U.S. stocks closed well off early highs on Thursday, following the latest round of corporate earnings and economic data, as investors awaited results from megacaps Amazon and Apple due after the closing bell.

Microsoft shares rose after it posted a strong earnings report and briefly surpassed the $4 trillion market cap threshold, becoming only the second publicly traded company to ever touch the milestone after Nvidia.

Meta Platforms surged and hit an intraday record high of $784.75 as AI-driven growth in its core ad business powered a bullish revenue forecast. Still, other AI-related names such as chipmakers Broadcom and Nvidia were weaker on the session, which weighed on the PHLX semiconductor index.

"Looking at the market action today, you have haves and have-nots, and so you have a couple tech companies, like a lot of the semiconductor-related and semi-cap equipment-related stocks are doing pretty poorly," said Ellen Hazen, chief market strategist at F.L. Putnam Investment Management in Lynnfield, Massachusetts.

"But then, of course, Microsoft is doing pretty well, and the same thing with Amazon and Meta, which are doing really well."

Of the 297 companies in the S&P 500 that have reported earnings through Thursday morning, 80.8% have topped analyst expectations, according to LSEG data, compared with the 76% beat rate over the past four quarters

According to preliminary data, the S&P 500 lost 19.33 points, or 0.37%, to end at 6,339.31 points, while the Nasdaq Composite gained 8.40 points, or 0.04%, to 21,138.08. The Dow Jones Industrial Average fell 320.83 points, or 0.72%, to 44,140.45.

The S&P 500 had risen as much as 1% and the Nasdaq as much as 1.5% earlier in the session. The Nasdaq has not logged a move of at least 1% in either direction since July 3 while the S&P last recorded a daily 1% move on June 24.

Earlier economic data from the Commerce Department report showed inflation picked up in June, with new tariffs pushing prices higher and stoking expectations that price pressures could intensify in the coming months, while weekly initial jobless claims signaled the labor market remained on stable footing.

Investors will now eye Friday's non-farm payrolls report and a looming tariff deadline, as U.S. President Donald Trump was expected to issue higher final duty rates for countries that have not reached an agreement, although Mexico was granted a 90-day reprieve.

U.S. stocks have rallied after a sharp selloff that began in early April after Trump announced a bevy of sharp tariffs, only to rebound as deals have been struck with many trading partners on duty levels. The Dow, S&P 500 and Nasdaq recorded their third straight monthly gain.

Drug stocks were also weaker after the White House said Trump sent letters to the CEOs of 17 major pharmaceutical companies, urging immediate action to lower the cost of prescription drugs for Americans. The NYSE Arca pharmaceutical index was down 2.3%.