When Inoue was told that "Shōhō" had been sunk, he ordered the invasion convoy to pull back to the north. He ordered Takagi to destroy the American carrier forces. As the invasion convoy pulled back, it was bombed by eight U.S. Army B-17s, but was not damaged. Gotō and Kajioka were told to place their ships south of Rossel Island for a night battle if the American ships got close enough.
At 12:40, a seaplane saw Crace's force. At 13:15, an aircraft from Rabaul saw Crace's force. Takagi turned his carriers west at 13:30 and told Inoue at 15:00 that the US carriers were too far away to attack them that day.
Inoue's men sent attack aircraft from Rabaul towards Crace. The first group included 12 torpedo-armed Type 1 bombers and the second group was 19 Mitsubishi Type 96 aircraft armed with bombs. Both groups found and attacked Crace's ships at 14:30. Crace's ships were undamaged and shot down four Type 1s. A short time later, three U.S. Army B-17s bombed Crace by accident, but caused no damage.
Crace radioed Fletcher that he could not complete his mission without airplanes. Crace moved southward. Crace's ships were low on fuel.
Takagi's staff thought that the Allied ships would be close enough to attack before nightfall. Takagi and Hara decided to attack with aircraft, even though they would have to return after dark.
To try to confirm the location of the American carriers, at 15:15 Hara eight torpedo bombers to look westward. The dive bombers returned from their attack on "Neosho" and landed. At 16:15 Hara launched 12 dive bombers and 15 torpedo planes with orders to try to find the American ships.
At 17:47, TF 17 detected the Japanese forces on radar heading in their direction. The Americans sent 11 CAP Wildcats to attack the Japanese planes. The Wildcats shot down seven torpedo bombers and one dive bomber, and heavily damaged another torpedo bomber. Three Wildcats were lost.
The Japanese leaders canceled the mission and returned to their carriers. The sun set at 18:30. Several of the Japanese dive bombers found the American carriers in the darkness and tried to land on them. Anti-aircraft fire from TF 17's destroyers sent them away. By 20:00, TF 17 and Takagi were about apart. Takagi turned on his ships' searchlights to help the 18 surviving aircraft get back.
At 15:18 and 17:18 "Neosho" radioed TF 17 that she was sinking. Fletcher knew his only nearby fuel supply was gone.
As nightfall ended aircraft flights for the day, Fletcher ordered TF 17 to head west. Crace also turned west. Inoue told Takagi to destroy the U.S. carriers the next day. He delayed the Port Moresby landings to 12 May. Takagi took his carriers north during the night to protect the invasion convoy. Gotō and Kajioka were unable to attack the Allied warships at night.
Both sides spent the night preparing their aircraft for the battle. In 1972, U.S. Vice Admiral H. S. Duckworth said Coral Sea was the most confused battle area in world history." Hara said he was so frustrated with the "poor luck" the Japanese had on 7 May that he felt like quitting the navy.
At 06:15 on 8 May, Hara launched seven torpedo bombers to search the area south from the Japanese carriers. Three Kawanishi Type 97s from Tulagi and four Type 1 bombers from Rabaul also helped in the search. At 07:00, the carrier force turned to the southwest and was joined by two of Gotō's cruisers, and . The invasion convoy, Gotō, and Kajioka moved east of Woodlark Island.
At 06:35, TF 17 launched 18 SBDs to search for Japanese ships. The skies over the American carriers were mostly clear.
At 08:20, a "Lexington" SBD spotted the Japanese carriers and told TF 17. Two minutes later, a "Shōkaku" plane saw TF 17 and told Hara. The two forces were about away from each other. Both sides got ready to launch their aircraft.
At 09:15, the Japanese carriers launched 18 fighters, 33 dive bombers, and 18 torpedo planes. The American carriers each launched a separate attack. "Yorktown"s group consisted of six fighters, 24 dive bombers, and nine torpedo planes. "Lexington"s group was made up of nine fighters, 15 dive bombers, and 12 torpedo planes. Both the American and Japanese carrier forces turned to head directly for each other.
"Yorktown"s dive bombers reached the Japanese carriers at 10:32. At this time, "Shōkaku" and "Zuikaku" were about apart, with "Zuikaku" hidden under clouds. The two carriers were protected by 16 CAP Zero fighters. The "Yorktown" dive bombers attacked at 10:57 on "Shōkaku" and hit the carrier with two bombs, causing heavy damage to the carrier's flight and hangar decks. The "Yorktown" torpedo planes missed with all of their torpedoes. Two U.S. dive bombers and two CAP Zeros were shot down during the attack.
"Lexington"s aircraft arrived and attacked at 11:30. Two dive bombers attacked "Shōkaku", hitting the carrier with one bomb, causing further damage. Two other dive bombers attacked "Zuikaku", missing with their bombs. The rest of "Lexington"s dive bombers were unable to find the Japanese carriers in the heavy clouds. "Lexington"s TBDs missed "Shōkaku" with all 11 of their torpedoes. The 13 CAP Zeros on patrol shot down three Wildcats.
With her flight deck heavily damaged and 223 of her crew killed or wounded, "Shōkaku" was unable to launch any more planes. At 12:10, "Shōkaku" and two destroyers pulled back to the northeast.
At 10:55, "Lexington"s radar detected the Japanese aircraft and sent nine Wildcats to attack the planes. Six of the Wildcats were too low, and they missed the Japanese aircraft as they passed by overhead. Because of the heavy losses in aircraft the night before, the Japanese could not do a full torpedo attack on both carriers. The Japanese sent 14 torpedo planes to attack "Lexington" and four to attack "Yorktown". A Wildcat shot down one and 8 "Yorktown" SBDs destroyed three. Four SBDs were shot down by Zeros escorting the torpedo planes.
The Japanese attack began at 11:13 as the carriers, stationed apart, fired with anti-aircraft guns. The four torpedo planes which attacked "Yorktown" all missed. The remaining torpedo planes hit "Lexington" with two Type 91 torpedoes. The first torpedo broke the aviation gasoline tanks. The second torpedo caused several of the boilers to stop working. Four of the Japanese torpedo planes were shot down by anti-aircraft fire.
The 33 Japanese dive bombers attacked after the torpedo attacks. The 19 "Shōkaku" dive bombers attacked "Lexington" while the remaining 14, attacked "Yorktown". Zeros protected the dive bombers from four "Lexington" CAP Wildcats. Takahashi's bombers damaged "Lexington" with two bomb hits, causing fires which were put out by 12:33. At 11:27, "Yorktown" was hit in the center of her flight deck by a single , semi-armor-piercing bomb which penetrated four decks before exploding, causing severe damage and killing or seriously wounding 66 men. Up to 12 near misses damaged "Yorktown"s hull below the waterline. Two of the dive bombers were shot down by a CAP Wildcat during the attack.
As the Japanese aircraft completed their attacks and began to fly back, they were attacked by US planes.
The planes, with many damaged aircraft, landed on their carriers between 12:50 and 14:30. "Yorktown" and "Lexington" were both able to land planes. Forty-six of the original 69 aircraft from the Japanese force returned. Three more Zeros, four dive bombers, and five torpedo planes were damaged beyond repair and were pushed into the ocean.
As TF 17 got its aircraft back, Fletcher thought about the situation. Fletcher knew both his carriers were hurt and that he had lost a lot of fighters. Fuel was also a problem due to the loss of "Neosho". At 14:22, Fitch told Fletcher that there were two undamaged Japanese carriers. Fletcher pulled TF17 out from the battle. Fletcher radioed MacArthur the position of the Japanese carriers and suggested that he attack them with bombers.