Fed Decision and Big Tech Earnings Dominate Market Attention: Dow Jones, S&P, Nasdaq, Wall Street Futures

U.S. stock futures edged higher on Thursday as investors weighed the Federal Reserve’s latest interest rate decision alongside a fresh wave of earnings from major technology companies. While the Fed left interest rates unchanged, a divided vote and persistent inflation concerns kept markets cautious. Investors also reacted to sharply different post-earnings performances from Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META), as both companies continued to ramp up spending on artificial intelligence.

Futures Edge Higher After Volatile Session

By 01:55 ET (05:55 GMT), Dow Jones futures were up 27 points, or 0.1%, while S&P 500 futures gained 15 points, or 0.2%. Nasdaq 100 futures outperformed, rising 133 points, or 0.5%.

Wall Street closed lower on Wednesday as traders digested comments from Federal Reserve Chair Kevin Warsh following the central bank’s latest policy meeting.

Chipmakers remained under pressure for another session. The Philadelphia Semiconductor Index fell 5.33%, extending its five-day decline to more than 14%, while the Nasdaq 100 officially entered correction territory after falling more than 10% from its recent peak.

Investor enthusiasm for semiconductor stocks has weakened amid growing concerns over whether the massive investment in AI infrastructure, including chips and data centres, can generate sufficient long-term returns. Rising competition from Chinese technology companies has also weighed on sentiment.

Those concerns intensified after Microsoft and Meta Platforms became the first of the major AI-focused technology giants to report quarterly results.

Meanwhile, geopolitical risks remained firmly on investors’ radar after renewed U.S. military strikes inside Iran. Brent crude futures climbed a further 1.4% to $92.01 per barrel after surging roughly 7% during the previous session.

Federal Reserve Leaves Rates Unchanged

The Federal Reserve kept its benchmark interest rate unchanged at a range of 3.5% to 3.75% following its two-day policy meeting, although three policymakers voted in favour of raising rates.

Inflation remained the central issue facing policymakers. Price pressures continue to run well above the Fed’s 2% target, largely due to higher energy costs linked to the ongoing conflict involving Iran.

Although June inflation data came in below expectations, oil prices have remained highly volatile throughout July, reflecting continued uncertainty surrounding developments in the Middle East.

Higher interest rates could help reduce inflationary pressures, but policymakers also risk weakening a labour market already characterised by subdued hiring and relatively low levels of layoffs.

Kevin Warsh, who chaired only his second policy meeting since taking over as Federal Reserve Chair, emphasised that the decision to leave rates unchanged should not be interpreted as a reluctance to act if necessary.

“There was nothing inertial about our discussions,” Warsh said.

Asked whether further rate increases could help curb inflation, Warsh replied that higher rates remained an available tool but added, “I wouldn’t say it’s in isolation.” He also noted that the rise in longer-term Treasury yields since the June meeting may already be contributing to tighter financial conditions.

Long-dated U.S. Treasury yields moved higher as investors searched Warsh’s comments for clues about future policy decisions. Bond yields typically move inversely to prices.

“[T]he vague and arguably counterproductive communications from […] Warsh during the press conference make forecasting the Fed’s next move even trickier than it already was,” said Thomas Ryan, Senior North America Economist at Capital Economics, in a note.

Microsoft Impresses With Cloud and AI Growth

Microsoft delivered another strong quarterly performance, driven by continued momentum in its cloud computing business and growing demand for its AI products.

Revenue for the quarter ended in June increased 18% to $90 billion, while net income climbed 31% to $35.8 billion, comfortably exceeding analyst expectations.

Chief Executive Satya Nadella also revealed that annual revenue from Microsoft’s AI-powered Azure cloud platform exceeded $100 billion for the first time.

Microsoft typically does not disclose Azure’s standalone revenue, making the announcement particularly significant given investor comparisons with Google’s cloud business, which recently projected annual cloud revenue approaching the same milestone.

The company showed no indication that it intends to slow investment in artificial intelligence infrastructure. Capital expenditure reached $41 billion during the June quarter, up nearly 70% from a year earlier, bringing total annual spending to $145.3 billion.

Investors appeared encouraged by Azure’s continued growth despite the heavy investment programme, sending Microsoft shares more than 7% higher in after-hours trading.

Meta Slides Despite Record Revenue

Meta Platforms moved sharply lower after reporting quarterly results, with shares falling more than 7% in extended trading despite posting record second-quarter revenue of $60.8 billion.

Investor attention centred on the company’s higher spending plans. Meta increased its expected capital expenditure for the year to at least $130 billion from a previous forecast of $125 billion, while leaving the upper end of its guidance unchanged at $145 billion.

Management was expected to address investor concerns over AI investment and monetisation during its earnings call, but the immediate market reaction suggested those concerns remained unresolved.

The company also reported free cash flow of less than $1 billion, while quarterly profit declined 14% to $18.3 billion.

Meta’s revenue guidance for the current quarter also fell short of analyst expectations, and the company warned that ongoing legal cases related to the impact of social media on young users could result in significant financial losses.

Attention now turns to Apple and Amazon, with both technology giants scheduled to report earnings later on Thursday.

Qualcomm, Starbucks and Chipotle Also Report

Outside the largest technology companies, Qualcomm (NASDAQ:QCOM) shares declined in after-hours trading after the chipmaker issued weaker-than-expected guidance for the current quarter.

The company also indicated it plans to increase product prices to offset rising manufacturing and memory costs. Chief Executive Cristiano Amon said the semiconductor industry continues to face higher production expenses and supply chain constraints linked to growing demand for AI data centres.

Qualcomm reported adjusted third-quarter earnings per share of $2.21, slightly below FactSet estimates. Revenue declined 4% to $9.95 billion but still exceeded analyst forecasts.

Starbucks (NASDAQ:SBUX) reported quarterly results ahead of expectations, supported by improving customer traffic in North America and continued progress under its turnaround strategy. Its shares gained around 4% in extended trading.

Chipotle Mexican Grill (NYSE:CMG) also delivered better-than-expected quarterly earnings and revenue, helped by restaurant expansion and branding initiatives. The company raised its full-year comparable sales outlook, sending its shares higher after the closing bell.

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