U.S. stock futures surged Thursday morning after stellar earnings from tech heavyweights Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) helped shift attention away from the Federal Reserve’s decision to hold interest rates steady. Meanwhile, President Donald Trump announced a new trade agreement with South Korea, ahead of the August 1 deadline for new “reciprocal” tariffs.
Futures Climb on Tech Momentum
By 03:43 ET, futures on the Dow Jones had gained 171 points (0.4%), the S&P 500 rose by 64 points (1.0%), and Nasdaq 100 futures climbed 330 points (1.4%). The lift was largely attributed to strong quarterly earnings from major tech firms, which softened investor concern over a potentially delayed interest rate cut from the Fed in September.
On Wednesday, Wall Street finished mixed after the Fed’s rate announcement. A stronger-than-expected GDP reading for the second quarter—driven by a drop in imports—provided some optimism. However, domestic demand, as measured by final sales to private domestic purchasers, rose just 1.2%, the slowest pace since late 2022.
Separate labor market data also indicated strength, with a better-than-forecast private payrolls report hinting at continued job resilience. The July nonfarm payrolls report, a key economic indicator, is due Friday.
A handful of solid results from consumer-oriented companies also supported sentiment, reinforcing the perception of a sturdy U.S. consumer.
Trade Deal With South Korea
President Trump announced that the U.S. and South Korea had struck a trade agreement under which Washington would apply a 15% tariff on imports—lower than the initially threatened 25% rate.
The deal is part of a flurry of trade announcements from the administration ahead of its self-imposed August 1 deadline to implement enhanced “reciprocal” duties. Following talks with South Korean officials, Trump said Seoul had agreed to invest $350 billion in U.S. projects and commit to an additional $100 billion in energy purchases.
The structure of South Korea’s investment and the enforceability of its commitments remain vague, echoing similar concerns raised after recent deals with other global partners. Analysts at Capital Economics highlighted lingering uncertainty around how South Korea’s electronics and pharmaceuticals sectors will be affected by upcoming product-specific tariffs.
Fed Holds Rates, Internal Dissent Surfaces
As expected, the Federal Reserve held its benchmark interest rate steady in the 4.25%–4.5% range. The Fed pointed to a “low” unemployment rate, a “solid” labor market, and “somewhat elevated” inflation as reasons for its cautious stance.
Chair Jerome Powell continues to face mounting political pressure from Trump to aggressively lower borrowing costs to stimulate economic activity. Despite Trump’s public criticism—and implied threats to remove Powell—he maintained a cautious tone.
Powell reiterated that it’s premature to signal a rate cut in September and said monetary policy is only “modestly restrictive,” suggesting it’s not yet weighing down the broader economy.
However, not all Fed officials were aligned with Powell. Governors Christopher Waller and Michelle Bowman, both appointed by Trump, favored a 25-basis point rate cut this month, citing signs of labor market softening as justification.
Other central banks also kept rates unchanged this week, including the Bank of Canada and the Bank of Japan.
Meta Soars on Ad Growth and AI Hopes
Meta Platforms shares soared in after-hours trading thanks to strong second-quarter performance driven by its core advertising business and optimism surrounding AI initiatives.
Sales climbed 22% to $47.5 billion, and net income hit $18.3 billion, both surpassing analyst expectations. Analysts at Vital Knowledge noted the results were driven by an 11% increase in ad impressions and a 9% rise in ad prices.
Looking ahead, Meta expects Q3 revenue to grow between 17% and 24% year-over-year but cautioned that growth in Q4 could slow due to a tough comparison base.
Meta reaffirmed its capital spending forecast of $66 billion to $72 billion, up slightly from a prior range of $64 billion to $72 billion, and hinted at a massive $100 billion in capex for 2026. Analysts predict next year’s spending could reach $80 billion.
Executives also flagged that higher depreciation and compensation could create “meaningful upward pressure” on operating costs in 2026.
“Bottom line: the Meta report is extremely robust, and the only negative takeaway is the warning management issues about 2026 costs,” said analysts at Vital Knowledge.
Microsoft Leans Into AI
Microsoft also delivered a standout quarter, with artificial intelligence driving big gains in its cloud business. Azure, its flagship cloud platform, saw revenue jump 39% in the fiscal fourth quarter, beating expectations and contributing to total revenue of $76.4 billion.
Net income rose to $27.2 billion, or $3.65 per share—well ahead of estimates.
CFO Amy Hood said capital expenditures will top $30 billion in the first quarter, up from $24.2 billion in the prior period, as the company continues to ramp up investment in AI infrastructure.
Microsoft stock, which had already climbed over 22% this year, rose more than 8% in post-market trading.
With Meta and Microsoft now having posted results, the spotlight turns to other “Magnificent Seven” members, including Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), both due to report earnings after Thursday’s closing bell.
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