U.S. stocks edged higher on Thursday as another encouraging inflation report helped ease fears of a near-term Federal Reserve rate hike, while investors worked through a busy round of corporate earnings. The S&P 500 gained about 0.5%, while the tech-heavy Nasdaq Composite advanced roughly 0.7% as growth stocks benefited from a friendlier rate backdrop.
The Dow Jones Industrial Average bucked the trend, slipping about 0.1% as the blue-chip index struggled for direction. Thursday's gains followed Wednesday's cooler consumer inflation report, with softer producer prices adding to evidence that inflation pressures may be stabilizing despite continued uncertainty surrounding energy markets and the Strait of Hormuz.
Market Movers:
- Omeros (OMER) +29% - Shares surged after the biotech company delivered better-than-expected second-quarter results as the commercial rollout of YARTEMLEA gained momentum, with gross revenue from the drug reaching $32.2 million, up 190% from the first quarter. Omeros also swung to adjusted net income of $1.8 million from a $17.1 million adjusted loss in Q1 and ended the quarter with $132 million in cash and short-term investments.
- Birkenstock (BIRK) +13% - Shares jumped after the footwear company posted stronger-than-expected fiscal third-quarter results, with revenue climbing 13% year over year to €719.5 million as direct-to-consumer and wholesale sales both posted double-digit growth. Investors welcomed the company's ability to maintain full-price demand despite pressure on discretionary spending, although tariffs, currency headwinds and Middle East tensions remain potential drags on margins.
- IREN (IREN) +11% - Shares rallied after the AI infrastructure company completed and received acceptance for its first AI Cloud deployment for Microsoft under their $9.7 billion, five-year cloud services agreement. The 50-megawatt Horizon 1 deployment is now operational at IREN's Childress, Texas campus, while the company continues targeting 480 megawatts of gross AI Cloud capacity in 2026 and 1.2 gigawatts in 2027.
- Microsoft (MSFT) +2% - Shares rose after JPMorgan lifted its price target on the software giant to $625 from $550 while maintaining an Overweight rating, citing accelerating opportunities across Copilot and AI infrastructure. The firm sees AI spending supporting faster Azure and Microsoft 365 Commercial Cloud growth, with Copilot potentially adding between $24 billion and $41 billion in revenue.
- Cerebras Systems (CBRS) -10% - Shares plunged after the AI chipmaker delivered weaker-than-expected second-quarter revenue and a steep adjusted earnings miss despite continued rapid growth in its core business. Revenue climbed 74.3% year over year to $180.1 million but fell short of consensus, while management projected full-year core revenue of $880 million to $890 million.
- Cisco Systems (CSCO) -7% - Shares fell despite the networking giant beating fiscal fourth-quarter expectations and delivering guidance above Wall Street forecasts, highlighting how demanding expectations have become for companies tied to the AI infrastructure boom. Revenue increased 18% year over year to $17.3 billion, while Cisco expects roughly $7.5 billion in AI-related hyperscaler revenue in fiscal 2027 after hyperscaler orders more than doubled in the latest quarter.
- Virgin Galactic (SPCE) -5% - Shares dropped after the space tourism company pushed the beginning of commercial service to February 2027 from the fourth quarter of 2026 as it works through additional avionics and systems installations. Virgin Galactic said demand remains strong and its $750,000 ticket tranche is oversubscribed, but the latest delay extends the wait for meaningful commercial revenue.
- JD.com (JD) -4% - Shares declined after the Chinese e-commerce company reported better-than-expected quarterly results but showed signs of softer top-line momentum, with product revenue falling 5.4%. Service revenue grew 6.8% and profitability improved significantly, but cautious consumer spending, intensifying competition and a 10.4% increase in fulfillment expenses kept investors focused on the challenges ahead.
Softer Inflation Data Gives the Fed More Breathing Room
Thursday's Producer Price Index added to evidence that inflation pressures are beginning to cool. Producer prices rose less than economists had expected, while core measures showed slower price growth on both a monthly and annual basis. The report followed Wednesday's Consumer Price Index, which showed annual inflation easing to 3.4% in July from 3.5% in June. Together, the reports have encouraged investors to scale back expectations for a September rate hike, particularly after July's surprisingly weak employment report showed the U.S. economy losing 23,000 jobs.
That does not mean the inflation fight is over. Price growth remains well above the Federal Reserve's 2% target, leaving policymakers with an uncomfortable mix of softer employment and still-elevated inflation. The question increasingly facing markets is whether recent moderation will prove durable enough for the Fed to remain on hold through the rest of the year.
Oil and the Strait of Hormuz Remain a Wild Card
Energy prices remain one of the biggest threats to that improving inflation picture. Oil prices moved lower Thursday as the Trump administration shifted its focus from active military operations toward economic pressure on Iran, but uncertainty surrounding shipping through the Strait of Hormuz remains elevated. The disruption matters well beyond energy markets. A prolonged restriction on oil shipments could push crude prices higher again, feed through to transportation and production costs, and complicate the Fed's efforts to bring inflation under control.
The dollar is also caught between competing forces. Reduced expectations for Fed tightening could pressure the currency, while continued geopolitical instability and the United States' position as a major energy producer could preserve demand for the dollar as a safe-haven asset.
AI Earnings Put Sky-High Expectations to the Test
Earnings season continues to reveal a striking divide in the AI trade: demand for computing infrastructure remains enormous, but investors are becoming increasingly selective about which companies receive credit for that growth. Cisco's decline despite better-than-expected results offered another example. Its AI-related hyperscaler business continues to expand rapidly, yet strong numbers were not enough to satisfy investors after a powerful run for AI infrastructure stocks. Cerebras faced an even harsher reaction after its revenue and earnings fell short of expectations.
At the same time, IREN's Microsoft deployment reinforced the scale of spending still flowing into the sector. Investors will get another important read after Thursday's close when chip-equipment heavyweight Applied Materials reports results, with its outlook likely to provide another window into semiconductor demand and the durability of the AI infrastructure cycle.
Looking Ahead
Markets now have two encouraging inflation reports in hand, giving investors more reason to believe the Federal Reserve can remain patient after July's weak jobs data. If inflation continues to cool without a deeper deterioration in employment, the prospect of an extended Fed pause could provide support for equities, particularly rate-sensitive technology and growth stocks. But the path remains unusually dependent on developments outside the traditional economic calendar. Oil prices, the Strait of Hormuz, elevated Treasury yields, and increasingly demanding expectations for AI companies all have the potential to quickly shift sentiment. With major indexes hovering near record territory, investors will be looking for confirmation that cooling inflation and resilient corporate growth can keep the rally moving without another shock upsetting the balance.