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* Futures up: Dow 0.23%, S&P 500 0.41%, Nasdaq 0.86%

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

growth

* Meta drops 9.2% after second-quarter free cash flow

plunges 91%

* Traders see 65% chance of 25-bps Fed rate hike in

September

July 30 (Reuters) - U.S. stock index futures steadied on

Thursday after a sharp selloff driven by uncertainty around the

Federal Reserve's policy outlook, while Microsoft's ( MSFT )

forecast-beating results soothed investor concerns about massive

AI spending by companies.

Microsoft ( MSFT ) rose nearly 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 dropped 10% from

its early June peak on Wednesday.

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

Platforms ( META ) dropped 9.2% 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.

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

Warsh left traders confused about the path of borrowing costs.

U.S. 30-year Treasury yields jumped to 19-year highs on

Thursday, while the yield on 2-year notes, which

reflects near-term interest rate expectations, was largely

unchanged at 4.26%.

Traders currently see a 65% chance that the U.S. central

bank will raise interest rates by 25 basis points at its

September meeting, as per CME Group's FedWatch tool.

Key economic data including the preliminary reading of

second-quarter GDP, personal consumption expenditures for June

and weekly initial jobless claims are due at 8:30 a.m. ET.

The GDP report is expected to show the U.S. economy grew at

a 2.1% annualized rate last quarter, matching the January-March

quarter's pace, as the economy largely weathered the Middle East

conflict.

At 6:18 a.m. ET, S&P 500 E-minis

were up 30.5 points, or 0.41%, Nasdaq 100 E-minis

were up 236.25 points, or 0.86%, and Dow E-minis

were up 119 points, or 0.23%.

Among other stocks, Qualcomm ( QCOM ) fell 5.3%, as the

chipmaker forecast fourth-quarter profit below estimates and

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

expected.

U.S.-listed shares of Arm dropped 5% after the

British chip designer said it expects smartphone royalties to

fall in "this next quarter".

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%.

Starbucks ( SBUX ) climbed 7.3% after the world's largest

coffee chain raised its annual sales and profit forecasts, while

Chipotle Mexican Grill ( CMG ) added 5% as the burrito chain

raised its annual sales forecast.