Stock market today: Nasdaq soars, Dow and S&P 500 rebound as Microsoft leads tech gains, bond yields rise

US stocks staged a major comeback on Thursday morning after a Fed-fueled sell-off, as Microsoft (MSFT) stock led tech gains and more earnings were on deck. But fresh US attacks on Iran, a bond rout, and worries about AI spending kept investors on guard.

The Dow Jones Industrial Average (^DJI) advanced 0.8%, while the SP 500 (^GSPC) rose 1.2%. The Nasdaq Composite (^IXIC) led gains, jumping 2.4% after the Nasdaq-100 (^NDX) index entered a correction on Wednesday, led by heavy declines in chip stocks.

The fortunes of Meta (META) and Microsoft (MSFT) stocks diverged after the two "Magnificent Seven" stalwarts reported earnings on Wednesday afternoon. Meta shares fell by about 9%, extending their historic losing streak, after the tech giant's earnings miss added to worries about its ability to recoup AI investments.

Microsoft's stock jumped more than 16%, meanwhile, after its Azure cloud business topped $100 billion in revenue for the first time. Shares were on track for their best day since 2008.

Amazon (AMZN) is the next hyperscaler to face Wall Street scrutiny on its capital expenditures and cloud business when it reports earnings after the bell. Apple (AAPL) will also release results, where the focus will be on margins amid memory chip price hikes.

Traders continue to digest the Federal Reserve's decision to hold rates steady on Wednesday as the bond market revolts, sending the 30-year Treasury yield to a multidecade high near 5.24% on Thursday. Although oil prices were flat Thursday morning, US strikes on a dozen Iranian targets overnight threatened to spiral into another escalation in the war, which could rekindle inflation.

PCE pricing data on Thursday showed inflation advancing at a slower pace in June than in the previous month, which will be welcome news for the Federal Reserve, especially as GDP data from the Commerce Department showed the US economy grew at a slower pace than expected in the second quarter.