U.S. and European markets retreated Thursday as investors reacted to a sell-off sparked by Microsoft’s earnings report and continued uncertainty surrounding the pace of interest rate cuts [[2]]. Shares of the tech giant plunged following concerns over rising capital expenditures related to artificial intelligence, renewing anxieties about the profitability of AI investments [[3]]. The downturn extended to European markets, compounded by regulatory concerns and disappointing earnings from other key players like SAP and Deutsche Bank.
U.S. stocks declined on Thursday, following a mixed open, as technology shares led the losses amid investor reaction to Microsoft’s earnings and the Federal Reserve’s latest interest rate decision. The tech sector’s struggles reflect growing concerns about the impact of rapid advancements in artificial intelligence on established companies.
The Dow Jones Industrial Average fell 0.24%, or 186 points, to close at 48,829. The broader Standard & Poor’s 500 index dropped 1% – a decrease of 68 points – to 6,908. The Nasdaq Composite saw the steepest decline, shedding 1.41%, or 475 points, to finish at 23,382.
Microsoft’s stock plummeted 12.17% to $423, marking its worst single-day performance since March 2020, after the company reported slowing growth in its cloud computing business during the second quarter of its fiscal year and issued weaker-than-expected guidance for its operating profit margin in the current quarter. This downturn pushed the software sector into correction territory.
The Federal Reserve, in its monetary policy statement on Wednesday, indicated that economic activity is growing at a strong pace with some stabilization in the labor market, suggesting a pause in monetary easing for the time being. This assessment contributed to the day’s market sentiment.
European markets also closed lower, with technology and banking stocks under pressure as investors digested corporate earnings reports. The Stoxx Europe 600 index decreased by approximately 0.25% to 607.14, with its technology sub-sector down 3.8%.
Germany’s DAX index fell 2.05% to 24,309, while France’s CAC 40 remained relatively stable at 8,071. The UK’s FTSE 100 edged up 0.15% to 10,171.
SAP shares fell 16% after the company’s quarterly cloud computing revenue came in below expectations. Deutsche Bank also experienced a decline, dropping 1.25% following a raid by German authorities on the bank’s offices in Berlin and Frankfurt as part of a money laundering investigation, adding to the pressure on the banking sector. The investigation highlights the ongoing regulatory scrutiny faced by major financial institutions.
