Megacaps boom, dollar surge cools

Megacap Earnings Boost Futures as Fed, BoJ Signal Hawkish Turns

Blowout results from megacaps Microsoft and Meta catapulted U.S. stock futures up more than 1% on Thursday, while an overnight dollar surge on hawkish noises from the Federal Reserve cooled a touch as the Bank of Japan gave similar signals today. The week's blizzard of economic data and corporate earnings, trade deadlines, and central bank decisions have helped Wall Street stocks and the dollar build a head of steam, with the greenback hitting two-month highs on Wednesday as Fed easing expectations retreated sharply. The dollar is now on course for its best week in almost three years.

Market Highlights

Central Bank Watch: In the face of above-forecast U.S. GDP, inflation, and payroll readings, the Fed on Wednesday signalled it was in no rush to cut rates again despite intense political pressure, knocking year-end easing bets back 10 basis points to just 35 bps. Futures now only see a 50-50 chance of a rate cut in September. Meanwhile, the Bank of Japan nudged up its inflation and GDP forecasts, increasing expectations for another rate rise there this year, which bolstered the yen.

Earnings Propel Stocks: Microsoft and Meta delivered big earnings beats after Wednesday's bell, causing their share prices to soar 9% and 12%, respectively, after hours, as investors welcomed news of artificial intelligence spending and cloud revenue. Microsoft is now on track to see its valuation eclipse $4 trillion. S&P 500 and Nasdaq futures both climbed more than 1% before today's open. European and Japanese stocks also advanced, while China's bourses bucked the trend on disappointing business surveys and trade tensions.

Trade Deal Updates: As Friday's U.S. tariff deadline nears, President Donald Trump said the U.S. will charge a 15% tariff on imports from South Korea, down from a threatened 25% and similar to deals for Japan and Europe. Canada and Mexico have yet to agree to separate deals, India faces 25% tariffs, and Brazil is still saddled with 50%. China's temporary pact with America was rolled over, but it too faces higher U.S. tariffs than Europe or Japan. However, Trump also sent copper prices down almost 20% after saying 50% tariffs on imports of copper pipes and wiring would kick in on Friday, short of the sweeping restrictions expected and with several exemptions.

Today's Market Minute

President Donald Trump said on Wednesday the U.S. will charge a 15% tariff on imports from South Korea, down from a threatened 25%, as part of a deal that eases tensions with a key Asian ally.

U.S. President Donald Trump intensified his trade war with Canada a day ahead of his August 1 deadline for a tariff agreement, saying it would be "very hard" to make a deal after it gave its support to Palestinian statehood.

The Bank of Japan revised up its inflation forecasts on Thursday and offered a less gloomy outlook on the economy than three months ago, keeping alive the possibility of a resumption in interest rate hikes this year.

The European Union's pledge to buy $750 billion of U.S. energy by 2028 risks exacerbating the bloc's dependence on American gas, just as it finds itself increasingly reliant on Chinese technology, writes ROI energy columnist Ron Bousso.

ROI columnist Jamie McGeever writes that while Trump has tempered his most belligerent trade threats, there is one major exception that won't be spared from punishing tariffs: Brazil.

Chart of the day

Big Tech is spending more than ever on artificial intelligence—but the returns are rising too, and investors are buying in. AI played a bigger role in driving demand across internet search, digital advertising, and cloud computing in the April-June quarter, powering revenue growth at technology giants Microsoft, Meta, and Alphabet. The upbeat commentary also bodes well for Amazon, the largest U.S. cloud provider, which reports earnings after Thursday's market close.

Today's events to watch

Economic Data: U.S. June personal consumption expenditures (PCE) inflation gauge (8:30 AM EDT); weekly jobless claims (8:30 AM EDT); U.S. Q2 employment costs (8:30 AM EDT); Chicago July business survey (9:45 AM EDT); Canada May GDP (8:30 AM EDT).

U.S. Corporate Earnings: Apple, Amazon, Ameren, AbbVie, Biogen, Bristol Myers Squibb, Eastman Chemical, Clorox, CVS, Comcast, Resmed, Cigna, Edison, Stryker, Mastercard, Intercontinental Exchange, Coinbase, S&P Global, Southern, Howmet, Masco, First Solar, Eversource, Ingersoll Rand, PG&E, PPL, Xcel Energy, Baxter, Mettler-Toledo, Wills Towers Watson, International Paper, AMETEK, Kimco, CMS.