Markets rallied on Thursday, driven by stellar earnings from Meta Platforms and Microsoft that helped counterbalance the Federal Reserve’s decision to leave interest rates unchanged. Meanwhile, President Donald Trump revealed a new trade agreement with South Korea, just days ahead of a key tariff deadline.
Futures Jump as Mega-Cap Techs Impress
Stock futures in the U.S. climbed sharply early Thursday, boosted by blockbuster quarterly results from Meta and Microsoft. As of 03:43 ET , Dow futures were up 171 points (0.4%), S&P 500 futures rose 64 points (1.0%), and Nasdaq 100 futures surged 330 points (1.4%).
Despite a mixed close on Wednesday—following the Fed’s widely expected pause on interest rates—investors responded positively to strong tech earnings and better-than-projected second-quarter GDP data. The upside surprise was attributed largely to a decline in imports.
However, final sales to private domestic purchasers—a measure often used to gauge true economic momentum—climbed just 1.2%, the weakest pace since Q4 of 2022. Still, private payroll data beat forecasts, pointing to persistent labor market strength. Investors now await July’s nonfarm payrolls report on Friday for further clarity.
Positive results from a number of consumer-facing firms also added to the optimistic mood, showcasing the resilience of U.S. households.
U.S. and South Korea Strike Tariff Deal
President Trump announced a new trade agreement with South Korea under which U.S. tariffs on imports from the Asian nation would be set at 15%, down from the originally threatened 25%.
The deal, part of a recent wave of trade moves by the White House, lands just before the administration’s August 1 deadline to enforce stiffer “reciprocal” tariffs. Trump said the pact followed meetings with South Korean officials and includes Seoul’s commitment to invest $350 billion in targeted U.S. projects and to purchase an additional $100 billion in energy products.
While the headline figures are significant, many details remain murky. Analysts noted a lack of clarity around when funds will be transferred, how investments will be structured, and whether any components are legally binding. Capital Economics flagged potential uncertainties regarding the treatment of South Korea’s electronics and pharmaceuticals sectors under upcoming product-specific tariffs.
Fed Holds Rates Amid Policy Divide
The Federal Reserve kept its benchmark interest rate at 4.25%–4.5%, as widely anticipated. The central bank pointed to a “low” unemployment rate, “solid” labor market conditions, and “somewhat elevated” inflation as justification for staying put.
Despite calls from President Trump to aggressively slash rates, Fed Chair Jerome Powell continued to advocate for caution, especially in light of Trump’s own unpredictable tariff strategy. Powell emphasized that it was too early to confirm whether a rate cut would be appropriate at the next meeting in September. He added that the current policy stance is “modestly restrictive.”
However, Powell’s stance wasn’t unanimous. Fed Governors Christopher Waller and Michelle Bowman, both appointed by Trump, dissented and voted for a 25-basis point cut, citing softening signs in employment.
Other central banks also held their rates steady this week, including the Bank of Canada and the Bank of Japan.
Meta Surprises With Ad Strength, AI Outlook
Meta Platforms saw its stock jump in after-hours trading thanks to better-than-expected second-quarter results fueled by its advertising segment and confidence in its AI trajectory.
Revenue rose 22% to $47.5 billion, while net income hit $18.3 billion—both handily beating Wall Street expectations. “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.
The firm’s ad performance was buoyed by an 11% increase in impressions and a 9% rise in pricing. For Q3, Meta expects revenue growth between 17% and 24% year-over-year, although it warned that the fourth quarter could see slower growth due to tough comps.
Meta kept its capital expenditure guidance largely unchanged at $66 billion to $72 billion, hinting at $100 billion in 2026 spending. Analysts have penciled in around $80 billion for 2025. Executives also noted that higher depreciation and employee costs could put “meaningful upward pressure” on expenses in 2026.
Microsoft Posts Strong Cloud Growth, Ramps AI Spending
Microsoft also delivered a strong quarter, with AI investment significantly boosting its cloud platform, Azure. Revenue at Azure jumped 39% in the fiscal fourth quarter, beating estimates and contributing to overall sales of $76.4 billion.
Profit totaled $27.2 billion, or $3.65 per diluted share, exceeding forecasts. The company said it plans to ramp up AI-related capital expenditures in the current quarter to over $30 billion. That’s up from the $24.2 billion reported last period—a 27% year-over-year increase.
Shares in Microsoft, already up more than 22% in 2025, gained over 8% in after-hours trading.
Following Meta and Microsoft’s reports, attention now turns to other tech heavyweights. Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) are both scheduled to report earnings after Thursday’s closing bell, potentially adding more fuel to the market’s momentum.
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