Global Markets-Microsoft rally lifts stocks, 30-year Treasury yield hits 19-year peak

U.S. stocks gained on Thursday as Microsoft's forecast-beating results eased investor concerns about massive AI spending by companies, while 30-year Treasury yields scaled a 19-year peak after the Federal Reserve left interest rates unchanged on Wednesday, stoking concerns about longer-term inflation. Microsoft MSFT.O rose 14% after the company forecast current-quarter sales and cloud growth that beat expectations, issued a capital expenditure outlook below Wall Street estimates, and said it expects to keep generating cash through the just-started fiscal 2027. Investors have been rattled by rising AI costs at big technology firms even as they report strong earnings. Negative cash-flow reports from Alphabet GOOGL.O and Tesla TSLA.O last week sparked a bout of selling in AI-linked stocks, with chip stocks also under pressure as investors questioned high valuations. "We don't think the AI story is over by any means, but clearly there's scope for bumps along the way," said Sanjiv Tumkur, head of equity research at Rathbones. The Dow Jones Industrial Average .DJI rose 0.68% to 51,945.26, the S&P 500 .SPX gained 1.29% to 7,410.61 and the Nasdaq Composite .IXIC was last up 2.43% at 25,037.38. The MSCI All Country World Price index [.MIWD00000PUS](https://amers2-apps.platform.refinitiv.com/web/apps/quotewebapi?RIC=.MIWD00000PUS) gained 1.30%, to 1,105.11, after earlier falling to its lowest level since June 11. South Korea's KOSPI .KS11 fell 1.23% to end its third consecutive day in the red. The pan-European STOXX 600 .STOXX index rose 0.88%, while Europe's broad FTSEurofirst 300 index .FTEU3 rose 0.89%. Longer-dated Treasury yields extended Wednesday's sharp rise after the Fed's decision to hold interest rates steady raised fears that inflation — already running well above the Fed's target — could climb further. The decision to leave policy on hold drew dissents from three of the 12 FOMC members, who had wanted a quarter-percentage-point hike instead. Fed Chairman Kevin Warsh's preference for less forward guidance has left traders even less certain of the Fed's next move. Warsh noted that bond yields had risen notably since the Fed's last policy meeting, reflecting investors pricing in future rate increases. He welcomed that move, while adding that it did not mean the central bank needed to ratify it with action of its own. "The aversion from Warsh to provide forward guidance is hurting a little bit of credibility here," said Oscar Munoz, head of US economics at TD Securities. "He's pointing to the market kind of doing the job for the Fed, but at some point there has to be some follow-through." A recent uptick in oil prices pushed yields higher ahead of the Fed meeting, as fighting resumed in the war with Iran. Fed funds futures traders are now pricing in 64% odds of a hike at the Fed's September meeting. The interest rate sensitive 2-year Treasury [US2YT=RR](https://amers2-apps.platform.refinitiv.com/web/apps/quotewebapi?RIC=US2YT=RR) yield fell 1.28 basis points to 4.223%, while the yield on benchmark U.S. 10-year notes [US10YT=RR](https://amers2-apps.platform.refinitiv.com/web/apps/quotewebapi?RIC=US10YT=RR) rose 4.51 basis points to 4.667%. Thirty-year yields were last up 6.94 basis points at 5.2124% and reached 5.2444%, the highest since mid-2007. Data on Thursday showed U.S. inflation slowed in June, with the Personal Consumption Expenditures Price Index rising 3.7% in the 12 months through June, after an unrevised 4.1% gain in May — the largest increase since April 2023. Separately, U.S. economic growth slowed in the second quarter amid a widening trade deficit, though an acceleration in consumer spending and robust business investment in AI infrastructure pointed to underlying strength. Oil prices fell on Thursday, as investors weighed talks between Oman and Iran over the Strait of Hormuz even as Washington and Tehran traded strikes on each other's military targets again. The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.77% to 100.01, with the euro EUR= up 0.5% at $1.1521. Sterling GBP= strengthened 0.49% to $1.3432. The Bank of England kept interest rates on hold as expected, but a third policymaker backed a rate hike, citing renewed conflict between the United States and Iran. The Japanese yen gained sharply, sparking speculation of possible intervention by Japanese authorities to shore up the beleaguered currency. It was last up 2.59% against the greenback at 159.16 per dollar. The [Bank of Japan is expected](reuters://realtime/verb=NewsStory/ric=nL4N43T029) to keep rates steady at 1% on Friday. After raising rates in June, a second successive hike would be unusual. Spot gold XAU= rose 0.93% to $4,102.91 an ounce.

Global Markets-Microsoft rally lifts stocks, 30-year Treasury yield hits 19-year peak

Microsoft rally lifts U.S. stocks

Treasury yields hit a 19-year peak

Currencies, oil and gold move after the Fed decision

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