Microsoft's steep sell-off pulls U.S. stocks back from record highs as gold cools

U.S. stocks fell Thursday as Microsoft posted its worst trading day in years, knocking the market off intraday record territory, while gold retreated after a recent surge to all-time highs. Investors shifted attention from strong headline earnings to concerns about corporate spending and growth prospects.

The S&P 500 dropped 1.3 per cent after briefly flirting with an all-time high earlier in the session. The Nasdaq fell 2.3 per cent and the Dow was down about 0.6 per cent, as major technology and growth names swung sharply on company-specific news.

Microsoft led the sell-off, sliding roughly 12 per cent despite reporting quarterly profit and revenue above analysts' expectations. Investors focused on the company’s rising investment spending, the pace of growth in its Azure cloud business and the timeline for its artificial intelligence initiatives to generate meaningful profit. The decline marked Microsoft’s worst session since the market turmoil in 2020.

Other big-cap names also moved the market. Tesla fell about 3 per cent even after beating profit forecasts, as investors weighed lower year-over-year results and CEO commentary that emphasises future robotics and robotaxi ambitions rather than near-term car sales growth.

Several companies posted results that beat expectations but still saw sharp stock declines. ServiceNow dropped about 11.6 per cent despite stronger-than-expected quarterly profit, continuing a sell-off that began in the summer. That pattern reflects heightened investor scrutiny: with many stocks at historically high multiples, markets are rewarding not just beats but clear signals of sustainable profit growth.

On the flip side, a handful of companies rallied after positive reports. Meta Platforms rose around 7.6 per cent after topping profit forecasts and confirming continued investment in AI. IBM climbed 5.3 per cent after surpassing estimates for revenue and profit. Southwest Airlines jumped nearly 12 per cent despite weaker quarterly profit, after issuing a long-term earnings forecast that exceeded analyst expectations following operational changes.

Precious metals saw some of the wildest moves. Gold rallied sharply early in the session, trading near US$5,600, before sliding back to about US$5,174 by midmorning, down roughly 3.2 per cent from its peak. The metal first topped US$5,000 earlier in the week and has nearly doubled over the past 12 months, reflecting demand for perceived safe havens amid geopolitical and economic uncertainty.

Silver, which had also experienced a steep run higher, fell about 3.6 per cent. Traders cited a mix of factors behind the recent metal price strength, including concerns over expensive equity valuations, political risks, possible tariffs and heavy government debts worldwide. Critics warned that the rapid gains were due for a pullback, and Thursday’s action showed how quickly momentum can reverse.

Fixed-income markets reflected the cautious tone. The yield on the 10-year U.S. Treasury fell to about 4.22 per cent from 4.26 per cent late Wednesday. The U.S. dollar, which has slipped over the past year amid the same risks that helped lift gold, edged higher against the British pound and some other currencies on Thursday.

The Federal Reserve decided to pause further cuts to its main interest rate at its most recent meeting, after lowering rates three times late last year. The central bank cited persistent inflation above its two per cent target as a reason to hold off on additional easing for now. That stance can complicate the macro picture, since lower rates tend to weaken the dollar but also risk keeping inflation higher.

Stock indexes rose across much of Europe and Asia despite U.S. volatility, with South Korea’s Kospi adding about one per cent and reaching fresh highs in part due to strength in chipmaker shares. Markets will be watching upcoming corporate earnings for clearer signs of profit momentum and any fresh comments from the Fed on policy direction.

Investors should also track precious metals and currency moves, since rapid shifts in those markets can influence risk sentiment and corporate valuations. With big technology names still accounting for a large share of market value, company-specific news will continue to set the tone for broader indexes.

Thursday’s session underscores how quickly market leadership can rotate, and how investor focus has shifted from headline earnings beats to the quality of growth, investment spending and the path to durable profits.