Microsoft Pushes Higher: 8 Key Items Shaping the Stock Market Thursday

These are the early headlines and other items poised to influence the market at the start of the trading day. As we share this collection of market drivers, futures point to a positive start to the trading day when U.S. equity markets open later on Thursday morning.

1. Washington hit dozens of military targets in an operation early Thursday aimed at degrading Tehran’s ability to threaten US troops, its Arab allies and commercial shipping in the region, US Central Command said in a post on X. Iran targeted a building in northern Kuwait, killing one worker and causing “significant” material damage, the Kuwait Army said, while Jordan said it intercepted five missiles from the Islamic Republic. (Bloomberg)

The renewed fighting continues to raise questions over a path to peace talks and, early on Thursday morning, oil prices were once again trending higher. However, there is an OPEC+ meeting on Sunday, and the talk is that the group will announce a supply increase of up to 188,000 barrels per day in September. That has the potential to take some of the pressure of oil and related prices and could ease concerns over inflation pressures retiring to levels see in April and May. Meanwhile, we are reading reports about a pickup in shipping across the crucial Strait of Hormuz in recent days, with the U.S. claiming its navy escorted some tankers across the waterway.

2. As expected, the Fed’s postmeeting policy statement contained no forward guidance. The Fed chairman also declined to provide any analysis of the data or scenarios that might prompt the Fed to raise rates, even when grilled by increasingly testy reporters. Warsh confirmed that the Fed’s official 2% inflation benchmark is tied to the annual growth in the personal consumption expenditures (PCE) price index, which the FOMC voted to reaffirm in January. But he then added that he is also looking at a broader set of inflation data than PCE, while declining to provide details because he didn’t want to fully reveal his “cards.” The say-nothing stance confused reporters and market analysts who want to know: What is the Fed waiting for? When questioned about the uncertainty that the Warsh Fed has introduced into markets, he cited the difficulty of reform. (Barron’s)

We also walked away from Fed Chair Kevin Warsh’s press conference with the feeling that there really wasn’t a lot of substance there. Perhaps that was Warsh’s intent as he looks for the market to focus on the data, but he came across more as a politician looking to avoid questions rather than answering them. For a new Fed chair that is looking to restore the central bank’s credibility when it comes to taming inflation and returning it to the Fed’s intended goal of 2%, he did a poor job.

We did see the market’s expectation for a September rate hike tick higher per the CME FedWatch Tool, hitting a probability of just over 63%. Given the dates for the Fed’s next policy meeting, we will have two more months of inflation data in hand. Based on the rebound in oil prices and other pricing commentary this month, odds are the July facing data will tick higher compared to June.

With the mid-term elections looming, a cynical view would be that the White House needs find an off ramp for the war with Iran with enough time for oil and other inflation pressures to fade sufficiently enough to pre-empt the need for a September hike.

We’ll leave it there and get ready for the next piece of inflation data out before the market opens…

3. The Bureau of Economic Analysis is set to release the personal consumption expenditures (PCE) price index and the preliminary estimate of second-quarter gross domestic product growth on Thursday at 8:30 a.m. Eastern. Like the June consumer-price-index report, lower gasoline prices are expected to drive a decline in the latest reading — though not by as much. PCE inflation is expected to fall by 0.1% month over month in June. CPI fell 0.4% on the month. Compared with a year ago, headline PCE inflation, which is the Federal Reserve’s official price growth benchmark, is projected to rise 3.6%, a notable pullback from a 4.1% advance in May. (Barron’s)

No doubt a softer print could be viewed as a positive for the market, but our view is that the smart money will discount the June PCE inflation data, given the rebound in oil prices we touched on above. To us, the more important data to focus on will be the prices components in next week’s July PMI reports from ISM and S&P Global. The July Flash PMI report from S&P Global published on July 24 showed renewed input and output inflation pressures, and odds are that next week’s reports are going to show more of that.

4. Samsung Electronics on Thursday reported a more than 250-fold jump in chip profit and announced multi-year supply deals with major data centre operators, saying it expects global chip shortages to become more acute and extend into 2028… The South Korean conglomerate has signed supply agreements with the five biggest global data centre firms and is nearing deals with five other major players, it said without identifying them… Samsung aims to secure contracts covering about two-thirds of its memory output over the longer term, Kim said, joining rival efforts to reduce exposure to boom-and-bust cycles. The deals will last at least five years and typically include upfront payments and floor pricing aimed at hedging the risk of capital investment, Kim said. (Reuters)

Despite the current market mood, our take on Samsung’s (SSNLF) comments above are supportive of the ongoing build out in AI and data center capacity that keeps us long-term bullish on several holdings in the Portfolio. That includes Samsung’s comment that it expects its HBM4 revenue to more than triple in the third quarter, especially since Nvidia (NVDA) is one of its HBM customers.

During the earnings call, Samsung management discussed its step up in capital spending during the quarter for memory and foundry capacity. That along with the beat-and-raise quarter delivered last night by Lam Research (LRCX), which included Lam hiking its 2026 semi-cap industry spending forecast, means we will have more to say about the Portfolio’s position in Applied Materials (AMAT) on Thursday morning.

Samsung also reinforced the concern over memory supply for the smartphone and PC markets, the ones that led us to exit the Portfolio’s position in Qualcomm (QCOM) back in January near $165:

…for mobile and PC applications, although we are observing some demand moderations as customers increase their end product prices, the pace of additional demand for server, DRAM, SSD and HBM is far exceeding such moderation. Therefore, it seems evident that the gap between supply and demand in the following year will become much wider… right now the massive demand for AI servers is creating a shortage and driving up prices for mobile memory. We already saw this in Q2 as memory prices rose quarter-on-quarter leading to pressure on our profitability, and we expect that cost burden to continue through the second half of the year.

Following Qualcomm’s quarterly results on Wednesday night, its shares are down in pre-market trading, indicated near $147.

5. Microsoft’s revenue rose 18% to $90 billion in the quarter ended in June, a sign that the company’s AI-revenue growth is accelerating and that it will continue to spend on data centers… Chief Executive Satya Nadella said revenue from the company’s Azure cloud business surpassed $100 billion for the first time in fiscal year 2026, which ended in June. The disclosure was notable because Microsoft historically doesn’t break out revenue for that business, making it difficult to compare it with rivals Amazon Web Services and Google Cloud… Azure’s growth rate in the quarter was 43%, higher than the previous quarter’s 40% growth rate. (WSJ)

We’ll have more to say in a standalone note on Thursday morning, but the cut to the quick takeaway is that Microsoft (MSFT) is ramping capacity and monetizing its cloud backlog at a quicker pace compared to the prior quarter. As important, Intelligent Cloud operating margins were steady at 41% compared to year-ago levels and ticked a point higher compared to the March quarter. Commercial RPOs also climbed to $678 billion exiting June from $627 billion at the end of March.

Microsoft also lowered its calendar 2026 capital-expenditure forecast to about $175 billion from roughly $190 billion, after extending the estimated useful life of its data centers and office buildings to 25 years from 15 years. However, it does plan to spend more than $50 billion in the current quarter, up from $41 billion in the June quarter as AI and cloud demand continues to exceed supply. Microsoft confirmed another capex increase in 2027, but also shared it expects to remain cash flow positive.

The combination of accelerated cloud growth, margin performance and the comment on remaining free cash flow positive are what’s driving MSFT shares higher on Thursday morning.

6. Meta shares fell 7.5 per cent on Wednesday on weak financial results and rising expenses, as chief executive Mark Zuckerberg defended his costly quest to make the company a leading contender in AI. The social media group forecast revenues of between $61bn and $64bn in the current quarter, with a midpoint below Wall Street expectations of $63.1bn. Meta’s sales in the second quarter were narrowly better than analysts’ estimates, but its costs and expenses jumped 55 per cent to $42bn. Free cash flow in the three months to the end of June dropped by 91 per cent year on year to $784mn, down from $8.5bn, driven by gargantuan spending on AI infrastructure. (FT)

While there were several positives to be found in Meta’s (META) earnings report last night, including the continued step up in advertising revenue and average revenue per user, those are being overlooked by the bottom line miss for the June quarter and the jump in spending. As you might guess this is raising questions over the company’s AI investment plans even though it only tightened its 2026 capital spending forecast to $130 billion to $145 billion, up from $125 billion to $145 billion. However, its new guidance for expenses to be between $165 billion to $169 billion means a hefty increase in the back half of the year.

We’ll have more detailed comments later on Thursday morning, but given developments, we must reconsider our current One rating on the shares. More to come.

7. Economic data today per TipRanks: Initial & Continuing Jobless Claims (Weekly), GDP (Q2 2026), Personal Income & Spending (June), PCE Price Index (June), EIA Natural Gas Inventories (Weekly)

8. Companies reporting today per TipRanks: Open: AGCO (AGCO), Altria (MO), Bristol-Myers (BMY), Builders FirstSource (BLDR), Check Point Software (CHKP), Hershey Foods (HSY), Martin Marietta (MLM), Mastercard (MA), Quanta Services (PWR), Terex (TEX), Trinity Industries (TRN). Close: Amazon (AMZN), Apple (AAPL), Floor & Décor (FND), Ingersoll-Rand (IR), Universal Display (OLED).

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At the time of publication, TheStreet Pro Portfolio was long AAPL, AMZN, META, MSFT and NVDA.