Stocks Drop as Microsoft Outage Hit Major Companies Operations: Market Update

Tech stocks drop due to Microsoft outages affecting flights, banks, and more. Investors react to Fed rate cut signals and policy shifts

iShook Opinion

Jul 19, 2024 - 05:45

Jul 19, 2024 - 05:43

Stocks Drop as Microsoft Outage Hit Major Companies Operations: Market Update

Global stock markets fell as big tech companies faced new problems due to major technical outages, especially affecting Microsoft's online services. Europe's Stoxx 600 index dropped by 0.5%, marking its fifth day of losses, the longest streak since October. The London Stock Exchange Group, which runs the London stock market, saw its shares fall by 1% after reporting global technical issues that stopped news from being published. Opening trades were delayed across multiple exchanges.

Market Impact

In the U.S., premarket trading showed Microsoft shares dropping by 2.8%. Even though Microsoft said it had fixed the cloud services outage that disrupted flights and banking services, the market reaction was still negative. Cybersecurity firm Crowdstrike Inc. fell by up to 14% after announcing it was affected by the outage. Major airlines like United Airlines and Delta Air Lines saw their shares drop by more than 1%.

Contracts on the S&P 500 dropped by about 0.2%, while the Nasdaq 100 slid by 0.4%. This comes after a tough week for the tech-heavy Nasdaq, which has decreased by 3.7%, potentially marking its worst week since April. In contrast, the Russell 2000 index, which focuses on smaller companies, rose by 2.3% this week.

Reasons Behind the Drop

Investors moved away from large tech stocks to smaller companies because they expect the Federal Reserve might cut interest rates in September. This belief was reinforced by recent data showing the largest increase in jobless claims since early May. Additionally, the possibility of more protectionist policies under a potential Donald Trump presidency added to market uncertainty.

Mohit Kumar, a strategist at Jefferies International Ltd., said, "The Fed moving towards a rate cut and increasing Trump odds should be positive for risk." However, he also mentioned that investors might need to rethink their investments as summer approaches, affecting sectors with heavy positioning.

Expert Opinions

Goldman Sachs strategist Christian Mueller-Glissmann warned of a potential summer stock market setback due to "weaker growth data, already more dovish central bank expectations, and rising policy uncertainty into the U.S. elections."

Company News

In Europe, Sartorius AG's shares dropped by 13% after the German electronics maker lowered its full-year guidance. Ubisoft Entertainment SA, a computer games maker, saw its shares fall by over 8% after presenting mixed full-year targets. Similarly, gaming firm Evolution AB's shares dropped after earnings that missed estimates.

In the U.S., Netflix Inc. shares rose in extended trading after the streaming giant reported strong subscriber additions.

Asia-Pacific Market

Earlier, the MSCI Asia Pacific Index declined by more than 1%, set for its biggest weekly drop in three months. Chip stocks continued to fall amid concerns over new U.S. restrictions on sales to China. Taiwan Semiconductor Manufacturing Co. shares declined for the third day.