Wall Street got a reminder Thursday that not all selloffs are created equal. The day after the Federal Reserve meeting, volatility came roaring back, but this time it wasn't about macroeconomic anxiety or interest rate fears. This was good old-fashioned stock-picking pain, where individual companies lived or died on their own merits, and a few heavyweight names dragged entire indices down with them.
By midday in New York, the tech-heavy benchmarks were taking it on the chin, with Microsoft Corp. (MSFT) delivering the kind of drop that makes you check your screen twice. The software giant's shares cratered 12%, marking the company's worst trading session since March 18, 2020, back when the world was coming to grips with pandemic lockdowns. That's the kind of historical context that gets your attention.
Here's the kicker: Microsoft actually beat expectations on both earnings and revenue. So what went wrong? Investors decided to focus on what they didn't like, namely slowing growth in Azure cloud services and guidance that didn't inspire confidence. The big question hanging over everything: just how quickly can Microsoft actually turn all those AI investments into real money? The market's answer Thursday was apparently "not fast enough," and the resulting selloff vaporized roughly $400 billion in market capitalization. That's not a typo.
Given Microsoft's massive weight in the major indices, that single stock move rippled through the broader market. The S&P 500 dropped 1% to 6,900 points, while the Nasdaq 100 shed 300 points or 1.6%. The Dow Jones and Russell 2000 held up relatively better, benefiting from their lighter tech exposure.
Meta Shines While Software Stocks Sink
Most of the Magnificent Seven traded in the red, but Meta Platforms (META) was the notable exception, jumping more than 8% after delivering a strong fourth-quarter beat. The company also issued upbeat revenue guidance for the first quarter and announced plans to crank up capital spending on AI and advertising infrastructure. Apparently investors liked what they heard about Meta's AI story more than Microsoft's.
International Business Machines Corp. (IBM) also managed to stand out in a positive way, climbing 6% after reporting better-than-expected quarterly results and guidance. Not bad for a company that often gets lumped into the "boring tech" category.
But software stocks broadly? Ouch. ServiceNow Inc. (NOW) plunged 12% despite posting solid headline numbers. The problem was what investors saw when they looked ahead: signs of slowing momentum that nobody wanted to hear about. Salesforce Inc. (CRM) slid 8%, and Oracle Corp. (ORCL) fell 5%.
The real disaster zone was SAP SE (SAP), the German software giant, which absolutely cratered 16% after disappointing results and an outlook that killed sentiment across the entire enterprise software sector. When a company that size moves that much, it sends a message, and that message Thursday was that maybe the software spending party isn't quite as robust as everyone hoped.
Defense and Travel Stocks Fly High
Outside the tech wreckage, some companies were having a very good day. Lockheed Martin Corp. (LMT) soared more than 5% following upbeat earnings and guidance. The defense contractor is now up more than 30% for January, which marks its strongest monthly performance ever recorded. Defense spending, it seems, remains a reliable growth story.
Travel and leisure stocks caught a serious bid after positive earnings reports suggested consumers are still eager to spend on experiences. Royal Caribbean Group (RCL) jumped 15% and Southwest Airlines Co. (LUV) advanced 14%, lifting the entire travel sector with them. Norwegian Cruise Line Holdings Ltd. (NCLH) rose 9%, while Carnival Corp. (CCL) gained 7%. If you're looking for evidence that people want to get out and travel, these moves provided it.
Notable Losers and Mixed Movers
Elsewhere in the market, First Solar Inc. (FSLR) slid 11% after BMO Capital Markets downgraded the stock from 'Outperform' to 'Market Perform' and slashed its price target from $285 to $263. United Rentals Inc. (URI) plunged 14% after missing sales expectations, earning the dubious distinction of being the worst performer in the S&P 500 for the day.
Las Vegas Sands Corp. (LVS) sank 13.5% after issuing weak guidance tied to softer trends in Macau. When the casino business in Macau slows down, investors don't wait around to see if it's temporary.
Commodities Cool While Bitcoin Takes a Hit
Commodity markets backed off after hitting extreme levels overnight. Gold tumbled 3% to $5,250 after briefly touching nearly $5,600 earlier in the session. Silver slid 4% to $112. Both precious metals had been on a tear, so some profit-taking isn't shocking.
Copper and oil, however, moved in the opposite direction. Copper gained 2.5% to a fresh record at $6.20 a pound, while WTI crude climbed 3.5% above $65 a barrel, the highest level since last August. These moves suggest continued strength in industrial demand expectations.
The crypto markets saw intensified selling pressure. Bitcoin fell 5% to $85,000, on track for its worst session since mid-October. Strategy Inc. (MSTR), the company formerly known as MicroStrategy that's basically a leveraged Bitcoin bet at this point, dropped 9% to levels last seen back in September 2024. Ethereum (ETH) and Solana (SOL) each slid about 6%, showing that the pain was spread across the crypto ecosystem.
Index and ETF Performance
By 12:10 p.m. ET, the major indices showed the tale of two markets: tech getting hammered, everything else holding relatively steady. The Dow Jones slipped just 0.1% to 48,987.96, while the Russell 2000 edged down 0.4% to 2,643.56. The S&P 500 fell 0.7% to 6,926.59, and the Nasdaq 100 led losses with a 1.4% decline to 25,648.41.
Looking at the ETFs, the divergence became even clearer. The Vanguard S&P 500 ETF slid 0.82% to $634.33. The SPDR Dow Jones Industrial Average ETF Trust edged down just 0.13% to $489.47. The tech-heavy Invesco QQQ Trust Series dropped 1.53% to $623.51, while the iShares Russell 2000 ETF eased 0.34% to $262.41.
The real story showed up in the sector ETFs. The Communication Services Select Sector SPDR Fund outperformed with a 1.8% gain, thanks largely to Meta's surge. Meanwhile, the Technology Select Sector SPDR Fund lagged badly, down 2.9%.
Top Movers in the Russell 1000
The day's biggest winners in the Russell 1000 told the travel and earnings beat story. Southwest Airlines led the way with a 15.10% surge, followed closely by Royal Caribbean Cruises with a 14.82% jump. Allegro MicroSystems gained 9.96%, ManpowerGroup climbed 8.97%, and Norwegian Cruise Line Holdings rounded out the top five with an 8.83% advance.
On the loser board, United Rentals took the crown with a 14.78% decline after those missed sales expectations. Las Vegas Sands fell 13.54% on weak Macau guidance. Atlassian dropped 12.78%, Microsoft posted its 11.83% loss, and HubSpot rounded out the bottom five with an 11.74% decline.
Thursday's action was a reminder that in markets, the story matters as much as the numbers. Microsoft beat estimates but told a story investors didn't want to hear about AI monetization. Meta beat estimates and told a story investors loved about future AI spending. Same sector, same day, completely different outcomes. That's what makes this business interesting.
