Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., Jan. 28, 2026.
Brendan Mcdermid | Reuters
The S&P 500 fell on Thursday, bogged down by Microsoft, as traders reacted to the megacap technology name’s latest earnings results as well as the Federal Reserve interest rate decision.
The broad market index slipped 1.2%, while the Nasdaq Composite declined 2.3%. The Dow Jones Industrial Average dropped 304 points, or 0.6%.
Microsoft dragged down the benchmark with an 11% slide, which would be its worst day since March 2020. That’s after the “Magnificent Seven” member reported that cloud growth slowed in the fiscal second quarter. The company also issued soft guidance on operating margin for the fiscal third quarter.
A tumble in software stocks added to the losses, with as fears grew among investors that artificial intelligence would disrupt Microsoft’s business model. ServiceNow shares pulled back 12% even after better-than-expected earnings and revenue for the fourth quarter. Shares of Oracle and Salesforce moved lower by 5% and 8%, respectively.
The iShares Expanded Tech-Software Sector ETF (IGV) — which tracks the performance of the software sector — fell into bear market territory Thursday, with its 6% loss on the day placing it 22% below its recent high. The fund’s move also puts it on track for its largest single-day drop since last April’s tariff-induced rout.
The pressure is now on Apple to deliver with its earnings results, which are set to be reported after the bell Thursday.
On a positive note, Meta shares jumped 7% after the Facebook parent gave a stronger-than-expected first-quarter sales forecast.
Elsewhere in earnings, Caterpillar shares were up more than 1% after the industrial giant reported fourth-quarter results that easily beat the Street.
Stocks are coming off a flat session after the S&P 500 briefly topped the 7,000 threshold after the Fed kept its benchmark interest rate at a range of 3.5% to 3.75%.
In its post-meeting statement, the policy-setting Federal Open Market Committee said that indicators are suggesting that “economic activity has been expanding at a solid pace” and that the unemployment rate “has shown some signs of stabilization.” Still, fed funds futures trading are still pricing in two quarter percentage point cuts by the end of 2026, according to the CME FedWatch Tool.
“The Fed statement was largely as expected, and markets tend to move on surprises,” said Sameer Samana, Wells Fargo Investment Institute head of global equities and real assets. “We are looking to earnings and economic data to drive the next leg higher, but also would not be surprised to see some midterm-elections related volatility in 2026.”