Wall Street's major indexes fell, exacerbating a sell-off driven by technology stocks and mixed earnings, while investors assessed the impact of a global cyber outage that pushed CrowdStrike's share price to a more than two-month low.
Shares of cybersecurity company CrowdStrike fell 11.2 percent on Friday after an update to one of its products appeared to cause an outage that affected customers using Microsoft's Windows operating system and led to business disruptions across several industries.
Major US airlines ordered operations to be halted due to communication problems. The Euronext stock exchange and the London Stock Exchange Group's Workspace news and data platform also had problems. The LSEG later announced that its data and services were back online.
Microsoft slipped 0.7 percent to a more than one-month low and was on track for a four-day decline driven by the slump in technology stocks.
“Any hint of bad news will hurt these stocks because they (technology stocks) are so perfectly valued. Both (CrowdStrike and Microsoft) are excellent companies and worth holding for the long term,” said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.
The disruption comes after two busy sessions for Wall Street as investors assessed second-quarter earnings and shifted away from megacaps that had largely driven the stocks' 2024 run.
The performance of the megacaps was largely mixed: Nvidia and Amazon.com lost one percent and 0.5 percent respectively, while Apple and Alphabet each gained one percent.
Chip stocks also struggled for direction. US-listed shares of Taiwan Semiconductor Manufacturing lost almost 1.5 percent, while Arm Holdings gained three percent.
In the last two trading sessions, the Nasdaq lost 3.5 percent and the S&P 500 lost 2.1 percent, leaving the indices on a track for weekly losses.
In a sign of investor concern, the VIX, Wall Street’s “fear indicator,” hit its highest level since early May.
In addition, investors will also be waiting for comments from Federal Reserve officials John Williams and Raphael Bostic later in the day for clues on policy direction.
Markets have priced in a 25 basis point rate cut by September and expect two cuts by the end of the year, according to LSEG data.
In early trading on Friday, the Dow Jones Industrial Average lost 179.14 points or 0.44 percent to 40,485.88, the S&P 500 lost 2.69 points or 0.05 percent to 5,541.90 and the Nasdaq Composite lost 18.08 points or 0.10 percent to 17,853.15.
Meanwhile, shares of other cybersecurity companies rose: Palo Alto Networks gained 1.5 percent, SentinelOne rose 6.4 percent.
Eli Lilly shares rose 2.6 percent after China approved the weight-loss drug tirzepatide, while Intuitive Surgical rose eight percent after above-average second-quarter results.
This helped the S&P 500 healthcare index lead the sector's gainers.
Netflix lost one percent in choppy trading after the streaming giant warned that subscriber numbers in the third quarter would be lower than a year earlier.
Oil and gas services provider SLB rose 1.3 percent after strong second-quarter earnings.
The S&P 500 companies that have so far announced their second-quarter results have exceeded expectations by 85 percent, with the growth rate coming in at 11.1 percent.
On the NYSE, the number of declining issues outweighed advancing ones by a ratio of 1.40:1 and on the Nasdaq by a ratio of 1.19:1.
The S&P index recorded 27 new 52-week highs and three new lows, while the Nasdaq recorded 16 new highs and 33 new lows.