Wall Street ends sharply higher as Microsoft rally lifts tech stocks

Wall Street bounces back with strong rally

Wall Street staged a sharp recovery on Thursday, with major indexes closing firmly higher after a brutal sell-off the previous session. The turnaround was powered by a massive surge in Microsoft shares, which jumped more than 8% following strong quarterly results.

The tech-heavy Nasdaq Composite led the charge, soaring 3.2%. The S&P 500 climbed 2.1%, while the Dow Jones Industrial Average rose nearly 500 points. The rebound erased a significant portion of Wednesday's losses, when concerns over slowing economic growth had rattled markets.

Microsoft's Azure cloud results fuel optimism

Microsoft's blowout earnings were the primary catalyst for the rally. The company reported better-than-expected revenue from its Azure cloud computing division, easing fears that corporate spending on AI infrastructure might be cooling. Investors took the results as a signal that demand for cloud services and artificial intelligence remains strong.

The stock's surge added roughly $200 billion to Microsoft's market capitalisation, making it the single biggest contributor to the S&P 500's gain for the day. The performance also lifted the entire technology sector, with the Philadelphia Semiconductor Index rising over 4%.

AI stocks rebound across the board

The positive sentiment spilled over to other AI-related names. Nvidia, the chipmaker that has become a bellwether for the AI trade, rose more than 5%. Amazon gained over 3%, while Nebius, a cloud infrastructure company, jumped nearly 10%. The coordinated rally suggested that investor appetite for AI stocks, which had cooled in recent weeks, remains intact.

Analysts pointed to Microsoft's Azure growth as a key indicator that enterprise spending on AI and cloud services is not slowing down. "This is a strong vote of confidence for the entire AI ecosystem," one market strategist noted.

Rising bond yields fail to dampen mood

Despite the equity rally, bond yields moved higher. The yield on the benchmark 10-year US Treasury note rose to 4.25%, reflecting expectations that the Federal Reserve may keep interest rates elevated for longer. Typically, rising yields weigh on stocks, especially high-growth technology shares. But Thursday's action showed investors prioritising strong corporate earnings over macro concerns.

The divergence between stocks and bonds highlighted the market's current focus on company-specific fundamentals. With the Fed's next policy meeting still weeks away, earnings reports are driving short-term trading decisions.

What to watch next

All eyes now turn to earnings from Apple and Amazon, both due after the closing bell next week. Their results will provide further clues on consumer spending and cloud demand. Markets are also watching for any shift in Fed rhetoric as key inflation data is set to be released early next month.