Microsoft's early gains expand to over 14% as last quarter's cloud revenue surges more than 40%, with capital expenditures below expectations; Meta drops nearly 10% as Q2 revenue beats expectations, but concerns over AI investments persist. Apple falls nearly 2%, Amazon rises over 3%, with latest quarterly financial reports to be released after hours.

Deutsche Bank points out that as central banks in the US, Europe, and Japan are tightening policy simultaneously, the market may still be underpricing the eventual terminal rates. With oil prices remaining high, inflation may spill over into core inflation and wages. Moreover, financial conditions have not tightened in tandem, which could weaken the effect of rate hikes. Citing the experience of 2022, Deutsche Bank notes that the market then expected a total of around 200 basis points of Fed rate hikes in the first year, but the final figure exceeded 400 basis points, illustrating that the market often underestimates the terminal rate.