After a rough patch earlier in the week, the stock market found its footing on Thursday. The S&P 500 jumped 1.66% to close at 7,437.63, recovering from the previous session's selloff. The catalyst? Strong earnings from Microsoft (MSFT) and a broad rally in semiconductor stocks that got investors feeling good about AI again.
Now, the question on everyone's mind is whether that momentum carries into Friday's open. According to Polymarket traders, the answer is a resounding yes. The July 31 contract on the prediction market implies a 94% probability that the index will open higher today. That's a pretty confident bet, but let's dig into why.
Why That Number Matters
Today isn't just any Friday. It's the final trading day of July, capping one of the busiest weeks of earnings season. Investors are still trying to figure out whether the massive amounts of money being poured into artificial intelligence are actually showing up in the bottom line. Thursday's rally suggests they are, at least for some companies.
After the bell on Thursday, Amazon (AMZN) reported better-than-expected second-quarter revenue, thanks to strength in its cloud-computing business. Shares jumped more than 9% in extended trading. Apple (AAPL) also beat revenue expectations, helped by a 22% surge in iPhone sales. Those are solid numbers, but they come with a caveat: Apple shares slipped in after-hours trading anyway, a sign that investors' expectations are sky-high.
Meanwhile, the market is still digesting the Federal Reserve's decision earlier this week to hold interest rates steady. Treasury yields remain near multi-year highs as investors reassess the inflation and monetary policy outlook. That's a backdrop that could cap gains if things get too frothy.
The Bull Case
Thursday's rally was a clear signal that investor appetite for AI-linked companies is alive and well, as long as earnings back up the hype. Microsoft surged 16% after reporting stronger-than-expected Azure cloud growth, and that sparked a wave of buying across the semiconductor sector. The iShares Semiconductor ETF (SOXX) climbed more than 8%, while Micron Technology (MU) gained 18% and Advanced Micro Devices (AMD) rose more than 13%.
The optimism wasn't confined to the U.S. On Friday, South Korea's Kospi recorded its best day on record as chipmakers rallied, Japan's Nikkei 225 climbed sharply, and European equities also traded higher. That global wave of positive sentiment is a good sign heading into the U.S. session.
The Countercase
But let's not get carried away. Despite the rebound, risks remain. The divergence in Big Tech earnings is a stark reminder that AI spending doesn't always translate into profits. While Microsoft's results boosted confidence, Meta Platforms (META) fell 8% after issuing soft revenue guidance and reporting a 91% drop in second-quarter free cash flow. That's a big red flag for a company that's been spending heavily on AI infrastructure.
Apple's after-hours dip, despite beating revenue estimates, also underscores how high the bar has been set. When good news isn't enough to move the stock up, it says something about investor expectations.
And then there's the bond market. Treasury yields remain elevated after the Fed's decision to hold rates steady. That could put pressure on equities, especially if yields keep climbing.
Still, S&P 500 futures were up 0.48% early Friday, suggesting the market is leaning toward the bull case, at least for now.
How The Previous Bet Played Out: The July 30 Polymarket contract attracted just $9,180 in traded volume, making it one of the quietest S&P 500 prediction markets this month. The index opened at 7,390.45, above the previous session's close of 7,316.15, meaning the contract ultimately resolved "Up." So traders who bet on that outcome got it right.
As we head into the open, the question is whether the AI rally has legs or if the skeptics will have their day. Either way, it's shaping up to be an interesting Friday.
