Tech sell-off deepens as cybersecurity outage hits Wall Street

Wall Street's main indexes plummeted Friday on heavy selling of technology shares and mixed earnings.

The losses were compounded by a far-reaching cyber outage that hit shares of cybersecurity company CrowdStrike hard, off 11.2 per cent to the lowest in more than two months.

The CrowdStrike outage affected its product update for Microsoft's Windows Operating System, paralysing activities across several industries.

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Major US airlines were ordering ground stops due to communication problems, while both the Euronext exchange and London Stock Exchange Group's Workspace news and data platform were hit by issues.

The LSEG later said its data and services were back online, but the initial disruptions had already dented investor sentiment.

Microsoft also slid 0.7 per cent, to over a one-month low, and extended its losses for a fourth consecutive day.

Microsoft's stock drop contributed to an overall rout in tech stocks. "Any hint of bad news because they're so priced to perfection is going to hurt these stocks," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.

Even so, Blancato cites CrowdStrike and Microsoft as two great long-term investment opportunities.

The latest turmoil comes after Wall Street experienced two bruising sessions, as investors grappled with second-quarter earnings reports and turned averse to the mega-caps that had broadly led the equity rally in 2024.

Big technology stocks moved in both directions, with Nvidia and Amazon.com down 1 per cent and 0.5 per cent, respectively, and Apple and Alphabet up 1 per cent apiece.

Chip stocks were another mixed bag, with U.S.-listed shares of Taiwan Semiconductor Manufacturing down nearly 1.5 per cent, and Arm Holdings rose 3 per cent. The Nasdaq Composite has dropped 3.5 per cent over the past two sessions, while the S&P 500 has lost 2.1 per cent, putting the indexes on pace for weekly losses.

The VIX, Wall Street's so-called "fear gauge," hit its highest level since early May, reflecting investor unease.

Investors now turn to comments from Federal Reserve officials John Williams and Raphael Bostic for possible clues regarding future monetary policy. Markets are pricing in a 25-basis-point interest rate cut by September and two cuts by year-end.

The Dow Jones Industrial Average slid 179.14 points, or 0.44 per cent, to 40,485.88; the S&P 500 dropped 2.69 points, or 0.05 per cent, to 5,541.90; and the Nasdaq Composite slipped 18.08 points, or 0.10 per cent, to 17,853.15 at 9:48 a.m. ET.

In contrast, other cybersecurity shares rose, with Palo Alto Networks 1.5 per cent higher and SentinelOne jumping 6.4 per cent. Eli Lilly jumped 2.6 per cent on news that China approved its weight-loss drug tripeptide.

Intuitive Surgical surged 8 per cent after reporting second-quarter earnings well above expectations. Those updates helped the S&P 500 healthcare index lead sectoral gainers.

On the other hand, Netflix fell 1 per cent in choppy trading following the streaming service's forecast of third-quarter subscriber additions below expectations and lower than a year earlier.

Oilfield services provider SLB rose 1.3 per cent following strong second-quarter profits.

Based on the most recent reports, S&P 500 corporations have posted an earnings beat rate of 85 per cent and an overall growth rate of 11.1 per cent.

However, market breadth was still soft. Declining issues outnumbered advancers during trading on both the NYSE and the Nasdaq.

(With inputs from Reuters)