Wall Street Rallies Ahead of Market Open Following Strong Tech Earnings

U.S. stock markets experienced a significant upswing early Thursday as numerous prominent companies reported robust quarterly earnings, amidst an increasingly unpredictable economic landscape influenced by evolving trade policies. Futures for the S&P 500 surged by 1.2%, while the Dow Jones Industrial Average saw an increase of 0.8%. The technology sector led the charge, with Nasdaq futures climbing 1.8% following impressive earnings reports from major players.

Microsoft's stock soared by 9.2% in after-hours trading after the company revealed that its cloud computing and artificial intelligence divisions drove a 13% rise in revenue and an even more substantial increase in profits, both surpassing Wall Street expectations. Similarly, Meta Platforms Inc., the parent company of Facebook and Instagram, reported strong performance, with revenue and profit exceeding analyst forecasts, attributed to enhanced advertising revenues boosted by AI tools, resulting in a 6.4% increase in its share price.

Conversely, McDonald's faced challenges, reporting a decline in same-store sales in the U.S., marking the most significant drop since 2020, amid concerns surrounding customer traffic due to economic uncertainties. The fast-food giant's shares fell slightly by less than 1% in pre-market trading.

General Motors also adjusted its profit guidance for 2025, anticipating a potential impact from tariffs between $4 billion and $5 billion. The automotive company now expects its full-year adjusted earnings before interest and taxes to fall within the $10 billion to $12.5 billion range. Following the release of this new guidance, GM's shares rose by 2.8%.

Investor anxiety regarding the ramifications of President Donald Trump's trade policies continues to loom large, particularly with fears of a worst-case scenario termed "stagflation," where economic stagnation coincides with persistent inflation. This situation poses a significant challenge to the Federal Reserve, which lacks effective tools to simultaneously address both issues through interest rate adjustments.

A more detailed report on the job market from the U.S. government is expected soon, as the unpredictable implementation of tariffs has resulted in considerable uncertainty for future economic conditions. This volatility has led to historic fluctuations across various financial markets, impacting stocks, bonds, and the value of the U.S. dollar.

As global markets react to these developments, many were closed for May Day, or International Labor Day, leading to varied performances. The FTSE 100 in London edged up less than 0.1%, while Japan's Nikkei 225 gained 1.1%, closing at 36,452.30. The Bank of Japan maintained its benchmark interest rate amid growing concerns over the repercussions of U.S. trade policies, also revising its economic growth forecast for the fiscal year ending in March 2026 down to 0.5% from a previously estimated 1.1%.

Economists anticipate that the Bank of Japan will adopt a wait-and-see approach to evaluate the effects of heightened global trade policy uncertainty on growth and inflation. The U.S. dollar strengthened against the Japanese yen, trading at 144.39 yen compared to 143.06 yen previously, while the euro slightly decreased to $1.1326 from $1.1331. Additionally, in energy markets, U.S. benchmark crude prices fell by $1.34 to $56.87 per barrel, and Brent crude dropped by $1.29 to $59.77 per barrel.