One person alone in a field is no warrior, but sometimes a single report can flip market sentiment 180 degrees. That's what happened with Microsoft, which jumped by 16% on Thursday after posting strong results, marking its best day since October 2008. The market that looked tired and fearful the day before suddenly came to life. The S&P 500 closed higher, the Nasdaq 100 logged its best day in four months, and the Philadelphia Semiconductor Index popped by 8.2%, ending a five-day slide.

Stock index dynamics

The positive move was not universal. Meta Platforms plunged by 8% after warning that free cash flow would turn negative for the first time since its 2012 IPO — the company's eleventh consecutive down day, a record losing streak. The split reaction to Microsoft and Meta exposes the key question for trading the AI theme: can companies that pour hundreds of billions into AI deliver commensurate returns?

Wells Fargo sees US equities' outlook as constructive on the back of strong earnings, continued AI adoption, and a resilient economy. According to the bank, the recent weakness is more like an overheated market's reset than a breakdown of the primary trend. UBS shares that view but advises investors to manage concentration risk and increase exposure to defence-oriented technology stories.

Microsoft and Meta Platforms performance

Retail traders have started to take profits. JPMorgan reports that outflows from technology ETFs were the second largest on record, and Vanda Research recorded the largest sequence of single-stock sales since 2020. Wall Street's reading is that the crowd is not exiting the market — it's becoming more selective. The problem will arise if institutions follow suit, but there is no sign of that yet.

Thursday's rally trimmed the semiconductor sector's July decline to 21%, yet it remains the largest monthly drop since 2008. Insatiable demand for AI continues to coexist with high volatility — lofty expectations leave little room for disappointment.

This rebound is, at base, an earnings story rather than a macro shift. The question is whether the banks' view of a healthy reset or the traders' profit-taking narrative will prevail.

Technically, the daily chart shows that the S&P 500 formed a false-break reversal (a bear-trap) after a false downside breakout below the previously formed consolidation range of 7,375–7,450. A break above the resistance level of 7,450 would be a technical trigger to build long positions, targeting a move toward at least fair value near 7,540.