Stocks Slide on a Global IT Outage and Chip Stock Weakness

The S&P 500 Index ($SPX) (SPY) today is down -0.29%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.68%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.43%.

Stock indexes today are moderately lower.  The broader market is under pressure today due to disruptions caused to worldwide businesses by a global IT outage.  Computer systems at companies and public service organizations worldwide were knocked offline today after a botched update of a widely used cybersecurity program at CrowdStrike Holdings took down Microsoft’s Windows operating systems.

A slide in chip stocks today also weighed on the overall market.  Travel stocks are under pressure today as the worldwide computer system outage caused some flights to be delayed and canceled.  Also, some international companies, including banks, insurers, and healthcare systems, reported technical issues today due to the global IT outages. 

Some positive corporate news is limiting losses in the broader market, with cybersecurity stocks climbing after today’s IT outage.  Also, Intuitive Surgical is up more than +6% after reporting better-than-expected Q2 adjusted EPS.

The markets are discounting the chances for a -25 bp rate cut at 5% for the next FOMC meeting on July 30-31 and 98% for the following meeting on September 17-18.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell to a 5-week low and is down -0.73%. China's Shanghai Composite climbed to a 2-week high and closed up +0.17%.  Japan's Nikkei Stock 225 Index fell to a 2-1/2 week low and closed down -0.16%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -8 ticks.  The 10-year T-note yield is up +2.7 bp at 4.229%.  Sep T-notes today are under pressure from negative carryover from a slide in European government bonds.  Also, rising US inflation expectations are bearish for T-notes as the 10-year breakeven inflation rate jumped to a 2-1/2 week high today of 2.315%.  In addition, upcoming supply pressures are undercutting T-notes as the Treasury will auction $213 billion of T-notes and floating-rate notes next week. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +3.0 bp at 2.462%.  The 10-year UK gilt yield is up +5.6 bp at 4.119%.

The German June PPI fell -1.6% y/y, right on expectations, and the twelfth consecutive month that prices have fallen year-over-year.

ECB Governing Council member Simkus said, "If there are no surprises or black swans and inflation converges as expected, further monetary-policy easing will undoubtedly be on the table in the next ECB meetings."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 78% for the September 12 meeting.

US Stock Movers

Weakness in chip stocks today is a drag on the overall market. Intel (INTC) is down more than -5% to lead losers in the Dow Jones Industrials.  Also, GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), ON Semiconductors (ON), and Analog Devices (ADI) are down more than -2%.  In addition, Nvidia (NVDA), Advanced Micro Devices (AMD), Microchip Technology (MCHP), ASML Holding NV (ASML), Micron Technology (MU), Applied Materials (AMAT), and Texas Instruments (TXN) are down more than -1%.

Cybersecurity stocks are climbing today after CrowdStrike Holdings plunged when an update of its widely used cybersecurity program took down Microsoft’s systems, resulting in a global IT outage.  As a result, SentinelOne (S) is up more than +4%, and Pal Alto Networks (PANW) is up more than +1%. 

CrowdStrike Holdings (CRWD) is down more than -11% to lead losers in the S&P 500 and Nasdaq 100 after a botched upgrade of its cybersecurity software took down Microsoft’s systems and caused a global IT outage.

Intuitive Surgical (ISRG) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 adjusted EPS of $1.78, stronger than the consensus of $1.54.

Huntington Bancshares (HBAN) is up more than +2% after reporting Q2 total deposits of $154.37 billion, above the consensus of $152.72 billion.

Eli Lily (LLY) is up more than +2% after China approved the company’s tirzepatide treatment for weight loss.

Accenture Plc (ACN) is up more than +1% after UBS upgraded the stock to buy from neutral.

Hawaiian Electric Industries (HE) is up more than +31% after Bloomberg reported the company is among several that have tentatively agreed to pay more than $4 billion to resolve hundreds of lawsuits over the wildfires that ravaged Maui last year.   

Netflix (NFLX) is up more than +1% after reporting Q2 streaming paid memberships of 277.65 million, better than the consensus of 273.78 million.

Haliburton (HAL) is down more than -4% after reporting Q2 revenue of $5.83 billion, weaker than the consensus of $5.95 billion.

Travelers Cos (TRV) is down more than -5% to lead losers in the Dow Jones Industrials after reporting Q2 revenue of $11.28 billion, below the consensus of $11.46 billion.

American Express (AXP) is down more than -4% after reporting Q2 revenue of $16.3 billion, below the consensus of $16.6 billion. 

Comerica (CMA) is down more than -12% after raising its full-year net interest income loss estimate to down -14% from a prior estimate of -11%.

PPG Industries (PPG) is down more than -1% after cutting its full-year adjusted EPS estimate to $8.15-$8.40 from a previous estimate of $8.34-$8.59, weaker than the consensus of $8.41. 

Earnings Reports (7/19/2024)

Amer Sports Inc (AS), American Express Co (AXP), Comerica Inc (CMA), Euronet Worldwide Inc (EEFT), Fifth Third Bancorp (FITB), Halliburton Co (HAL), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), Schlumberger NV (SLB), Travelers Cos Inc/The (TRV).

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