The S&P 500 experienced its first losing week in three, closing with a 0.7% decline, marking its worst performance since April. The Dow Jones Industrial Average dropped 377 points, or 0.9%, while the Nasdaq composite sank 0.8%. The market’s biggest winners, particularly Big Tech stocks, faced pressure as concerns grew over their high valuations. Nvidia, for instance, fell 2.6% on Friday and 8.8% for the week, despite a year-to-date gain of 138% driven by the artificial intelligence frenzy.
However, gains in previously overlooked sectors helped offset some of the declines. Smaller stocks and companies closely tied to the economy’s strength saw an increase, raising hopes for a healthier market where more stocks are rising. Brian Jacobsen, chief economist at Annex Wealth Management, noted that this rotation could continue, even if it means falling less rather than rising faster.
The momentum for these beaten-down areas of the market may be slowing, as the Russell 2000 index of smaller stocks fell 0.6% on Friday, marking its third consecutive drop after an impressive 11.5% surge over five days. Additionally, three out of every four stocks in the S&P 500 also experienced declines.
Friday’s market movements coincided with a major outage that disrupted flights, banks, and even doctors’ appointments worldwide. Cybersecurity firm CrowdStrike clarified that the issue behind the outage was not a security incident or cyberattack and had already deployed a fix. The problem stemmed from a faulty update sent to computers running Microsoft Windows. CrowdStrike’s stock dropped 11.1%, while Microsoft’s declined by 0.8%.
Richard Stiennon, a cybersecurity industry analyst, considered it a historic mistake by CrowdStrike but did not believe it revealed a larger problem within the cybersecurity industry or the company itself. He anticipated that both the markets and customers would forgive CrowdStrike, and the incident would blow over. Despite the decline, rival cybersecurity firms experienced stock gains, with SentinelOne jumping 7.8% and Palo Alto Networks rising 2.2%.
The outage initially impacted airport check-in procedures worldwide, leading to frustrated fliers and a temporary decline in U.S. airline stocks. However, the losses were quickly pared, with United Airlines turning a gain of 3.3%. The airline warned of potential delays and issued a waiver to facilitate travel plan changes. American Airlines Group slipped 0.4%, while Delta Air Lines rose 1.2%.
Comerica suffered a significant loss of 10.5%, despite reporting better-than-expected earnings for the spring. The bank received a preliminary notification that it would no longer serve as the issuer of the Direct Express debit card for approximately 4.5 million federal benefit recipients, a program it had been involved in since 2008. American Express also declined by 2.7% after falling short of analysts’ revenue forecasts, contributing to the Dow’s drop, despite reporting stronger-than-expected profits.
Halliburton fell 5.6% after meeting analysts’ profit expectations for the last quarter but missing revenue estimates. On the other hand, rival SLB experienced a stock increase of 1.9% after reporting stronger-than-expected profits.