In a tumultuous trading session on Friday, US benchmark equity indexes faced substantial declines as investors reacted to a significant global technology outage alongside the latest corporate earnings reports. The Dow Jones Industrial Average dipped 0.9%, settling at 40,287.5, while the Nasdaq Composite fell 0.8% to close at 17,726.9.
Furthermore, the S&P 500 saw a loss of 0.7%, finishing at 5,505. Among the sectors, technology and energy experienced the steepest declines, while the health care and utilities sectors managed to close higher, albeit marginally. When looking at weekly performance, the Nasdaq suffered a considerable plunge of 3.6%, and the S&P 500 shed 2%.
However, there was a silver lining for the Dow, which rose by 0.7% during the same period. The disruptions experienced by global tech systems stemmed from a recent update by CrowdStrike ($CRWD), which created ripples across various sectors, from airlines to broadcasters. The cybersecurity firm revealed a defect located in a content update for Microsoft ($MSFT) Windows hosts, leading to widespread outages.
In their published update at 1:25 pm ET, CrowdStrike stated, "We are working with all impacted customers to ensure that systems are back up and they can deliver the services their customers are counting on." Describing the situation, Scotiabank remarked to its clients that this incident is being billed as the largest overall IT outage in history.
Despite this disruption, Wedbush expressed confidence in CrowdStrike, labeling it as the "gold standard" in cybersecurity. In a notable statement, the brokerage added, "We believe this historical incident will only be a dark chapter for the company and not impact the long-term bull story for the name," reaffirming their support for the cybersecurity firm. The impact of the outage was starkly visible on the market, with CrowdStrike's shares plummeting by 11%, marking it as the worst performer on both the S&P 500 and the Nasdaq.
Microsoft also faced a slight decline, dropping 0.7%. In the realm of bonds, the US 10-year yield experienced a rise of 5.2 basis points, reaching 4.24%, while the two-year rate increased by 5.4 basis points, settling at 4.51%. In corporate news, Travelers ($TRV) shares witnessed a sharp decline of 7.8%.
This was one of the most significant drops on the S&P 500, despite the property and casualty insurer reporting stronger-than-expected second-quarter earnings, although earned premiums fell short of analyst estimates. In contrast, Intuitive Surgical ($ISRG) emerged as the top gainer on both the S&P 500 and Nasdaq, with an impressive increase of 9.3%.
The robotic surgical systems company reported better-than-anticipated second-quarter results, fueled by double-digit growth in procedure volumes. Another notable performer was Huntington Bancshares ($HBAN), whose shares ascended by 3.9%, marking it as the third-best performer on the S&P 500 following its second-quarter earnings, which surpassed Wall Street's expectations. Starbucks ($SBUX) was reported as the second-top gainer on the S&P 500 and Nasdaq, climbing 6.9%.
According to insights from The Wall Street Journal, activist investor Elliott Investment Management has recently acquired a significant stake in the coffee chain and has been privately pushing for strategies to enhance its stock price. On the commodities front, West Texas Intermediate crude oil experienced a decline of 3.1%, trading at $80.26 a barrel.
Meanwhile, Wells Fargo Investment Institute has upgraded its rating on the S&P 500 Index Financials sector from unfavorable to favorable, highlighting the potential for outperformance given that interest-rate cuts from the Federal Reserve appear to be on the horizon. Earlier this week, Federal Reserve Chair Jerome Powell suggested that policymakers would not wait for inflation to dip to 2% before initiating interest rate reductions.
In addition, Governor Christopher Waller mentioned that the central bank is "getting closer" to easing monetary policy. In contrast, Wells Fargo Investment downgraded the consumer staples sector, adjusting their rating from neutral to unfavorable. In the precious metals market, gold saw a decrease of 2.3%, now trading at $2,401.10 per troy ounce, while silver dropped 2.8%, settling at $29.39 per ounce..