US STOCKS-Microsoft, Meta earnings power stocks higher

By Chuck Mikolajczak

NEW YORK, May 1 (Reuters) - U.S. stocks rallied on Thursday, with the Dow and S&P 500 poised for their eighth straight session of gains, after strong results from megacaps Microsoft and Meta eased concerns about artificial intelligence spending.

Microsoft MSFT.O surged nearly 9% and hit its highest level since late January, driven by an upbeat quarterly growth forecast for its cloud-computing business Azure. Microsoft briefly surpassed Apple AAPL.O to become the world's most valuable company.

Meta Platforms META.O climbed more than 4% and reached a five-week high after posting higher-than-expected revenue on the back of a strong advertising performance.

The results helped allay fears the massive spending on AI in recent years would not be rewarded, and eased concerns about the Trump administration's tariffs could have on economic growth.

"It's nice that the day is being carried by earnings rather than just talking about tariffs for a second, so it's a little refreshing in that regard that we're talking about economic data and earnings," said Lamar Villere, Portfolio Manager with Villere & Co in New Orleans.

"Certainly when you see a company of Microsoft's size, Meta's size, putting up great earnings, you would believe that their run is not over."

The Dow Jones Industrial Average .DJI rose 213.67 points, or 0.53%, to 40,883.03, the S&P 500 .SPX gained 59.28 points, or 1.07%, to 5,628.34 and the Nasdaq Composite .IXIC gained 354.05 points, or 2.03%, to 17,800.09.

Repercussions from frequent shifts in U.S. trade policy have been overshadowed a solid earnings season so far, with many companies slashing or withdrawing their profit outlooks. Despite the uncertain outlook, S&P 500 first-quarter earnings are seen growing 12.9% on an annual basis, per LSEG data, up from the 8% growth rate seen on April 1.

Results from fellow heavyweights and "Magnificent Seven" companies Amazon.com AMZN.O and Apple AAPL.O are due after the closing bell. Amazon shares were up 3.1%.

Apple shares alternated between modest gains and losses after a federal judge ruled the iPhone maker had violated a U.S. court order to reform its App Store.

The S&P 500 and Dow were both on track for their eighth straight session of gains, the longest run for the Dow in a year and for the S&P since August.

With the gains in Microsoft and Meta, tech <.SPLRCT< and communication services .SPLRCL led sector gains, up 3.2% and 2.1%, respectively.

Economic data on the session painted a mixed picture.

Weekly jobless claims, the latest in a strong of labor market data this week ahead of Friday's key government payrolls report, showed layoffs increased more than expected last week, potentially hinting at a pick-up in job cuts following tariffs.

ISM PMI data showed U.S. manufacturing contracted further in April, though slightly less than expected by economists polled by Reuters, while input prices were elevated.

That followed Wednesday's data showing the U.S. economy contracted for the first time in three years in the last quarter.

Eli Lilly LLY.N reported quarterly results, but tumbled more than 9% after CVS Health's CVS.N decision to drop Lilly's obesity drug Zepbound from some lists of medicines it covers for reimbursement. The healthcare sector .SPXHC slumped about 2%, the worst performer on the session.

Among other earnings, McDonald's MCD.N shed 1.5% after posting a surprise drop in first-quarter global sales.

Mobile chip designer Qualcomm QCOM.O tumbled 8% after it forecast a hit to revenue from the trade war.

General Motors GM.N slipped 0.1% after offering a new forecast for 2025 core profit.

Advancing issues outnumbered decliners by a 1.37-to-1 ratio on the NYSE and by a 1.25-to-1 ratio on the Nasdaq.

The S&P 500 posted nine new 52-week highs and four new lows while the Nasdaq Composite recorded 37 new highs and 57 new lows.