(Reuters) – U.S. stock index futures fell on Friday as traders abandoned expensive mega-cap tech stocks as they assessed the impact of a global technology outage affecting companies across sectors.
Major U.S. airlines ordered ground stops due to communications problems, while companies, including some financial services firms and banks, reported system outages that disrupted their operations.
Microsoft fell 2.7% in premarket trading after the cloud disruption.
CrowdStrike Holdings fell 19% after the Australian government said some outages in the country appeared to be linked to a problem at the company.
The disruption comes after two grueling sessions for Wall Street, as investors assessed second-quarter earnings and moved away from mega-cap tech stocks that largely powered the 2024 stock rally.
Other megacaps such as Nvidia and Apple fell 0.9% and 0.3% respectively. Chip stocks were mixed in premarket trading, with Taiwan Semiconductor Manufacturing’s U.S. listing down 1.8% while Broadcom rose 0.10%.
The London Stock Exchange Group’s news and data platform Workspace was also hit by the outage, affecting user access worldwide and causing disruptions in financial markets, while Euronext said some North American stock-based indices were incorrectly broadcast.
“There are rumors that cybersecurity company Crowdstrike released an update that didn’t work on Microsoft’s operating system and caused systems to fail. Because we don’t know the full details, it’s too early for investors to work out the financial or reputational damage. impact on these companies,” said Dan Coatsworth, investment analyst at AJ Bell.
Over the past two sessions, the Nasdaq Composite has fallen 3.5%, the benchmark S&P 500 lost 2.1% and the Russell 2000 posted a five-day winning streak on Wednesday.
The VIX, Wall Street’s “fear gauge,” signaled investor unease, trading above 16 points – its highest level since late April.
Corporate profits are also at stake. Reports from American Express, The Travelers Companies and Halliburton are expected before markets open Friday.
Investors will also await comments from US Federal Reserve officials John Williams and Raphael Bostic for hints on monetary policy later in the day.
Markets have roughly priced in a 25 basis point rate cut at the Fed’s September meeting and still expect two cuts by the end of the year, LSEG data show.
At 5:26 a.m. ET, the Dow e-minis were down 128 points, or 0.31%, the S&P 500 e-minis were down 13.5 points, or 0.24%, and the Nasdaq 100 e-minis were down with 73.25 points, or 0.37%.
Cybersecurity companies including Palo Alto Networks, Fortinet and Zscaler rose between 1.4% and 6.3% following the global disruption.
Among single movers, Netflix fell 1.6% after the streaming giant warned that the number of subscribers in the third quarter would be lower than a year earlier and third-quarter revenue was below expectations.
(Reporting by Lisa Mattackal in Bengaluru; Editing by Pooja Desai)