United States benchmark averages closed mixed on Thursday (Friday AEDT), as a sharp sell-off in Microsoft pressured the broader technology sector, while investors continued to digest the Federal Reserve’s latest policy decision and a deluge of corporate earnings.
The Dow Jones Industrial Average edged up or 56.0 points or 0.1%, to settle at 49,071.6. In contrast, the S&P 500 slipped 9 points or 0.1% to finish at 6,969.0, while the Nasdaq Composite fell 172.3 points or 0.7% to 23,685.1.
Microsoft was the main drag on the benchmark indices, tumbling nearly 10% in its worst session since March 2020. The decline followed the technology giant’s latest earnings release, which showed a slowdown in cloud growth during its fiscal second quarter.
The company also issued softer-than-expected guidance for operating margin in the fiscal third quarter, dampening investor confidence in near-term profitability.
The weakness in Microsoft spilled over into the broader software space. Shares in SAP listed in the U.S. tumbled 15.2% after the company issued a cautious outlook for its cloud business, while ServiceNow also fell 9.9% following its earnings report.
With Microsoft’s results disappointing the market, attention has shifted to Apple, which is due to report earnings after the closing bell.
However, not all large-cap technology stocks finished weaker. Meta Platforms jumped 10.4% after the Facebook parent issued a stronger-than-expected forecast for first-quarter sales, offering reassurance that digital advertising demand remains resilient.
Outside the technology sector, Caterpillar gained more than 3% after the industrial group reported fourth-quarter results that comfortably exceeded Wall Street estimates.
In Washington, political developments added another layer of uncertainty. The Senate failed to clear a procedural vote on a government funding package, raising the likelihood of a partial federal government shutdown.
Monetary policy remained a central focus for investors. The Federal Reserve held interest rates steady at its meeting on Wednesday (Thursday AEDT), maintaining a wait-and-see approach as policymakers assess the trajectory of inflation and the labour market.
Analysts at ANZ said: "We did not read the lack of guidance from Powell as signalling the FOMC is now on an extended pause, although it is clear that for the FOMC to resume cutting in the near term, additional signs of weakness in the labour market are likely to be required.
"Hiring momentum is currently very weak and heavily concentrated in a select few industries.
"In our assessment, a mildly stimulatory policy stance is appropriate from a risk management perspective to guard against downside labour market risks. We continue to forecast 25bp cuts in March and June."
Economic data released on Thursday showed the advance figure for seasonally adjusted initial jobless claims came in at 209,000, a decrease of 1,000 from the previous week’s revised level and slightly above expectations for 205,000.
The prior week’s figure was revised up by 10,000 from 200,000 to 210,000, suggesting some continued softening in labour market conditions, though claims remain historically low.
On the bond markets, the yield on the 10-year U.S. Treasury note fell 0.3% to 4.235%, while the 2-year yield dropped by a similar margin to 3.561%.
