Stocks recover from Fed day sell-off, Nasdaq soars 2% led by chip stocks and Microsoft

U.S. stocks rose Thursday, rebounding from the prior day’s sell-off when the Federal Reserve decided to hold rates steady. Microsoft and semiconductors helped drive the gains.

The Nasdaq Composite climbed 2.5%, on pace for its best day since June 15. The S&P 500 advanced 1.4%. The Dow Jones Industrial Average added 511 points, or about 1%.

Microsoft jumped 15% after reporting growth from its Azure business. Semiconductors rallied following the results, with the iShares Semiconductor ETF (SOXX) higher by more than 8%. Micron Technology surged 13%, while Advanced Micro Devices were up more than 13%.

In contrast, Meta Platforms was down 9% after issuing a soft revenue forecast and a 91% drop in second-quarter free cash flow.

“This is ultimately a tale of two AI investment strategies,” said Stephen Evans, chief investment officer at Pave Finance. “One company is increasing profits while spending heavily, while the other is allowing those costs to eat into its bottom line.”

The latest economic data released Thursday showed inflation remaining above the Fed’s target. The core reading for the personal consumption expenditures price index in June showed an annual level of 3.3%, which was in line with Dow Jones consensus estimates.

U.S. growth also slowed to 1.5% in the second quarter, missing the forecasted 1.8%. However, underlying drivers for the economy remained solid.

Stocks are coming off a dismal session. On Wednesday, the Dow plunged more than 1,100 points, marking its worst decline going back to April 2025.

A selloff that started earlier in the day accelerated in the late afternoon after the Fed decision. Yields spiked, as investors worried that the Fed was falling behind on its against inflation.