Wall Street opened sharply lower as Microsoft (MSFT) tumbled 10% to its lowest level in nine months after reporting slowing cloud growth for its fiscal second quarter and issuing weaker-than-expected margin guidance for Q3. Analysts said the slowdown in cloud computing'central to the AI narrative'sparked concerns that heavy AI investments may be outpacing demand. Early selling was also driven by profit-taking after the S&P 500 briefly crossed the 7,000 mark for the first time.

Selling pressure eased later in the day, with some investors buying the dip amid sustained optimism about the economic outlook. Meta Platforms (META) jumped 10.4% after posting strong fourth-quarter results and upbeat revenue guidance, while IBM (IBM) also rallied following better-than-expected earnings on both revenue and profit, helping limit broader market losses.

Software stocks saw substantial weakness, with the Dow Jones U.S. Software Index plunging by 7.7% to a nine-month closing low. The nosedive by Microsoft weighed on the sector along with a steep drop by ServiceNow (NOW), which plummeted by 9.9% despite reporting better than expected fourth quarter earnings. Gold stocks were considerably weak , as reflected by the 3.8% slump by the NYSE Arca Gold Bugs Index. The sector saw continued weakness even though the price of gold recovered from an early sell-off. Airline stocks moved sharply higher over the course of the session, driving the NYSE Arca Airline Index up by 2.3%. Telecom, banking and commercial real estate stocks also moved notably higher as the day progressed, helping to lift the markets well off their early lows.

Asia-Pacific stocks moved mostly higher. Japan's Nikkei 225 Index closed marginally higher, while China's Shanghai Composite Index edged up by 0.2% and Hong Kong's Hang Seng Index climbed by 0.5%. The major European markets turned in a mixed performance on the day while the German DAX Index dove by 2.1%, the French CAC 40 Index crept up by 0.1% and the U.K.'s FTSE 100 Index inched up by 0.2%.

In the bond market, treasuries regained ground following the pullback seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.4 bps to 4.22%.

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