S&P 500 and Dow Jones Forecast: Microsoft Rally Lifts Stocks as Tariff Risks Grow
These tariffs may hinder trade with key U.S. trading partners. American-based businesses rely on China and India for technology parts, industrial goods, pharmaceuticals and consumer goods. The increased import prices may lead to decline in the profit margins of businesses or increased consumer prices. This would put pressure on multinational companies in both the S&P 500 and Dow Jones. It also has potential to provide for elevated inflation and higher Treasury yields.
The plan still faces resistance in Congress as both members are worried about inflation, economic damage and the broader presidential trade authority. Therefore, it is considered the risk scenario rather than the base case. Trump also signed a smaller tariff rate quota on imports of quartz surfaces on 31st July. It will be in effect for four years, starting Aug. 15 and will have a few exceptions to the list of trading partners. It may not have direct impact on markets but it does represent a reminder that tariffs are part of the U.S. economic policy agenda.
Microsoft Earnings Fuel the S&P 500 and Dow Jones Rally
Microsoft delivered a strong forecast and initiated a rally on Wall Street on Thursday last week. This rally resulted in strong weekly gains in the S&P 500 with 1.05% and the Dow Jones with 1.14%.
Microsoft recieved 21.75% gain last week and the market value also increased dramatically. The company forecasted strong quarterly sales and cloud growth. It announced capital expenditure below expectations and expects to generate positive cash flows into fiscal 2027. These results alleviated fears that the financial consequences of the investments in AI would reduce profits of large tech firms.
The chart below shows that Microsoft’s rebound developed from the strong long-term support at the $350 level. This support is defined by the neckline of a cup and handle pattern. This pattern developed from November 2021 to October 2023. Each time Microsoft’s stock price reaches this level, it initiates a strong rally toward new record high.
The first example was seen in April 2025 while the second was seen in March 2026. The drop in June 2026 resulted in another strong surge in Microsoft. Moreover, the stock price closed above its 2026 high, which represents a strong recovery. The rising volume in Microsoft also shows strong buying interest as the price increases. The stock price is now also above the 200-day SMA on the daily chart which indicates positive momentum in Microsoft over the next few days.