Stock market today: Nasdaq, Dow, S&P 500, Nasdaq futures jump as Big Tech earnings, trade deals lift spirits

US equity futures, led by the Nasdaq and S&P 500, surged on Thursday, propelled by strong earnings from Meta and Microsoft that reinforced optimism in Big Tech's AI investments, with Meta up 12% and Microsoft over 8%, nearing a $4 trillion valuation. This market enthusiasm unfolded as bets for a September Fed rate cut fell below 40% post-Chair Powell's cautious remarks, ahead of the PCE index release. Elsewhere, Carvana and eBay reported robust results, while AB InBev shares slid on disappointing sales volumes and Samsung Electronics' chip profit plummeted due to inventory costs and export controls, illustrating a mixed corporate earnings landscape.

Analysis

The market is exhibiting a strong, yet narrowly focused, rally driven by exceptional results from AI-centric mega-cap technology firms. Meta (META) and Microsoft (MSFT) delivered significant earnings beats and robust guidance, propelling their shares up 12% and 8% respectively in pre-market trading and validating their massive AI capital expenditures. This enthusiasm, however, is not universal across the technology sector. Qualcomm (QCOM) and Arm (ARM) shares fell approximately 6% each due to a lack of near-term catalysts and concerns over profit impact from new investments, while Samsung's chip division reported a sharp profit decline linked to inventory costs and a loss of market share in high-bandwidth memory. Outside of tech, the corporate landscape is mixed: Carvana (CVNA) and eBay (EBAY) demonstrated consumer resilience with strong results, whereas Anheuser-Busch InBev (BUD) slumped over 9% on weaker-than-expected sales volumes in key emerging markets. This corporate divergence is set against a cautious macroeconomic backdrop, with the Federal Reserve holding rates steady and Chair Powell's commentary reducing market expectations for a September rate cut to below 40%, increasing the focus on upcoming inflation data like the PCE index.

Key Decisions for Investors

• Given the outperformance of Meta and Microsoft, investors should prioritize exposure to companies demonstrating clear monetization of AI investments, while exercising caution with firms where AI-related catalysts are more speculative or long-dated.
• The significant divergence in performance between top-tier tech and other firms like AB InBev, Qualcomm, and Samsung underscores the need for a selective, stock-picking approach rather than relying on broad market momentum.
• Monitor upcoming PCE inflation data closely, as the Federal Reserve's cautious stance and diminished rate cut expectations introduce a macro risk that could challenge the current equity rally if inflation proves persistent.
• While results from Carvana and eBay suggest consumer resilience, it is crucial to scrutinize the quality of earnings, particularly for companies like Carvana where profits are heavily reliant on financial activities like loan sales rather than core operations.