Written by: Chao Xiang Research

The market was full of cries of despair yesterday, but it completely flipped overnight. The U.S. PCE price index fell to 3.7% year-on-year in June, and the inflation data continued to cool. Coupled with Microsoft's pre-market announcement of its earnings report, which showed the fastest cloud growth in four years, these two pieces of news ignited the opening on Thursday.

Microsoft's stock price surged more than 15% in a single day, marking the largest single-day increase since 2008, adding $450 billion to its market value in just one day, setting a new historical record for single-day market value increase. Memory chip stocks celebrated collectively, with Kioxia surging nearly 32%, SanDisk rising about 26%, Micron up more than 18%, and the Philadelphia Semiconductor Index rising over 8%, ending a five-day streak of declines.

However, in the same report, the preliminary GDP for the second quarter showed an annualized growth rate of only 1.5%, far below the market expectation of 2.1%. After the bell, Apple and Amazon also revealed their respective results.

Adding $450 billion in one day, a new record for U.S. stock market value increase

The Nasdaq rose 2.78%, the S&P 500 rose 1.66%, and the Dow Jones rose 1.19%, with all three major indices seeing significant increases.

Microsoft was undoubtedly the main character, with its stock price surging over 15% in one day, marking the largest single-day increase since October 2008, and its market value increasing by $450 billion in just one day, which itself set a historical record for U.S. stocks. The earnings report showed the company's cloud business revenue growth exceeding 40%, the fastest in four years, and capital expenditures were below market expectations, aligning revenues and outputs effectively.

The Philadelphia Semiconductor Index rose over 8%, ending five consecutive trading days of decline. Memory stocks were all in frenzy, with the Roundhill Storage ETF surging 16.7% in one day, Kioxia ADR up nearly 32%, SanDisk rising about 26%, Micron Technology up over 18%, SK Hynix rising over 17%, and Lumentum and Western Digital both seeing increases of over 15%.

The Livermore Index for Chinese concept stocks closed up 3.02%, and most major European stock indices closed higher, with Germany's DAX30 up 0.45%.

WTI crude oil settled at $83.59 per barrel, down 1.03%. Brent crude oil settled at $89.03 per barrel, down 1.88%. COMEX gold rose 1.68%, settling at $4166 per ounce. COMEX silver rose 2.12%, settling at $59.32 per ounce.

Bitcoin opened at $63902.90, unchanged from the previous day, briefly rising to $64838.92 in early trading; Ethereum opened at $1908.34, down 0.6%, rising to $1923.23 in early trading.

PCE inflation continues to cool, GDP growth rate slows significantly

The U.S. PCE price index in June rose 3.7% year-on-year, a significant drop from 4.1% in May, and also decreased by 0.1% month-on-month, making it the first month-on-month negative growth in more than six years. The core PCE, excluding food and energy, increased by 3.3% year-on-year, in line with market expectations, and only rose 0.1% month-on-month, below the expected 0.2%. This inflation indicator, most valued by the Federal Reserve, has provided some reassurance to the market.

In the same report, the actual GDP preliminary value for the second quarter showed an annualized growth of only 1.5%, far below the market expectation of 2.1%, with the personal savings rate dropping to 2.7%, the lowest level since June 2007. The cooling of inflation should be viewed as good news, but the combination of slowing growth and bottomed-out savings rates indicates that households' confidence in consumption may be weakening.

After the data was released, gold briefly spiked and then retreated, the dollar index tested the lows before rebounding, and the futures for the three major stock indices moved upward. The market seems more willing to interpret this "mixed" report as a reason for the Fed to avoid continuing its hawkish stance.

Apple and Amazon reveal results after the bell, Amazon raises capital expenditure forecast again

Apple's third-quarter revenue was $109.42 billion, a year-on-year increase of 16%, exceeding market expectations of $108.85 billion, with earnings per share of $2.02, a year-on-year increase of 29%, also exceeding expectations. However, the company's guidance for fourth-quarter revenue is a growth of 9% to 11%, lower than the market expectation of 12.1%, leading to a relatively muted response in after-hours trading.

Amazon's story is even more compelling, with second-quarter net sales of $200.6 billion, a year-on-year increase of 20%, exceeding the expected $197.01 billion, and AWS cloud revenue growing 37% year-on-year, the fastest growth since 2021, with backlog orders reaching $496 billion. The company also raised its full-year capital expenditure forecast from $200 billion to $220 billion, with CEO Jassy stating that the investment boom in the short term is unlikely to slow down, predicting that AI demand will still be very significant by 2028. This earnings report sent Amazon's stock soaring nearly 10% in after-hours trading.

Meta increases spending commitment to nearly $700 billion, AI infrastructure ecosystem continues to expand

Meta also disclosed on the same day that it has committed to nearly $700 billion in future expenditures through long-term and short-term agreements, mainly invested in AI data centers and cloud computing. Additionally, there are reports that a data center developer collaborating with Anthropic is planning to raise $15 billion to build a large data center and supporting power plant in Texas, with Google providing financial backing and chip support for this transaction.

Selling pressure eased faster than expected, AI narrative withstands the test

Yesterday, the market was gloomy over the five-day decline in storage stocks and the Nasdaq entering a correction zone, but today's Microsoft earnings report completely reversed all pessimistic sentiments. This extreme intra-day contrast exactly indicates that the selling pressure accumulated over the past few weeks is more about positions and emotional aspects rather than any underlying fault in the AI narrative. As long as a giant can present convincing growth evidence, the capital will undoubtedly flow back.

Amazon's capital expenditure raised to $220 billion, along with Meta's nearly $700 billion spending commitment, indicating that major giants are not only not reducing their AI investments but are actually ramping them up.

This contradicts the recently discussed concern about "return on investment," where more money is indeed being spent on the books, but as long as the actual figures in cloud business and backlog orders keep up, the market currently seems willing to pick up the tab.

The real focus needs to be on the division signals behind the PCE and GDP data. The cooling of inflation provides the Federal Reserve with some breathing room, but the slowing economic growth and bottomed-out savings rate suggest that the consumption engine itself may be slowing down. If the upcoming data confirms that this slowdown has become a trend, not just a one-time fluctuation, whether this current rebound led by tech giants can withstand macroeconomic drag will be a question for the market to answer next week.