick in seven weeks, but remains at a low level. It is also 4,000 fewer than the market estimate of 222,000.
Brett Kenwell, US investment analyst at eToro, said, "Rate cuts are good, but they are not essential for US stock gains," adding, "Rather, earnings are driving the market trend. Today, the focus is especially on the results of MS and Meta, and the S&P 500's forward earnings expectations have returned to record highs."
US Treasury yields are showing slight weakness. The 10-year US Treasury yield, the global bond benchmark, is down 2 basis points (1bp=0.01 percentage point) from the previous trading day to 4.34%. The 2-year US Treasury yield, which is sensitive to monetary policy, is moving at around 3.93%, the same level as the previous day.
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