U.S. stocks ended sharply higher on Thursday, rebounding from the massive selloff in the previous session after the Federal Reserve left interest rates unchanged. Semiconductor stocks also bounced back after blowout earnings and an upbeat forecast from Microsoft Corporation eased concerns over the sustainability of AI stocks. All three major indexes ended in positive territory.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) jumped 1.2%, or 613.92 points, to close at 52,208.06 points, after giving more than 11,00 points in the prior session.
The S&P 500 gained 1.7%, to finish at 7,437.63 points. Tech and consumer discretionary stocks were the biggest gainers.
The Information Technology Select Sector SPDR (XLK) gained 5.2%, while the Consumer Discretionary Select Sector SPDR (XLY) rose 1.6%. Seven of the 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq advanced 2.8% to end at 25,122.18 points.
The fear gauge, the CBOE Volatility Index (VIX), was down 17.28% to 17.09. Advancers outnumbered decliners across the U.S. stock markets by a 2.2-to-1 ratio. A total of 18 billion shares were traded on Thursday, higher than the last 20-session average of 17.2 billion.
Tech Stocks Rebound, AI Fears Ease
Tech stocks rebounded on Thursday after suffering massive losses over the past few sessions. The rally was led by a jump in shares of Microsoft Corporation (MSFT), which surged 15.5%, recording the biggest single-day gain ever for the company, after the company reported robust quarterly results.
Microsoft said that it gained from its Azure business. The tech giant also issued quarterly sales and cloud growth forecasts above expectations. Thursday’s jump boosted Microsoft’s market cap by $450 billion. Microsoft has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors have lately been concerned about the hefty spending by tech giants on AI infrastructure. Last week, reports of negative cash flow from Alphabet Inc. (GOOGL) and Tesla, Inc. (TSLA) raised further concerns, leading to a sell-off in AI-related stocks. Chip stocks also came under pressure as investors raised concerns over their sky-high valuations.
However, the fears were somewhat alleviated after Microsoft said that it expects to continue generating cash through 2027, and the process has begun.
Tech and chip stocks rallied following Microsoft’s announcement. The PHLX Semiconductor (SOX) ended 8.2% higher, snapping its five-day losing streak. Shares of Applied Materials, Inc. (AMAT) surged 15%, while Micron Technology, Inc. (MU) surged 18.4%
The earnings season is in full swing as a batch of big tech companies continues to report quarterly results this week.
Economic Data
U.S. GDP grew at a slower pace than expected in the second quarter. The Bureau of Economic Analysis reported on Thursday that GDP grew 1.5% in the second quarter of 2026 after increasing 2.1% in the first quarter. Analysts had forecast GDP to grow 2% in the second quarter.
In a separate report, the Bureau of Economic Analysis said that the Personal Consumption Expenditures (PCE) index declined 0.1% sequentially in June. Year over year, PCE rose 3.7% in June after increasing 4.1% in May, which was the largest gain since April 2023.
Core PCE, which excludes volatile food and energy, rose 0.1% sequentially in June and 3.3% from year-ago levels.
Consumer spending, which accounts for two-thirds of the overall economic activity, climbed 0.3% in June.
Personal income increased 0.2% in June after rising 0.7% in the prior month. Meanwhile, the saving rate dropped to 2.7% to hit the lowest level since June 2022, from 2.8% in the month earlier.
The Labor Department reported that jobless claims totaled 197,000 for the week ending July 25, an increase of 9,000 from the previous week’s revised level of 188,000. The four-week moving average was 202,750, a decrease of 5,000 from the previous week’s revised average of 207,750.
Continuing claims came in at 1,782,000, a decrease of 7,000 from the previous week’s revised level of 1,789,000. The 4-week moving average was 1,797,500, a decrease of 6,000 from the previous week’s revised average of 1,803,500.
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