* Microsoft ( MSFT ) jumps 14% after beating sales and cloud growth

expectations

* 30-year Treasury yield reaches 5.2444%, highest level

since mid-2007

* Fed funds futures price 64% odds of September rate hike

(Updated in New York morning time)

By Karen Brettell

July 30 (Reuters) - U.S. stocks gained on Thursday as

Microsoft's ( MSFT ) forecast-beating results eased investor concerns

about massive AI spending by companies, while 30-year Treasury

yields scaled a 19-year peak after the Federal Reserve left

interest rates unchanged on Wednesday, stoking concerns about

longer-term inflation.

Microsoft ( MSFT ) rose 14% after the company forecast

current-quarter sales and cloud growth that beat expectations,

issued a capital expenditure outlook below Wall Street

estimates, and said it expects to keep generating cash through

the just-started fiscal 2027.

Investors have been rattled 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 under pressure as investors questioned high

valuations.

"We don't think the AI story is over by any means, but

clearly there's scope for bumps along the way," said Sanjiv

Tumkur, head of equity research at Rathbones.

The Dow Jones Industrial Average rose 0.68% to

51,945.26, the S&P 500 gained 1.29% to 7,410.61 and the

Nasdaq Composite was last up 2.43% at 25,037.38.

The MSCI All Country World Price index .MIWD00000PUS gained

1.30%, to 1,105.11, after earlier falling to its lowest level

since June 11.

South Korea's KOSPI fell 1.23% to end its third

consecutive day in the red.

The pan-European STOXX 600 index rose 0.88%, while

Europe's broad FTSEurofirst 300 index rose 0.89%.

THIRTY-YEAR YIELDS HIGHEST SINCE 2007

Longer-dated Treasury yields extended Wednesday's sharp rise

after the Fed's decision to hold interest rates steady raised

fears that inflation - already running well above the Fed's

target - could climb further.

The decision to leave policy on hold drew dissents from three of

the 12 FOMC members, who had wanted a quarter-percentage-point

hike instead. Fed Chairman Kevin Warsh's preference for less

forward guidance has left traders even less certain of the Fed's

next move.

Warsh noted that bond yields had risen notably since the

Fed's last policy meeting, reflecting investors pricing in

future rate increases. He welcomed that move, while adding that

it did not mean the central bank needed to ratify it with action

of its own.

"The aversion from Warsh to provide forward guidance is

hurting a little bit of credibility here," said Oscar Munoz,

head of US economics at TD Securities "He's pointing to the

market kind of doing the job for the Fed, but at some point

there has to be some follow-through."

A recent uptick in oil prices pushed yields higher ahead of

the Fed meeting, as fighting resumed in the war with Iran. Fed

funds futures traders are now pricing in 64% odds of a hike at

the Fed's September meeting.

The interest rate sensitive 2-year Treasury US2YT=RR yield fell

1.28 basis points to 4.223%, while the yield on benchmark U.S.

10-year notes US10YT=RR rose 4.51 basis points to 4.667%.

Thirty-year yields were last up 6.94 basis points at 5.2124%

and reached 5.2444%, the highest since mid-2007.

Data on Thursday showed U.S. inflation slowed in June, with the

Personal Consumption Expenditures Price Index rising 3.7% in the

12 months through June, after an unrevised 4.1% gain in May -

the largest increase since April 2023.

Separately, U.S. economic growth slowed in the second quarter

amid a widening trade deficit, though an acceleration in

consumer spending and robust business investment in AI

infrastructure pointed to underlying strength.

Oil prices fell on Thursday, as investors weighed talks between

Oman and Iran over the Strait of Hormuz even as Washington and

Tehran traded strikes on each other's military targets again.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

fell 0.77% to 100.01, with the euro up 0.5% at $1.1521.

Sterling strengthened 0.49% to $1.3432.

The Bank of England kept interest rates on hold as expected, but

a third policymaker backed a rate hike, citing renewed conflict

between the United States and Iran.

The Japanese yen gained sharply, sparking speculation of

possible intervention by Japanese authorities to shore up the

beleaguered currency. It was last up 2.59% against the greenback

at 159.16 per dollar.

The Bank of Japan is expected to keep rates steady at 1% on

Friday. After raising rates in June, a second successive hike

would be unusual.

Spot gold rose 0.93% to $4,102.91 an ounce.