* Apple shares tumble more than 7% after disappointing

forecast on component shortages

* US 10-year Treasury yield hits 4.747%, highest since

January 2025

* Traders price in 69% odds of Fed rate increase in

September

(Updated after New York stock market close)

By Karen Brettell

July 31 (Reuters) - U.S. stocks rose on Friday as strong

earnings from Amazon ( AMZN ) and Microsoft ( MSFT ) drew investors back into the

AI trade, while longer-dated Treasury yields hit new multi-year

highs on fears that rising oil prices could fuel inflation.

Currency markets also stayed on alert for further

intervention, a day after Japanese authorities stepped in to

support the yen, according to a market source.

Microsoft ( MSFT ) on Wednesday forecast strong cash

generation through fiscal 2027. Amazon ( AMZN ) followed a day

later with its strongest cloud growth in more than four years,

reassuring investors eager for proof that massive AI spending is

paying off.

"There were worries that Amazon's ( AMZN ) spending was just moonshot

spending, that it's irresponsible spending, and (CEO) Andy Jassy

just put those fears to bed," said Jake Dollarhide, CEO of

Longbow Asset Management in Tulsa, Oklahoma.

The Dow Jones Industrial Average rose 0.53% to

52,485.74, the S&P 500 gained 0.70% to 7,489.81 and the

Nasdaq Composite ended up 1.00% at 25,373.85.

Gains were limited by a more than 7% drop in Apple shares after

a disappointing forecast showed that the iPhone maker was

struggling to secure enough components as the AI-driven

data-center boom strains global supply chains.

South Korea's battered KOSPI leapt 17.91%, mounting a

record comeback after heavy losses earlier this week. The

tech-heavy bourse, still about 30% off its all-time high, has

become emblematic of the sharp swings in investor sentiment

towards AI-related stocks.

MSCI's gauge of stocks across the globe rose

1.22%, to 1,120.59.

The pan-European STOXX 600 index fell 0.12%, while

Europe's broad FTSEurofirst 300 index fell 0.09%.

HAWKISH FED SPEAK SENDS BOND YIELDS HIGHER

Longer-dated Treasury yields jumped after three Fed

policymakers who had dissented in favor of a rate hike at this

week's meeting made their case publicly on Friday for higher

rates.

The Fed kept rates unchanged - an expected outcome that aligned

with market pricing, which showed a roughly one-in-three chance

of a hike. Uncertainty over the decision was unusually high,

however, as traders adjust to Fed Chairman Kevin Warsh's

preference for less forward guidance.

The yield on benchmark U.S. 10-year notes rose

4.51 basis points to 4.708% and reached 4.747%, the highest

since January 2025.

The 30-year bond yield gained 4.39 basis points

to 5.2509%, the highest since mid-2007.

Traders are now pricing in 69% odds of a rate increase at

the Fed's September meeting.

Oil prices closed more than $1 per barrel higher, ending July

with their biggest monthly gains since March, as concerns over

global crude flows mounted on Iranian reports that some tankers

were forced to turn back in the Strait of Hormuz.

"The shock absorbers in oil markets are dwindling fast, so a

failure to de-escalate would be materially costlier than

previous rounds of tension," wrote Teddy Bunzel, head of Lazard

Geopolitical Advisory at Lazard Asset Management.

Shipments through the crucial Strait of Hormuz remain

disrupted. The alternative route through the Bab el-Mandeb

Strait has also come under attack from the Iran-backed Houthis,

further worsening the outlook.

BOJ HOLDS RATES DAY AFTER INTERVENTION

The yen strengthened 0.22% against the greenback to

159.16 per dollar, following sharp gains on Thursday after Japan

conducted yen-buying, dollar-selling intervention, according to

a market source.

The U.S. Treasury also told several banks it may intervene in

the yen market on Friday and that they should "stand ready for

future action," a source familiar with the matter told Reuters.

The BOJ kept interest rates unchanged on Friday, but signalled

its resolve to push up borrowing costs.

At a press conference, BOJ Governor Kazuo Ueda said inflation

risks were skewed to the upside, and the central bank was

prepared to speed up the pace of rate hikes should monetary

conditions be accommodative.

Analysts note that intervention has had limited success in

providing durable support for the yen, and say the currency's

outlook is unlikely to improve unless the BOJ raises rates.

"The yen fundamentals and technicals are very poor.

Intervention is not a credible, long-term solution," said Lauren

van Biljon, senior portfolio manager, rates and FX, at Allspring

Global Investments.

The dollar index, which measures the U.S. currency

against a basket of peers including the yen and the euro, fell

0.12% to 99.95, with the euro up 0.02% at $1.1529.

Spot gold fell 1.26% to $4,050.69 an ounce.