MARKET SNAPSHOT
U.S. stocks rallied as anxiety about AI spending eased. Treasury yields finished mixed as the markets sensed dovishness in Warsh's remarks and the U.S.-Iran war accelerated. Oil futures settled lower after the U.S. hit back at Iran. Gold and silver rose, while the dollar weakened.
MARKET WRAPS
EQUITIES
U.S. stocks rallied as Microsoft's robust earnings report restored momentum to the artificial-intelligence boom.
Anxiety about tech companies' massive AI infrastructure investments subsided but was not erased. After the bell Wednesday, Microsoft reported blockbuster revenue growth at its cloud-computing unit and gains on an Anthropic stake. That revealed the potential payoff for AI investments. At the same time, Facebook owner Meta Platforms said its data-center spending was pinching free cash flow.
The Dow Jones Industrial Average rose 1.2%, rebounding from a plunge Wednesday. The broad S&P 500 gained 1.7%. The tech-heavy Nasdaq Composite jumped 2.8%.
Earlier Thursday, stocks in Asia were mixed.
Japan's Nikkei 225 index climbed 0.7%, and Hong Kong's Hang Seng climbed 0.2%.
In China, the benchmark Shanghai Composite declined 0.6%. The Shenzhen Composite fell 2.5% and the ChiNext Price Index ended 4.0% lower.
South Korean chip stocks led declines, with the Kospi falling 1.2%. SK Hynix shares fell more than 6% and Samsung Electronics reversing earlier gains to trade 0.7% lower, despite reporting a 14-fold surge in second-quarter net profit.
In Australia, the S&P/ASX 200 Benchmark Index fell 0.8%. New Zealand's S&P/NZX 50 Index dropped 1.5%.
COMMODITIES
Oil futures returned some of the previous session's gains after the U.S. hit back at Iran, as expected, for an attack on its bases in Jordan.
Continuing strife around the Persian Gulf region limited losses. "The conflict has somehow morphed from eliminating Iran's nuclear program to opening the Strait of Hormuz," although there doesn't seem to be a plan to reopen the waterway, Mizuho's Robert Yawger said in a note. "Saudi exports through the Red Sea are now risky, and the concept of Iran abandoning their nuclear program and handing over their nuclear dust to the U.S. seems to be highly unlikely."
WTI settled down 1% at $83.59 a barrel and Brent fell 1.9% to $89.03 a barrel ahead of Friday's expiration.
Gold settled 1.6% higher, snapping a two-session losing streak, while silver also rose 1.6%, up for a second-consecutive session.
TODAY'S TOP HEADLINES
U.S. Economic Growth Slowed to 1.5% in Second Quarter
U.S. economic growth slowed in the second quarter, weighed down by strong imports to fuel the artificial-intelligence boom.
The AI surge has become such a huge part of the economy that it's a big growth driver and also affects trade in a way that can offset some of that growth. Specifically, high demand for imported components like semiconductors weighs against the U.S. growth calculation because the products aren't made in the U.S.
At the same time, Thursday's gross domestic product report included positive signs on other fronts. Consumers increased their spending, shrugging off a surge in gas prices fueled by the conflict with Iran. Business investment remained strong as companies kept investing in IT equipment and software for the AI build-out.
Fed's Preferred Inflation Index Cooled but Remained Elevated in June
The inflation gauge tracked by the Federal Reserve cooled in June but remains well above the central bank's 2% target, a challenge that has animated keen speculation about how the Fed is likely to respond under new Chairman Kevin Warsh.
The price index of personal-consumption expenditures declined by 0.1% last month as lower energy prices helped pull down the overall price level, the Commerce Department said Thursday. That yielded a 12-month PCE inflation rate of 3.7%, a decline from 4.1% in May.
Setting aside volatile food and energy categories, a 0.1% price increase in June gave rise to a 12-month core PCE inflation rate of 3.3%, slightly cooler than the 3.4% recorded in May.
Japanese Yen Jumps to 2-Month High Versus Dollar in Possible Intervention
The Japanese yen jumped by 3% to a two-month high against the U.S. dollar on Thursday, raising the prospect that the Japanese government has intervened to prop up the currency after officials stepped up verbal warnings against speculative moves that threaten to accelerate inflation in Japan.
The move came after the yen recently dropped to a 40-year low of 163.94 per U.S. dollar, LSEG data showed.
The dollar dropped to a low of 157.96 Japanese yen on Thursday, according to LSEG. The DXY dollar index, which measures the dollar's value against a basket of currencies, also fell 1% to 99.890.
Diesel Back in Spotlight as Middle East Conflict Escalates
The renewed escalation of conflict in the Middle East is rattling diesel prices even more now, as concerns mount over supply with the approach of the high-demand autumn season.
"We're in a diesel supply crunch right now because none of the Persian Gulf refineries can get product out," said Joe DeLaura, senior energy strategist at Rabobank.
The global shortage, made worse by Ukrainian attacks on Russian refineries and lower Chinese refinery runs, has kept prices rising with implications for economies and inflation.
Apple Sales Exceed $109 Billion, Driven by Strong iPhone Sales Growth
Apple reported record June-quarter sales, powered by strong consumer demand for last year's iPhone lineup and surprising strength for Mac computers, which have been popular for AI uses.
IPhone sales grew 21% in the period, ahead of Wall Street expectations of about 19%, continuing a hot streak for the iPhone 17. Sales of the company's signature product have rallied in the past year after Apple took steps to redesign its software and add a lower-cost option to its smartphone offerings.
Total revenue came in at $109.4 billion for the quarter, about 15% higher than the year-earlier period and slightly above Wall Street's expectation of $108.2 billion.
Amazon Shares Jump as Cloud Sales Accelerate
Amazon.com reported higher revenue from Amazon Web Services on Thursday, continuing a streak of growth for its cloud-computing business driven by artificial-intelligence demand.
Sales by AWS, a major profit driver, grew 37% year-over-year, its fastest growth rate since 2022.
Revenue grew 20% to $200.6 billion. Net income grew to $62.2 billion. Both were ahead of analysts' estimates.
Banks in Talks to Lend $15 Billion for Anthropic Data Center Backed by Google
A data-center developer working with Anthropic is in advanced talks to borrow $15 billion to build a massive new campus and power plant in Texas, with Google providing financial guarantees and chips, according to people familiar with the matter.
Under the deal being discussed, a consortium of banks led by Morgan Stanley would lend $15 billion to Nexus Data Centers to build the campus in Hubbard, Texas, which would have its own natural-gas power plant capable of generating 1.6 gigawatts of electricity. The deal could be announced as soon as today.
To help Nexus raise the debt, Google has provided guarantees for billions of dollars of Anthropic's lease and power-payment obligations in the event the startup defaults, according to people familiar with the matter. Google's support was limited and covered the minimum amount the banks required to get the financing done, one of those people said.
Expected Major Events for Friday
01:00/JPN: Jun Steel Imports & Exports Statistics
01:30/AUS: Jun Financial Aggregates, incl Private Sector Credit
01:30/CHN: Jul CFLP China Manufacturing Purchasing Managers' Index (PMI)
01:30/CHN: Jul CFLP China Non-Manufacturing Purchasing Managers' Index (PMI)
01:30/AUS: 2Q PPI
02:00/SIN: 2Q Employment
02:00/SIN: 2Q Unemployment Rate
02:00/SIN: Jun Money Supply
02:00/SIN: Jun Bank Loans
04:30/JPN: Jun Preliminary Report on Petroleum Statistics
05:00/JPN: Jun Housing Starts
05:00/JPN: Jun Construction Orders
06:30/AUS: Jun International Reserves & Foreign Currency Liquidity
07:00/MAL: Jun Money Supply
07:30/THA: Weekly International Reserves
08:00/TAI: 2Q Advance GDP
08:15/HK: Jun Money Supply
08:30/HK: 2Q Advance GDP
08:59/JPN: Japan Monetary Policy Meeting decision
09:59/PHI: Jun Money Supply (M3)
09:59/HK: Jun Tourism figures
00:00/SKA: Jul Trade data
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