Dow slips in wake of global outage

July 19, 2024

3 minutes read

US stocks wavered on Friday as worries over a global IT outage calmed, with Wall Street looking for recovery from a sell-off that saw the Dow snap a run of wins and a tech rout continue.

The Dow Jones Industrial Average (^DJI) slipped 0.2%, coming off a drop of over 1% for the blue-chip index. The S&P 500 (^GSPC) gained 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) rose 0.3%.

Stocks are facing weekly losses after a wobbly handful of sessions that saw a dive in techs, with AI-focused chip stocks bearing the brunt. Investors are rotating out of the tech heavyweights that have fueled the recent rally and into small caps, seen by some as benefiting more from interest-rate cuts.

In the early hours, investors assessed the potential impact of an “unprecedented” failure in computer systems worldwide that grounded flights and hit banks, telecoms and media companies, among others. But concerns eased after CrowdStrike (CRWD) said a fix was in place for the glitch, a botched update that affected Microsoft-based (MSFT) systems.

CrowdStrike shares plunged as much as 20% as the outage spread, but pared losses to around 12% at the open. Shares in Microsoft — which was working on problems with its Azure cloud services — were slightly lower but also recovering.

Meanwhile, Republican presidential contender Donald Trump used his nomination speech on Thursday to say he would “end the electric vehicle mandate on day one.” His comment comes as the market wakes up to the “Trump trade” — the implications of his policies for assets if the former president takes the White House.

Live3 updates

Fri, July 19, 2024 at 2:32 PM GMT+1

Stocks little changed after global IT outage

Stocks were little changed on Friday as more details emerged about a global IT outage. Wall Street was struggling to recover from a sell-off that left all major averages in the red on Thursday.

The Dow Jones Industrial Average (^DJI) slipped 0.2% after dropping more than 1% in the prior session.

The S&P 500 (^GSPC) hovered around the flatline, while the tech-heavy Nasdaq Composite (^IXIC) slipped 0.2%.

Investors have been rotating out of tech stocks this week with AI focused chip stocks leading to the downside.

Early this morning investors assessed the impact of an “unprecedented” failure in computer systems that work with CrowdStrike (CRWD) and Microsoft-based (MSFT) platforms.

CrowdStrike CEO George Kurtz said a fix was in place for the glitch. He said “CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts.”
Fri, July 19, 2024 at 1:26 PM GMT+1

Off the phone with: American Express CEO

Another solid quarter from American Express (AXP) will see it hike its marketing budget to $800 million this year to $6 billion, CEO Stephen Squeri just told me by phone.

He also had this to say on whether he is thinking more cautiously on the second half of the year because of the election:

“If I was baking in more caution. I wouldn’t have raised the guidance. I wouldn’t be increasing the marketing and so forth. I think we’ll just be consistent and I think that’s the key point here. The Fed will do what the Fed is going to do probably in September. I certainly is not going to raise rates, they’ll probably be cut, they’ll probably be another cut before the end of the year. I think that’ll help you know, consumer confidence. I think we’ll see whatever happens in the election in November, which I don’t think anybody has any idea and the reality is this company has been around for 174 years with 30 presidents — we’ll get through whatever is we need to get through.”
Fri, July 19, 2024 at 10:54 AM GMT+1

In other news…

In news not related to Trump’s RNC speech, Hulk Hogan ripping his shirt off at the event moments earlier and Cloudflare’s (NET) outage wrecking havoc on life (and its stock price) this morning…

We DID have Netflix earnings last night, which Yahoo Finance’s Alexandra Canal breaks down here. The stock is down slightly in the pre-market, with some concern on third quarter subscriber guidance.

Here’s what Jefferies tech analyst Brent Thill had to say on this front:

“We don’t think so [guidance is a problem]. Given the massive growth over the last 12 months from password sharing (+39M net adds), a slowdown in sub growth shouldn’t be surprising. It is worth highlighting that the 8M net adds in Q2 was the strongest Q2 the company has reported except for Q2’20. We expect Q4 sub growth to accelerate to 7.7M net additions given the content slate (Squid Game S2, NFL Games) and better seasonality in Q4 vs. Q3.”

Makes sense to me.