Market Overview - The three major U.S. stock indices opened higher on July 31, with the Dow Jones up 0.22%, Nasdaq up 1.22%, and S&P 500 up 0.7% [1] - The U.S. dollar index reached 100 for the first time since May 29, increasing by 0.07% [3] Microsoft Financial Performance - Microsoft reported Q2 revenue of $76.44 billion, a year-over-year increase of 18%, surpassing market expectations of $73.89 billion [4] - Earnings per share (EPS) for Microsoft were $3.65, up 24% year-over-year, exceeding the forecast of $3.37 [4] - The commercial cloud business, including Office and Azure, generated $46.7 billion in revenue, a 27% increase year-over-year, above the expected $45.96 billion [5] - The intelligent cloud segment, which includes Azure, Windows Server, and GitHub, reported $29.9 billion in revenue, a 26% year-over-year increase, exceeding the forecast of $29.1 billion [5] - Microsoft’s capital expenditures grew by 27% to $24.2 billion, above the expected $23.08 billion, crucial for overcoming supply constraints related to rising AI demand [5] - As of the report, Microsoft's stock price was $544.974 per share, with a market capitalization of $4.05 trillion [5] Meta Financial Performance - Meta's Q2 revenue was $47.516 billion, exceeding market expectations of $44.83 billion [6] - The company reported an EPS of $7.14, significantly higher than the expected $5.89 [6] - Meta's guidance for Q3 revenue is projected between $47 billion and $50.5 billion, above the market expectation of $46.2 billion [6] - For the full year 2025, Meta's spending is expected to be between $66 billion and $72 billion, revised from a previous estimate of $64 billion to $72 billion [6] - Meta's stock rose over 11%, approaching a market capitalization of $2 trillion [5]

Group 1: Economic Overview - The US GDP for Q2 grew by 3%, surpassing the market expectation of 2.4%, rebounding from a 0.5% decline in Q1 [2] - The growth was primarily driven by a decrease in imports, with domestic demand only slightly increasing [2] - The latest ADP report indicated that private sector employment increased by 104,000 in July, exceeding the forecast of 75,000 [2] Group 2: Federal Reserve and Interest Rates - The Federal Reserve maintained the federal funds rate, aligning with market expectations, while Chairman Powell stated that a decision on a rate cut in September has not yet been made [2][3] - Following the Fed's statement, market expectations for a rate cut in September rose to approximately 68%, but fell below 50% after Powell's comments [3] Group 3: Company Earnings - Meta reported Q2 revenue of $47.52 billion, exceeding the market expectation of $44.83 billion, with ad revenue of $46.5 billion also surpassing expectations [4] - Meta's Reality Labs division reported a loss of $4.5 billion, better than the anticipated loss of $4.8 billion, and EPS was $7.14, above the expected $5.89 [4] - Microsoft posted Q2 revenue of $76.44 billion, an 18% year-over-year increase, exceeding the forecast of $73.89 billion, with EPS of $3.65, up 24% [5] Group 4: Future Projections - Meta expects total revenue for Q3 to be between $47.5 billion and $50.5 billion, with analyst estimates averaging $46.17 billion [5] - Microsoft anticipates a significant increase in total spending and capital expenditures in 2026, primarily due to rising infrastructure costs and ongoing investments in AI [5] Group 5: Market Reactions - Following the positive earnings report, Meta's stock rose over 11% in after-hours trading [5] - Microsoft's stock increased by over 7% after the earnings announcement, potentially placing it in the $4 trillion market cap club alongside Nvidia [6]

Core Viewpoint - The article discusses the mixed performance of the US stock market, influenced by better-than-expected GDP growth and the Federal Reserve's interest rate decision, while highlighting the strong earnings reports from major tech companies like Meta and Microsoft [1][3]. Economic Overview - The US GDP for Q2 grew by 3%, surpassing the market expectation of 2.4%, rebounding from a 0.5% decline in Q1 [3]. - The growth was primarily driven by a reduction in imports, with domestic demand showing only a slight increase [3]. - The Federal Reserve decided to maintain the federal funds rate, with Chairman Powell indicating uncertainty regarding potential rate cuts in September [3][4]. Company Earnings - **Meta Platforms**: - Reported Q2 revenue of $47.52 billion, exceeding the market expectation of $44.83 billion [6]. - Advertising revenue was $46.5 billion, above the forecast of $44.07 billion [6]. - The Reality Labs division reported a loss of $4.5 billion, better than the anticipated loss of $4.8 billion [6]. - EPS was $7.14, significantly higher than the expected $5.89 [6]. - Q3 revenue is projected between $47.5 billion and $50.5 billion, with full-year spending expected to be between $66 billion and $72 billion [7][8]. - CEO Zuckerberg emphasized the stability of the advertising business to support AI market expansion [9]. - **Microsoft**: - Reported Q2 revenue of $76.44 billion, a year-over-year increase of 18%, surpassing the expected $73.89 billion [10]. - EPS was $3.65, up 24% from the previous year, exceeding the forecast of $3.37 [10]. - The commercial cloud business generated $46.7 billion, a 27% increase, while the intelligent cloud segment brought in $29.9 billion, growing 26% [10]. - Capital expenditures rose by 27% to $24.2 billion, crucial for meeting the rising demand for AI [10]. Market Reactions - Following the earnings reports, Meta's stock surged over 11% in after-hours trading, while Microsoft's stock rose more than 7% [9][10]. - The market's expectations for a rate cut in September fluctuated, initially rising to about 68% but dropping below 50% after Powell's comments [4]. Sector Performance - The tech sector showed mixed results, with notable movements in stocks like Nvidia (+2.1%), Google (+0.4%), and declines in Amazon (-0.35%), Tesla (-0.6%), and Apple (-1.0%) [12]. - The Nasdaq China Golden Dragon Index fell by 1.8%, with significant drops in stocks like Vipshop and Pinduoduo [13]. Commodity Prices - International oil prices increased, with WTI crude rising by 1.14% to $70 per barrel and Brent crude up by 1.01% to $73.24 per barrel [14]. - Gold prices fell below $3,300 per ounce, with futures dropping by 0.85% [15].

Core Viewpoint - The recent correction in the Nasdaq Composite presents a buying opportunity for quality stocks, specifically Alphabet and Microsoft, which are now more attractively priced than earlier in the year [1]. Group 1: Alphabet - Alphabet's shares are down approximately 20% from their all-time highs in early February, resulting in a forward price-to-earnings (P/E) ratio of 18.5, indicating an attractive valuation [2]. - The company is a leader in digital advertising, with Google being the largest platform globally and YouTube ranking fourth [3]. - Alphabet is heavily investing in artificial intelligence (AI) to enhance search results and create new ad formats, which could significantly increase monetization opportunities [4]. - The Gemini 2.0 model is improving Alphabet's capabilities in multimodal search, and its Veo 2 text-to-image video generator is outperforming competitors [5]. - Google Cloud, Alphabet's cloud computing division, reported a 30% revenue growth and a 142% increase in segment income last quarter, indicating a profitability inflection point [6]. - Alphabet is also advancing in quantum computing and autonomous driving, with its Waymo unit being the only provider of paid robotaxi rides in the U.S. [7]. Group 2: Microsoft - Microsoft, known for its Office 365 productivity tools, also owns the second-largest cloud computing business and operates various platforms including LinkedIn and GitHub [8]. - The company has successfully transitioned to a subscription model for its software, driving growth and embracing AI through significant investments in OpenAI [9]. - Azure, Microsoft's cloud computing unit, experienced a 31% revenue growth last quarter, with Azure AI revenue soaring 157% year over year [10]. - Microsoft 365 AI copilots are a significant growth opportunity, offering AI assistance to users for various tasks, which could lead to high adoption rates if proven effective [11][12]. - Following the market pullback, Microsoft's stock trades at a forward P/E of 25 based on fiscal year 2026 estimates, presenting a reasonable valuation for a leading tech company [13].