Microsoft leads a rally on Wall Street, while worries about inflation remain in the bond market

NEW YORK (AP) — U.S. stocks are rebounding Thursday after Microsoft leaped on hopes that its big spending on AI is translating into profits, while computer-chip companies clawed back some of their sharp recent losses.

The S&P 500 rallied 1.1% and recovered two-thirds of its drop from the prior day, which was its worst in seven weeks. The Dow Jones Industrial Average was up 287 points, or 0.6% as of 11:45 a.m. Eastern time. The Nasdaq composite, which is full of artificial-intelligence stocks, jumped 2.3% a day after it fell 9.8% below its record set last month.

Microsoft led the way and leaped 15.1% after reporting a stronger profit for the latest quarter than analysts expected. Growth was strong for its Azure cloud business, and CEO Satya Nadella said it reflects how customers are using Microsoft to move into AI.

Perhaps just as importantly for Wall Street, Microsoft did not announce a big increase in how much it plans to spend on AI investments, something that several other Big Tech rivals have done. Worries are high that such spending is eating into companies’ cash flows and may not ultimately be worth it if AI does not produce as much productivity and profits as promised.

Meta Platforms helped demonstrate such fears after falling 9%. The parent company of Facebook and Instagram reported a weaker profit for the latest quarter than analysts expected, even though it made slightly more in revenue than expected. It also raised the lower end of its forecasted range for spending on investments this year.

Companies involved in the making of the computer memory and processors that such “hyperscalers” are buying rose Thursday, recovering some of the big losses they’ve taken on worries that their stock prices shot too high in the euphoria around AI.

Micron Technology jumped 15.4%, for example, to trim its loss for the week to 7.4%. It was one of the strongest forces lifting the S&P 500 after Microsoft.

Lam Research, a supplier to the semiconductor industry, soared 19% after reporting stronger profit and revenue for the latest quarter than analysts expected. Chip giant Advanced Micro Devices rallied 12.9%.

In the bond market, longer-term Treasury yields held a bit steadier following their sharp accelerations Wednesday. They had jumped after the chairman of the Federal Reserve, Kevin Warsh, gave few clues about what the central bank will do with interest rates to combat the painfully high inflation that continues to hurt the country.

Higher rates could keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.

The yield on the 10-year Treasury eased to 4.66% from 4.67% late Wednesday. The 30-year Treasury yield edged up to 5.21% from 5.20%, a day after it shot up from 5.09%. They move with investors’ expectations for inflation and economic growth in upcoming years.

Warsh reaffirmed on Wednesday the Fed wants to get inflation back down to 2%, even though the central bank decided not to raise interest rates despite its remaining higher than that. He also implied the bond market may already be doing some of the Fed’s work to restrain inflation, and he pointed to how yields have climbed since the central bank’s last meeting six weeks earlier.

That leaves investors questioning whether the Fed is prepared to act if inflation worsens, or whether it is relying on financial markets to achieve the same outcome, according to Seema Shah, chief global strategist at Principal Asset Management.

“If investors conclude that the latter is true, the credibility of the Fed’s inflation-fighting commitment could come under increasing scrutiny. Arguably, it already is.”

President Donald Trump, who nominated Warsh to lead the Fed, has argued for lower interest rates even though they could cause inflation to accelerate.

Reports released Thursday suggested the U.S. economy’s growth slowed by more during the spring than economists expected. A measure of Inflation, meanwhile, remained worse last month than the Federal Reserve’s target, but it slowed from May.

In the oil market, prices eased back.

Brent crude, the international standard, fell 0.9% to $87.28 per barrel. It had swung as low as $72 early this month and as high as $102 last week on uncertainty about whether the United States and Iran could reach a deal to allow oil tankers to move freely again from the Middle East to customers worldwide.

In stock markets worldwide, indexes rose in Europe following a mixed finish in Asia. South Korea's Kospi fell 1.2%, and France's CAC 40 rose 0.8% for two of the world's bigger moves.

Seoul's market has been at the center of the huge recent moves for AI stocks because it's dominated by two tech titans, Samsung Electronics and SK Hynix. After more than doubling through this year's first six months, the Kospi has plunged 34% so far in July.

Its drop on Thursday came as Samsung Electronics dipped 0.7%. The tech giant reported a record profit for the spring and said demand for its chips continues to outpace supply, but its earnings nevertheless fell shy of analysts' high expectations.

AP Business Writers Chan Ho-him and Matt Ott contributed to this report.

FILE - People pass the New York Stock Exchange on May 28, 2024, in New York. (AP Photo/Peter Morgan, File)

FILE - The New York Stock Exchange is seen in New York, Thursday, March 19, 2026. (AP Photo/Seth Wenig, File)

A screen shows the Korea Composite Stock Price Index (KOSPI), SK Hynix and Samsung Electronics Co. stock price at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, July 30, 2026. (AP Photo/Ahn Young-joon)

Currency traders work at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, July 30, 2026. (AP Photo/Ahn Young-joon)

A currency trader passes by a screen showing the Korea Composite Stock Price Index (KOSPI) and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, July 30, 2026. (AP Photo/Ahn Young-joon)

Currency traders watch monitors near a screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, July 30, 2026. (AP Photo/Ahn Young-joon)

A currency trader talks on the phone at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, July 30, 2026. (AP Photo/Ahn Young-joon)

CAIRO (AP) — The United States and Iran each fired barrages of missiles Thursday, as the pattern of back-and-forth strikes took hold again and hope dimmed for a quick end to the five-month conflict.

Following a few days of respite, fears of a wider war have grown, with renewed fighting threatening to engulf even more countries: Jordan said Thursday it intercepted Iranian missiles for the second consecutive day, while Kuwait said a strike in the northern part of the country killed one person. Also this week, drones caused fires on ships at an Egyptian port, and Saudi Arabia said it came under fire from Iran-backed militias in Iraq.

The war — which in its early days President Donald Trump said would last four to five weeks, although he warned it could take longer — has caused the price of fuel to spike and roiled the global economy. As months have passed, concerns have deepened about using up the stockpile of weapons the U.S. needs to defend its bases and allies.

Meanwhile, the war is unpopular among Americans, and a new AP-NORC poll says Trump’s approval rating on Iran has dipped slightly since last month.

The recent pause in fighting, which began over the weekend and spurred hopes among mediators of diplomatic progress, ended with increasing missile and drone attacks across many countries in the Middle East.

“We note with concern that the security situation remains precarious,” said Pakistani Foreign Ministry spokesperson Tahir Andrabi, whose country has been a key mediator.

Talks “are ongoing to normalize the situation, particularly the situation in the Strait of Hormuz,” he told reporters.

An Iranian strike hit a Chinese firm’s building in Kuwait on Thursday, severely damaging the structure and killing a worker, Kuwait’s military said, hours after Jordan’s air defenses shot down five missiles launched from Iran.

No injuries were reported from Jordan’s interception, Jordan’s state-run Petra news agency said, quoting the spokesman for the country’s armed forces. Both countries are U.S. allies and host American troops.

The attacks came after the U.S. military said it completed “a heavy wave of strikes against Iran,” conducted in response to an earlier Iranian missile attack on a U.S. base in Jordan.

The military's Central Command said in a social media post that the U.S. struck dozens of targets belonging to Iran’s Revolutionary Guard, including military command centers, missile and drone facilities, and coastal surveillance and defense sites.

Iran's official IRNA news agency said three people were killed and two were wounded in a strike on the island of Qeshm, which lies just off the Iranian mainland in the Strait of Hormuz — a crucial waterway for the world's energy supplies that has been at the center of the conflict.

The latest barrage came after the U.S. partnered with Saudi Arabia on Wednesday to strike Iran-backed militias in Iraq, killing at least 20 fighters and six Iranian advisers.

Also on Wednesday, British maritime security firm Ambrey said drone strikes ignited fires on two natural gas vessels at the Egyptian port of Damietta. It was not immediately clear who was responsible for the strikes on a U.S.-owned floating storage facility and a Greek-owned tanker. No injuries were reported.

The office of the Egyptian prime minister said initial investigations showed the fires on the two vessels had been caused by a drone.

Egypt, a close U.S. ally and regional mediator, is one of the only countries in the Middle East to have been spared direct military action during the war. A strike by Iran or its allies, if confirmed, would mark a significant widening of the conflict. The Iran-backed Houthi rebels in Yemen have denied they were behind the attack.

Since Iran began threatening and firing on ships in the Strait of Hormuz early in the war, the conflict has wreaked havoc on the global economy as energy shipments through the waterway ground to a near halt. Much of the diplomacy around ending the war has focused on reopening the strait, through which 20% of oil and natural gas shipments passed in peacetime.

The already limited ship traffic through the strait has plunged to wartime lows during the recent exchange of strikes, from 82 ships during the week of July 13-19 to just 39 from July 20-26, Lloyd’s List Intelligence, a shipping data and analysis firm, said in an webinar.

Fighting elsewhere has squeezed energy supplies further.

Saudi Arabia has accused the Iraqi militias of firing drones against its oil facilities over the past days. An umbrella group of Iraqi militias initially denied the allegations, while the Houthi rebels said they had attacked Saudi energy facilities as part of a separate but related conflict.

The Houthis have also declared a blockade of Saudi shipping and threatened to choke off another crucial Middle East trade route, the Bab el-Mandeb Strait from the Red Sea into the Gulf of Aden. That route became even more important during the war, as Saudi Arabia used it to bypass the Strait of Hormuz.

While some Saudi oil exports are continuing through the Bab al-Mandab Strait despite the blockade, Lloyd’s List Intelligence said much of that oil now follows an expensive and time-consuming workaround: It travels from Saudi Arabia on tankers to the Egyptian city of Ain Sokhna on the Red Sea coast before being pumped overland through a pipeline to the Mediterranean port of Sidi Kerir. Then it's loaded on tankers again.

The Suez Canal is not deep enough to handle the largest and most economical tankers when they are full loaded with oil.

On Monday, the Houthis said they had launched drones targeting facilities used to transport oil across Saudi Arabia to the Red Sea port of Yanbu. The rebels said the attack was in response to a Saudi drone they said breached Yemen’s airspace.

Saudi Defense Minister Khalid bin Salman met Wednesday with Trump and Vice President JD Vance, according to two people familiar with the matter who were not authorized to comment publicly about the private meetings.

They said the Saudi decision to join the U.S. attacks against the Iraqi militias was meant to send a message to Iran that the kingdom would not tolerate Iran or its proxies targeting the Saudi oil industry and other critical infrastructure. At the same time, the defense minister underscored to Trump and Vance that the Saudis want to see a de-escalation in the war and for Washington and Tehran to return to negotiations.

Becatoros reported from Athens, Greece. Associated Press writers Konstantin Toropin and Aamer Madhani in Washington, Qassim Abdul-Zahra in Baghdad and Fatma Khaled in Cairo contributed.

A child rests his head on the coffin of a Popular Mobilization Forces fighter draped in the Iraqi flag during a funeral for Popular Mobilization Forces fighters killed in airstrikes on PMF bases in Najaf, Iraq, Thursday, July 30, 2026. (AP Photo/Anmar Khalil)

Mourners carry the coffin of an Iranian adviser draped in the Iranian flag during a group funeral for Iranian advisers and Popular Mobilization Forces fighters killed in airstrikes on bases belonging to Iraq's Popular Mobilization Forces, a coalition of predominantly Shiite militias that includes Iran-backed groups, in Mosul, Iraq, Wednesday, July 29, 2026. (AP Photo/Hadi Mizban)

A damaged vehicle at the site of an airstrike on a Popular Mobilization Forces base in Mosul, Iraq, Wednesday, July 29, 2026. (AP Photo/Farid Abdulwahed)

FILE - A man sits on a surfboard as a container ship and other commercial vessels appear anchored in the Strait of Hormuz off Bandar Abbas, Iran, Monday, July 27, 2026. (Razieh Poudat/ISNA via AP, File)