Dow leaps 550 points, Nasdaq surges as tech stocks rally on Microsoft earnings

Wall Street bounces back in broad rally

US stocks staged a powerful comeback on Thursday, erasing the previous session's losses. The Dow Jones Industrial Average surged more than 550 points, while the S&P 500 and the Nasdaq Composite also posted sharp gains. The rally was broad-based, with technology and semiconductor stocks leading the charge.

The rebound came as traders returned from a selloff triggered by lingering concerns over inflation and monetary policy. Thursday's move higher signaled renewed risk appetite, even as bond yields remained elevated.

Chip and memory stocks fuel tech surge

The technology sector was the standout performer of the day. Chip and memory stocks rallied hard, with several major names notching double-digit percentage gains. The Philadelphia Semiconductor Index jumped sharply, reflecting optimism about demand and supply conditions in the industry.

Microsoft was a key driver after the software giant reported quarterly earnings that beat analyst expectations. The company's cloud computing and AI segments showed strong growth, boosting investor confidence. Shares of Microsoft rose significantly, lifting the broader market.

Other megacap tech stocks also participated in the rally. The positive sentiment extended to the Nasdaq, which had been under pressure in recent weeks. The index closed sharply higher, recovering much of the ground lost in the prior day's decline.

Inflation data and Fed stance in focus

Investors also had fresh economic data to digest. The latest inflation reading came in line with expectations, showing that price pressures are moderating but remain above the Federal Reserve's target. The data did little to shift expectations for the central bank's next move on interest rates.

The Fed has maintained a cautious stance, signalling that it needs to see more evidence of inflation cooling before considering rate cuts. Thursday's data reinforced the view that the Fed will hold rates steady at its next meeting. Treasury yields, which had hit multiyear highs earlier in the week, remained elevated but did not derail the equity rally.

Market participants are now pricing in a higher probability of a rate hold through the end of the year. The focus remains on corporate earnings and economic indicators for clues on the path ahead.

Amazon and Apple earnings on deck

Attention is now turning to the next batch of megacap earnings. Amazon and Apple are both scheduled to report their quarterly results after the closing bell. These reports are expected to be major catalysts for the market.

Analysts are watching Amazon's cloud computing business and retail margins closely. For Apple, focus will be on iPhone sales trends and services revenue. Strong results from either company could extend the tech rally into Friday's trading session.

Bond markets also remained in focus. The yield on the 10-year Treasury note was hovering near multiyear highs, a factor that has weighed on growth stocks in recent months. However, Thursday's equity rally suggested that investors are looking past the rate environment, at least for now.

What to watch next

Traders will be closely monitoring the Amazon and Apple earnings calls for any forward guidance. The market's ability to sustain the rally will depend on whether these results justify current valuations. Broader market sentiment will also hinge on next week's jobs data and any fresh signals from the Fed.