The Federal Reserve held rates steady, with two voting members advocating for a rate hike and Fed Governor Williams offering no clear direction on December policy. On Wednesday, U.S. equities edged higher, with storage and cloud computing stocks continuing their rebound. After the close, Microsoft and Google earnings triggered divergent market reactions: Microsoft Azure revenue surged 48%, sending shares up over 6% intraday; Google’s revenue and EPS fell short of expectations, pushing shares down over 10% post-market. Tonight’s GDP and PCE data will provide new insights into economic momentum and inflation trends.

Three Indices Record Three Consecutive Gains, Storage Stocks Remain Strong

On Wednesday, the S&P 500 rose 0.28% to close at 7,743.98; the Nasdaq Composite gained 0.27% to finish at 26,549.85; the Dow Jones Industrial Average advanced 0.19% to end at 52,475.10. All three major indices posted gains for the third consecutive trading session, while the VIX declined 3.48% to 16.91.

Among the 11 sectors in the S&P 500, information technology, finance, energy, industrials, healthcare, and materials posted gains, while discretionary consumer, staples consumer, communication services, real estate, and utilities declined. Information technology rose 0.80%, while utilities dropped 0.84%.

During regular trading hours, among the Big Seven, Alphabet Class A gained 1.34%, Amazon rose 0.59%; Microsoft dipped 0.06%, Tesla fell 0.80%, Apple declined 0.94%, Nvidia dropped 1.17%, and Meta slipped 1.24%.

The Philadelphia Semiconductor Index climbed 1.75% to close at 11,684.00. Micron jumped 5.86%, Arm rose 4.10%, Marvell gained 3.32%, AMD increased 3.24%, and Broadcom advanced 2.77%.

Storage stocks stood out, with SK Hynix U.S. stock surging 13.30%, SanDisk up 7.66%, Silicon Motion gaining 7.56%, and Seagate rising 4.51%. Optoelectronics firms Lumentum climbed 5.52%, and Corning added 3.88%.

Oracle rose over 10% after unveiling updated cash flow projections; CoreWeave gained 7.32%, and Nebius advanced 6.96%. Oracle now expects free cash flow to turn positive in the second half of FY2028, reaching at least $30 billion in FY2029, alleviating investor concerns over expansion spending.

The Nasdaq Golden Dragon China Index declined 1.83% to close at 5,400.39. Baidu rose 1.57%, Alibaba gained 0.72%; Trip.com dropped 2.58%, NetEase slid 1.44%, and PDD Holdings fell 1.19%.

At the close of the New York bond market, the 10-year Treasury yield stood near 5.02%, while the 2-year yield was around 4.70%. Spot gold hovered near $4,067 per ounce. As of this morning’s draft, Bitcoin was trading around $81,000, and Ethereum near $2,353.

Fed Holds Rates Steady, Two Members Back Rate Hike

The Federal Reserve voted 10-2 to maintain the federal funds rate target range at 3.75%–4.00%. Governors Cook and Cleveland Fed President Mester dissented, advocating for a 25-basis-point rate increase.

The statement upgraded its assessment of economic activity from “solid expansion” to “strong expansion,” while emphasizing that inflation remains elevated and that additional data is needed to determine the appropriate policy stance. Williams declined to forecast the December decision during the press conference and did not rule out further hikes.

Meeting schedules will also be adjusted. The FOMC will continue to hold eight meetings annually, but in 2027 there will be one dedicated solely to monetary policy strategy without a rate vote; in 2028, such strategic meetings will increase to two, reducing the number of rate-setting meetings to six.

Microsoft Azure Revenue Up 48%, Capital Spending Below Expectations

After the close on Wednesday, Microsoft reported Q1 results for FY2027. Revenue reached $92.279 billion, up 19% year-over-year; operating profit was $45.915 billion, up 21%. Excluding the impact of OpenAI investments, non-GAAP EPS was $4.89, up 18% YoY.

Azure revenue grew 48% year-over-year, accelerating from 43% in the prior quarter; Microsoft Cloud revenue totaled $63.9 billion, up 30% YoY.

Cash capital expenditures for the quarter were $39.367 billion—though double the same period last year—they came in below market expectations. Operating cash flow reached $58 billion, resulting in free cash flow of $18.633 billion after deducting capital spending, a decline of about 27% compared to last year.

During the earnings call, the company projected Azure revenue growth of 49% to 50% in the next fiscal quarter on a constant currency basis. Accelerating cloud growth and lower-than-expected cash capex drove shares up over 6% post-market.

Google Cloud Revenue Doubles, Advertising and Cash Flow Miss Expectations

Alphabet’s Q3 revenue reached $127.577 billion, up 25% YoY; EPS was $2.12, both falling short of market estimates. The stock dropped more than 10% after hours.

Google Cloud was a standout, with revenue growing 103% to approximately $30.7 billion, driven by TPU system sales. However, search and related business revenue rose only 12%, and YouTube ad revenue increased by about 9%—both underperforming analyst expectations.

Investment losses weighed on profitability. Alphabet recorded a net loss of approximately $8.7 billion from equity investments in the quarter, reducing EPS by about $0.55 and explaining part of the earnings shortfall.

Cash flow pressure intensified. The company generated $42.29 billion in operating cash flow, but capital expenditures reached $51.355 billion, resulting in negative free cash flow of $9.065 billion—its second consecutive quarter of negative FCF.

Oil Rebounds, WTI Reclaims Above $102

On Wednesday, WTI crude December futures rose 2.88% to settle at $102.78 per barrel; Brent crude December futures gained 1.26% to close at $115.32 per barrel.

Houthi attacks on Saudi refining facilities heightened supply concerns. While U.S.-Iran talks continue toward resuming engagement, no new ceasefire arrangements have emerged, halting oil’s two-day losing streak.

Today’s Focus

All times are Beijing time.

20:30: U.S. Q3 preliminary GDP, September personal income and expenditure report. The latter includes the PCE price index. Key focus: consumer spending and corporate investment performance, and whether core inflation shows signs of cooling.

After U.S. market close on October 30: Amazon and Intel report earnings. For Amazon, monitor AWS growth, capital spending, and free cash flow; for Intel, focus on data center business, margins, and forward guidance.

Written by Chao Xiang Research