Stocks Finish Lower on Global IT Chaos and a Slide in Chip Stocks

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.71%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.93%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.93%.

Stock indexes Friday finished moderately lower, with the S&P 500 falling to a 2-1/2 week low and the Nasdaq 100 dropping to a 3-1/2 week low.  The broader market was under pressure Friday due to disruptions caused to worldwide businesses by a global IT outage.  Computer systems at companies and public service organizations worldwide were knocked offline Friday 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 on Friday also weighed on the overall market.  Travel stocks were under pressure Friday 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 Friday due to the global IT outages. 

Some positive corporate news limited losses in the broader market, with cybersecurity stocks climbing after Friday’s IT outage.  Also, Intuitive Surgical rose more than +9% 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 99% for the following meeting on September 17-18.

Overseas stock markets Friday settled mixed.  The Euro Stoxx 50 fell to a 5-week low and closed down -0.88%.  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) Friday closed down -12.5 ticks.  The 10-year T-note yield rose +3.9 bp to 4.241%.  Sep T-notes Friday were 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 Friday 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 on Friday moved higher.  The 10-year German bund yield rose +3.6 bp to 2.467%.  The 10-year UK gilt yield rose +6.0 bp to 4.123%.

The German June PPI fell -1.6% y/y, right on expectations, and the twelfth consecutive month that producer 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) closed down more than -5%, and GlobalFoundries (GFS) closed down more than -4%.  Also, ON Semiconductors (ON) and Lam Research (LRCX) closed down more than 3%.  In addition, Nvidia (NVDA), Advanced Micro Devices (AMD), Microchip Technology (MCHP), ASML Holding NV (ASML), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), Analog Devices (ADI), Micron Technology (MU), Applied Materials (AMAT), and Texas Instruments (TXN) closed down more than -2%.

Cybersecurity stocks moved higher Friday 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) closed up more than +6%, and Pal Alto Networks (PANW) closed up more than +2%. 

CrowdStrike Holdings (CRWD) closed 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) closed up more than +9% 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.

Travelers Cos (TRV) closed down more than -7% to lead losers in the Dow Jones Industrials after reporting Q2 revenue of $11.28 billion, below the consensus of $11.46 billion.

Starbucks (SBUX) closed up more than +6% after the Wall Street Journal reported that Elliot Investment Management had built a sizable stake in the company.

Huntington Bancshares (HBAN) closed up more than +3% after reporting Q2 total deposits of $154.37 billion, above the consensus of $152.72 billion.

Eli Lily (LLY) closed up more than +1% after China approved the company’s tirzepatide treatment for weight loss.

Hawaiian Electric Industries (HE) closed up more than +37% 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.   

Haliburton (HAL) closed down more than -5% after reporting Q2 revenue of $5.83 billion, weaker than the consensus of $5.95 billion.

American Express (AXP) closed down more than -2% after reporting Q2 revenue of $16.3 billion, below the consensus of $16.6 billion. 

Comerica (CMA) closed down more than -10% after raising its full-year net interest income loss estimate to down -14% from a prior estimate of -11%.

PPG Industries (PPG) closed down more than -2% 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.

Schlumberger (SLB) closed up more than +2% after reporting Q2 revenue of $9.14 billion, stronger than the consensus of $9.07 billion. 

Earnings Reports (7/22/2024)

AGNC Investment Corp (AGNC), Alexandria Real Estate Equities (ARE), BOK Financial Corp (BOKF), Brown & Brown Inc (BRO), Cadence Design Systems Inc (CDNS), Cleveland-Cliffs Inc (CLF), Crown Holdings Inc (CCK), Equity LifeStyle Properties In (ELS), IQVIA Holdings Inc (IQV), Medpace Holdings Inc (MEDP), Nucor Corp (NUE), NXP Semiconductors NV (NXPI), RLI Corp (RLI), Simpson Manufacturing Co Inc (SSD), Truist Financial Corp (TFC), Verizon Communications Inc (VZ), W R Berkley Corp (WRB), Zions Bancorp NA (ZION).

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