* Futures up: Dow 0.4%, S&P 500 0.6%, Nasdaq 1.6%

* Microsoft ( MSFT ) jumps after forecasting upbeat sales, cloud

growth

* Meta drops after second-quarter free cash flow plunges 91%

* Traders see 64% chance of 25-bps Fed rate hike in

September

(Updates before markets open)

By Sruthi Shankar and Ragini Mathur

July 30 (Reuters) - U.S. stocks were set for a higher open

on Thursday, as investors assessed a slew of economic data

including an inflation reading, while Microsoft's ( MSFT )

forecast-beating results soothed investor concerns about massive

AI spending by companies.

Microsoft ( MSFT ) rose 9% in premarket trading after the

company forecast current-quarter sales and cloud growth that

beat expectations, gave a capital expenditure outlook below Wall

Street estimates and said it expects to keep generating cash

through its just-started fiscal 2027.

Investors have been spooked by rising AI costs at big

technology firms even as they report strong earnings. Negative

cash-flow reports from Alphabet and Tesla

last week sparked a bout of selling in AI-linked stocks, with

chip stocks also coming under pressure as investors question

high valuations. The tech-heavy Nasdaq-100 dropped 10%

from its early June peak on Wednesday.

In a sign that AI concerns were far from over, Meta

Platforms ( META ) shed 9.7% after the social media giant

reported a 91% drop in second-quarter free cash flow,

underscoring the financial strain of its costly AI buildout.

Apple ( AAPL ) and Amazon ( AMZN ) are scheduled to report

earnings after markets close on Thursday.

On the economic data front, U.S. economic growth slowed in

the second quarter amid a widening in the trade deficit,

increasing at a 1.5% rate versus estimates of 2.1% growth.

A separate reading showed the Personal Consumption

Expenditures (PCE) price index fell 0.1% in June, in line with

analysts' expectations. The 'core' reading rose 0.1% on a

monthly basis versus expectations of a 0.2% increase.

At 8:44 a.m. ET, Dow E-minis were up 180 points, or

0.35%, S&P 500 E-minis were up 43.25 points, or 0.59%,

and Nasdaq 100 E-minis were up 436.25 points, or 1.6%.

U.S. stocks fell sharply on Wednesday, with the benchmark

S&P 500 posting its biggest percentage drop since June

10, after the Fed left interest rates unchanged in the 3.50% to

3.75% range, but mixed messages from new Fed Chair Kevin Warsh

left traders confused about the path of borrowing costs.

"The markets were very confused, which explains the yield

reaction and then this morning, the hold on rates is justified

when you're looking at the downward movement of PCE numbers,"

said Anna Rathbun, CEO and founder of Grenadilla Advisory.

Bond markets were on edge, with the yield on the 30-year

Treasury bond surging to its highest level in 19

years, as investors grew increasingly concerned about the

central bank's monetary-policy outlook and sought greater

protection against future inflation.

Traders currently see a 64% chance that the U.S. central

bank will raise interest rates by 25 basis points at its

September meeting, according to LSEG-compiled data.

Among other stocks, Qualcomm ( QCOM ) fell 3.2%, as the

chipmaker forecast fourth-quarter profit below estimates and

said revenue from Apple ( AAPL ) products would decline faster than

expected.

Cybersecurity firm Fortinet ( FTNT ) gained 11% after

lifting its annual revenue forecast, signaling strong enterprise

spending on its services amid rising data security incidents.

Starbucks ( SBUX ) climbed 4.6% after the world's largest

coffee chain raised its annual sales and profit forecasts.

Nearly half of S&P 500 companies have reported

second-quarter results so far. Of those, 85.2% have topped

analysts' profit estimates, as per LSEG IBES data, compared with

an average beat rate of 68%.