Investors spook easily these days. The stock market survived another major scare Wednesday and has since emerged with renewed strength thanks to Microsoft and Meta earnings. But with investors hung up on the economy
and tariffs, there could be more frights around the corner.
The S&P 500 has gained for seven consecutive days, rising 8% over that time—its biggest seven-day jump since November 2020, according to Dow Jones Market Data.
It seemed as
though weak economic data were going to snap the index’s streak Wednesday. The U.S. economy unexpectedly shrank in the first quarter. Private-sector jobs numbers also disappointed the market and the S&P 500 fell around 2% to start the day.
But the GDP contraction was mostly driven by a surge in imports, as companies tried to get ahead of tariffs. Consumer spending also held up well, rising 1.8%. When the Federal Reserve’s preferred inflation metric, core PCE, came in flat for March—the comeback was on for stocks.
The rally took another leg higher early Thursday following strong earnings after the bell from two of the so-called Magnificent Seven megacap companies—Microsoft and Meta. The Big Tech giants both doubled down on hefty capex spending, reigniting confidence in the artificial-intelligence growth story.
Once upon a time the Mag 7 could be relied on to consistently drive stocks
higher. While two other members of the illustrious group—Apple and Amazon—may well keep the tech momentum going with earnings after the close, Wednesday’s volatility shows investors are really looking elsewhere for direction.
The market wants to see the U.S. reaching trade deals or progress in talks with China—state media signaled Thursday
that Beijing may be open to negotiating. It doesn’t want to see signs that President Donald Trump’s tariffs regime is hurting the economy.
A softening economy has so far been reflected in surveys, sentiment, and
confidence indicators, rather than in hard data. Friday’s jobs report could change that. If it shows a hiring slowdown, then on Wednesday’s evidence, that may be a horror show for markets.
—Brian Swint
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Microsoft Beats Forecasts as Cloud Revenue Gains Accelerate
Microsoft beat forecasts on accelerating growth in its Azure cloud business, and a double-digit jump in overall cloud revenue. The results may dispel concerns about demand for cloud services
given the turmoil and uncertainty over trade policy. The software company said its spending plans for artificial intelligence are unchanged.
- Overall cloud revenue in the quarter rose 20% from a year ago to $42.4 billion, and the Azure public-cloud business revenue rose 33%, up from the prior quarter’s 31% growth.
Microsoft’s third-quarter adjusted earnings were $3.46 a share on revenue of $70.1 billion.
- What’s more, CFO Amy Hood said it expects fourth-quarter Azure revenue growth to be about 34%, signaling further acceleration. Its productivity and business-processes unit, including Microsoft 365 products, reported a 10% gain in revenue to $29.9 billion, and revenue from personal computing rose 6% to $13.4 billion.
- Microsoft’s Hood said capital expenditures in the quarter were $16.7 billion, slightly higher than Wall Street estimates, adding that even with the ongoing investments in AI, Microsoft continues to expect full-year operating margins to be up slightly from the prior year.
- Analysts were paying close attention to what Microsoft said about data center leases after reports it has adjusted some. CEO Satya Nadella, asked about this, said “The reality is we’ve always been making adjustments.” The company is watching demand curves, monitoring power needs, and considering locations.
What’s Next: Hood said on a call that through April demand signals across Microsoft’s commercial business and LinkedIn, gaming, and search have been consistent, and Microsoft’s outlook assumes those trends continue in the fourth quarter. Results may be affected if the environment changes, she said.
—Angela Palumbo and Liz Moyer
Apple Faces Potential Criminal Contempt Charge in U.S. Antitrust Case
Apple was sternly rebuked by a U.S. District Judge late Wednesday. It’s the latest twist in a long-running legal saga that stems from a 2021 trial in which Epic Games sued the iPhone maker on antitrust grounds.
- After the trial, Apple was required to make changes to the App Store to allow rivals to take payments. The case worked its way though appeals, and the injunction against Apple was finally in force in January 2024.
- In the Wednesday ruling, Judge Yvonne Gonzalez Rogers noted that Apple continued to take a 27% commission on the alternative payments, versus its usual 30%, while also taking steps to discourage use of the alternative systems. She has referred the case to the U.S. Attorney for the Northern District of California for possible criminal contempt charges.
- “Apple’s response to the Injunction strains credulity,” Rogers wrote. “Apple, despite knowing its obligations thereunder, thwarted the Injunction’s goals, and continued its anticompetitive conduct solely to maintain its revenue stream.”
- “We strongly disagree with the
decision,” an Apple spokesperson told Barron’s. “We will comply with the court’s order and we will appeal.”
What’s Next: Evercore analyst Amit Daryanani said the contempt charge could put about $6 billion worth
of U.S. App Store revenue at risk, but added that “the actual impact will be lower given many developers will continue to prefer Apple’s system.” The company is set to report its second-quarter earnings after Thursday’s closing bell.
—Adam Levine and George Glover
Meta Platforms Tops Expectations, Projects Higher Capex Spending
Meta Platforms roundly beat first-quarter earnings expectations and projected current-quarter revenue that was slightly above projections, which could ease concerns about tariffs hitting digital
advertising. Meta’s 10% ad price growth from a year ago more than doubled expectations. It also raised its capital spending outlook.
- Earnings rose sharply to $6.43 a share, and revenue rose 16% from last year, to $42.3 billion. Two of Meta’s main revenue drivers, users and ad views, came in as expected. Family daily active
people rose 6% from a year ago, to 3.43 billion.
- Meta boosted its annual capital expenditures range to $64 billion to $72 billion. Subtracting the $14 billion it spent in the first quarter, that leaves up to $58 billion in additional capex spending for the remaining nine months of the year.
- CEO Mark Zuckerberg told analysts that spending should pay off in improved advertising, more engaging experiences, business messaging, Meta AI, and in AI devices. He also said the industry’s progress and the opportunities ahead of Meta are “staggering.”
