The company's stock climbed $2.75, or about 4 percent, to $69.38.
At the close of regular trading yesterday, Microsoft stock was down $12.31, or 15.6 percent, at $66.62 following lowered outlooks from several investment banks and after third-quarter revenues grew less than anticipated. The company also took a hit from reports that the government is considering a breakup to prevent future antitrust violations.
The sell-off sent shudders through the markets yesterday, depressing the Dow Jones industrial average and the Nasdaq composite index.
Today, the Nasdaq rose 228.75, or about 6.5 percent, to reach 3,711.23. The Dow added 218.70, or about 2 percent, to 10,906.10.
Influential investment bank Goldman Sachs downgraded Microsoft to "market outperform" from "recommend list," while SG Cowen knocked it to "buy" from "strong buy." Thomas Weisel Partners cut the company to "market perform" from "buy."
Merrill Lynch, Chase H&Q, Banc America Securities and Robertson Stephens lowered their earnings estimates for the software maker.
"We expect the slide in (Microsoft) to continue this week following a disappointing (third-quarter) earnings release and the company's first forecast guidance on estimates in memory," Merrill Lynch analyst Christopher Shilakes wrote in his report.
Microsoft beat expectations by posting earnings of 43 cents per share on sales of $5.65 billion for the third quarter. But the results were tempered by news that sales of corporate PCs were slow.
The software giant has slid from a 52-week high of nearly $120. Its stock price reflects about a $240 billion drop in its market value. The company is behind General Electric and Cisco Systems, which have market values of $515.9 billion and $427.8 billion, respectively. Shares of Microsoft have tumbled 43.28 percent for the year.
Despite word of possible breakup plans and current market woes, Microsoft says it can face the challenges ahead.
"We take a long-term perspective with respect to the stock price and with respect to the innovation that we can bring to the marketplace," Microsoft chief operating officer Robert Herbold said yesterday on cable network CNBC.
"We will work through issues--be they short-term or what--but over the long haul, the principles we use to operate this company will serve the consumers well, and that is what it is all about."
Herbold added that the company believes a breakup of its business would be "inappropriate," according to Reuters. "We think any discussion around remedies such as what we've heard about this morning are completely inappropriate. They don't match what's going on in the marketplace," he said.
Reuters contributed to this report.