Strong Tech Earnings Drive U.S. Equities Higher
U.S. equity markets ended Thursday on a strong note, buoyed by impressive quarterly results from major technology firms. Microsoft surged over 7 percent, reaching its highest level since January, following upbeat projections for its Azure cloud business and sustained demand for artificial intelligence-driven services. Meta followed with a 4 percent gain, supported by strong advertising revenues and renewed investor enthusiasm around AI developments.
Despite these advances, not all tech giants had smooth sailing. Apple posted slightly better-than-expected results, but concerns over U.S.–China tariffs overshadowed the otherwise solid performance. The company anticipates approximately $900 million in additional costs this quarter due to tariffs and is shifting most U.S.-bound iPhone production to India. Apple’s stock declined 3.8 percent in after-hours trading. Meanwhile, Amazon disappointed investors with weak results from its cloud unit, Amazon Web Services, which grew at its slowest pace in five quarters. The company’s underwhelming second-quarter guidance and tariff-related concerns led to a 3.2 percent drop in its share price.
Technology and communication sectors led the broader market rally, while healthcare and consumer staples lagged behind.
Bond Yields and U.S. Dollar Strengthen
Investor optimism around AI and robust earnings lifted bond yields, with the U.S. 10-year Treasury yield rising to 4.21 percent. The U.S. dollar also strengthened across major currencies, supported by improved risk sentiment and solid economic data. The dollar index remained above 100, suggesting sustained appetite for the greenback amid global market volatility.
Asian Markets Rise, Europe Takes a Holiday Pause
Asian equity markets followed the U.S. lead, posting gains across the region. Hong Kong led the advance, fueled by optimism surrounding possible trade talks between the United States and China. Markets in Japan, India, South Korea, and Australia also moved higher. Chinese markets remained closed for Labour Day, while most European exchanges were shut in observance of the same holiday.
Oil Prices Lifted by Sanctions and Trade Hopes
Oil prices rebounded as geopolitical developments supported renewed optimism. The United States announced new sanctions targeting Iranian crude exports, while China signaled its openness to trade discussions with Washington. These twin developments raised hopes for a stabilizing global economic outlook. Nevertheless, oil remained on track for a weekly decline, pressured by soft macroeconomic data from both the U.S. and China and expectations that OPEC+ may raise production at its upcoming meeting.
Mixed U.S. Economic Signals
U.S. economic indicators offered a mixed picture. The S&P Global Manufacturing PMI remained slightly in expansion territory at 50.2, while the ISM Manufacturing Index held in contraction at 48.7, though it came in slightly better than expected. Initial jobless claims edged up to 241,000, while continuing claims stood at 1.9 million. Despite the modest rise in unemployment benefits, the overall labour market remains resilient, supported by healthy job openings, steady wage growth, and fewer layoffs compared to March.
Corporate Spotlight – Earnings & Forecasts
Apple and Amazon Face Tariff Pressures
Apple and Amazon were among the high-profile names dealing with rising tariff-related pressures. Apple confirmed that it expects $900 million in added costs this quarter due to U.S.–China tariffs. As a response, the company is shifting a significant portion of its iPhone production destined for the U.S. market to India. Despite robust iPhone sales during the March quarter, Apple’s shares fell by 3.8 percent in after-hours trading, driven by weaker-than-expected services revenue and lingering tariff concerns.
Amazon experienced similar pressures. The company reported that Amazon Web Services grew at its slowest pace in over a year, prompting investor concerns about competition in the AI space. Despite solid advertising and e-commerce results, Amazon’s weaker second-quarter guidance and the impact of ongoing trade uncertainty weighed on sentiment, leading to a 3.2 percent drop in share value.
Winners – Microsoft, Meta, and Mastercard
Microsoft extended its leadership in enterprise IT and artificial intelligence, buoyed by strong third-quarter results and positive forward guidance for its Azure cloud platform. Meta delivered a strong performance, supported by higher-than-expected advertising revenue, highlighting the company’s progress in monetizing AI initiatives across its platforms. Mastercard beat profit expectations for the first quarter, posting a 17 percent year-on-year revenue increase to $7.25 billion and earnings of $3.73 per share. The results reflected robust consumer spending, along with continued growth in cross-border transaction volumes and value-added services.
Sector Movers and Strategic Shifts
CVS Health raised its profit forecast for 2025 and announced plans to exit the Obamacare exchange market by 2026, citing weak performance in that segment. The company reported stronger-than-expected first-quarter earnings, driven by lower medical costs. Its pharmacy benefits unit also made a strategic switch, replacing Eli Lilly’s Zepbound with Novo Nordisk’s Wegovy after securing more favorable pricing terms.
Carrier Global exceeded expectations in the first quarter and raised its 2025 guidance. The company reported adjusted earnings of 65 cents per share and now expects full-year 2025 profits between $3.00 and $3.10 per share. This outlook was bolstered by strong demand for HVAC products, energy-efficient heat pumps, and aftermarket services, amid rising temperatures and tighter energy regulations.
General Motors lowered its 2025 profit forecast due to newly imposed automotive tariffs, now projecting annual adjusted core earnings between $10 billion and $12.5 billion, down from its prior estimate of $13.7 to $15.7 billion. The company is implementing cost-saving measures and ramping up U.S. production in an effort to offset what could be up to $5 billion in additional costs.
Block cut its 2025 profit growth forecast to 12 percent from 15 percent after missing first-quarter earnings estimates. The company saw its profit plunge by 60 percent, primarily due to a remeasurement loss on its bitcoin holdings. Muted consumer spending and slower growth in Cash App and transaction-based revenues further contributed to the weaker results.
McDonald’s reported a 1 percent decline in global comparable sales in the first quarter, with a steeper 3.6 percent fall in the U.S. This marked the restaurant giant’s worst domestic performance since the pandemic and was attributed to inflationary pressures and tariff-related uncertainty.
Estee Lauder issued a cautious outlook, forecasting a larger-than-expected drop in sales for fiscal 2025 due to weak demand in the U.S. and a sluggish recovery in China. Tariff impacts have further complicated the company’s recovery efforts. However, it plans to restructure and shift supply chains to mitigate the effects, aiming to return to growth by 2026.
Geopolitical and Strategic Developments
Ryanair threatened to cancel its $30 billion order for 330 Boeing aircraft if U.S. tariffs significantly raise the cost of the deal. The airline stated it is considering alternative suppliers, including China’s COMAC, although the latter faces certification and capacity constraints. Some analysts view Ryanair’s move as a negotiation tactic aimed at securing better pricing.
Tesla firmly denied reports from the Wall Street Journal suggesting that its board had begun a search to replace CEO Elon Musk. Chairwoman Robyn Denholm reaffirmed the board’s confidence in Musk’s leadership, despite ongoing investor concerns about his focus, political involvement, and the company’s recent struggles with falling sales and growing competition.
Reddit projected second-quarter revenue between $410 million and $430 million, ahead of expectations. The company reported a 61 percent year-on-year increase in first-quarter revenue, driven by growing digital advertising spend and ad tech innovation. However, Reddit noted potential headwinds related to upcoming changes in Google’s search algorithm. Airbnb also saw a 6 percent rise in first-quarter revenue, but its net income declined by 41.7 percent. The company’s forecast for the second quarter came in below Wall Street estimates due to weakening U.S. demand and consumer caution amid volatile trade policies.
Analyst Commentary and Rating Changes
Oppenheimer initiated coverage of Microsoft with a “Perform” rating, citing the company’s robust Azure growth, its leadership in the enterprise cloud space, and sustained AI-driven demand. Morgan Stanley reinstated Taiwan Semiconductor Manufacturing as a top pick, highlighting strong capital spending by major tech clients such as Meta and Microsoft. The brokerage noted easing concerns over semiconductor demand and trade tariffs, and assigned TSMC a 2025 estimated price-to-earnings ratio of 15.5 times.
Truist upgraded ServiceNow from “Hold” to “Buy” and raised its price target to $1,200. Analysts highlighted ServiceNow’s strong platform architecture, go-to-market execution, and increasing traction in both the commercial and federal sectors as reasons for expecting durable, high-teens growth. Baird upgraded Caterpillar to “Neutral” from “Underperform,” increasing its price target to $309. The firm pointed to stronger-than-expected demand and lean inventory levels as factors mitigating previous concerns about dealer destocking and margin pressure.
HSBC downgraded UPS from “Buy” to “Hold” and cut its price target to $105, citing softening demand, significant volume declines on Amazon and China–U.S. trade routes, and ongoing tariff-related uncertainty. These risks, according to the bank, could overshadow UPS’s internal cost-cutting and restructuring initiatives.
Upcoming Economic Data and Events
Attention now turns to Friday’s U.S. employment report, which will be closely watched for signs of strength or softness in the labour market. Earnings reports from Shell, ExxonMobil, Chevron, ING, and Cigna are also expected, and may offer further insight into the resilience of corporate performance amid ongoing macroeconomic and geopolitical uncertainty.
Global markets continue to navigate a complex mix of positive earnings surprises, evolving trade policies, and persistent geopolitical tensions. While optimism surrounding artificial intelligence and robust tech earnings has supported recent gains, ongoing concerns about inflation, tariffs, and economic headwinds mean that investor sentiment remains fragile and highly responsive to shifting global dynamics.
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