Stocks Down as Key Data Looms Next Week

The S&P 500’s ascent has been relentless this year, but it hasn’t been straight up for the index. Sure, there haven’t been any dramatic downside swings, but there was a 5.5% retracement back in April.

That pullback was driven by a handful of high inflation readings during the first quarter, which pushed interest rates to their loftiest levels of the year.

But after three weeks of selling, the index got right back up and resumed climbing thanks to big gains in mega-cap tech stocks.

The only other decline of 2% took place this week, with the index dropping nearly 2.2% from its high on Tuesday to its low on Thursday.

Will this turn into something bigger? Unlike in April, inflation is heading lower, and interest rates have been falling.

So far, this sell-off seems driven by investor positioning rather than anything happening with the economy. But perhaps next week’s heavy slate of economic releases will change that. 

Stocks fell Friday as markets grappled with what’s being called the largest global IT outage in history. The S&P 500 dropped 0.5% and the Nasdaq Composite declined 0.5%, marking a third consecutive down session. 

Microsoft fell 0.5% while CrowdStrike plunged 9.2% following an overnight content update by the cybersecurity company that disrupted Microsoft’s PC operating systems. The worldwide IT outage grounded flights and affected stock exchanges. 

The SPDR S&P 500 ETF Trust (SPY), which holds nearly 89 million Microsoft shares representing 7% of the index, decreased 0.6%. 

The Dow Jones Industrial Average retreated 386 points, or 1%. The SPDR Dow Jones Industrial Average ETF Trust (DIA) mirrored this decline, falling about 1%, while the Invesco QQQ Trust (QQQ) dropped 0.5%.

American Express fell 4% despite reporting second-quarter profit above analysts’ expectations and raising its full-year earnings guidance. The Amplify Mobile Payments ETF (IPAY), which holds 6.1% of American Express stock, declined 0.5%.

Netflix shares dropped 0.7% even after a strong second quarter that beat Wall Street estimates. The Invesco Next Gen Media and Gaming ETF (GGME), holding 6.5% Netflix stock, rose 0.1%, while the REX FANG & Innovation Equity Premium Income ETF (FEPI), with 7.8% Netflix stock, fell 0.5%.

Microsoft Inc. and global cybersecurity firm CrowdStrike Holdings Inc. suffered pre-market pullbacks Friday morning after what has been described as a botched update of a popular cybersecurity program disrupted Microsoft systems. 

The ripple effects of the glitch spread far and wide to include finance, healthcare, air travel and even some news outlets. Microsoft (MSFT) shares dropped nearly 2% in pre-market trading, while CrowdStrike (CRWD) shares dropped by nearly than 13%. 

Both stocks recovered lost ground after markets opened, although CRWD was still down about 9%. MSFT was in positive territory. 

The broad U.S. equity market indexes remained relatively calm leading up to the opening bell at 9:30 am ET, with gold representing a significant outlier with a decline of more than 2%. 

In the ETF space, the SPDR S&P 500 ETF Trust (SPY) is the largest holder of Microsoft at nearly 89 million shares, representing 7% of the index. SPY was down 1.7%. 

But the largest allocation to Microsoft belongs to the T-Rex 2X Long Microsoft Daily Target ETF (MSFX) at nearly 74% in the leveraged strategy. MSFX recently fell 1.3%. 

CrowdStrike, which has a market capitalization of more than $84 billion, composes nearly 9% of the TrueShares Technology, AI & Deep Learning ETF (LRNZ). LRNZ was off 0.8%. The Invesco QQQ Trust (QQQ) is the largest holder of CrowdStrike with 4.2 million shares. QQQ was off 0.4%.