Wall Street Looks Past Outage Before Tech Earnings: Markets Wrap

(Bloomberg) — The end of a wild week for stocks saw traders looking past a massive outage that shook businesses around the globe to get ready for the start of the tech earnings season.

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As trading kicked off on Wall Street, the S&P 500 was fairly stable, while still heading for its worst week since April. Most of that decline was due to investors trimming positions on this year’s winners in favor of 2024 laggards amid bets the bull market will broaden out of big tech amid Federal Reserve rate cuts. The swift repositioning spurred calls for a pullback or consolidation, especially as the megacaps start reporting their numbers.

“The next week is important for the near-term trajectory of the stock earnings, with many mega cap tech companies reporting,” said Glen Smith at GDS Wealth Management. “If we were to see the powerful combination of strong tech earnings and softening inflation, that could reverse the market’s recent weakness and spark a new leg higher in stocks.”

Computer systems at businesses and public services were disrupted Friday after a botched update of a widely used cybersecurity program took down Microsoft Corp. systems. CrowdStrike Holdings Inc. Chief Executive Officer George Kurtz posted on X that the fault had been identified and “a fix has been deployed,” adding that it wasn’t a cyberattack.

The S&P 500 hovered around 5,550. The yield on 10-year Treasuries advanced advanced four basis points to 4.24%.

Investors are flocking to US equities as they grow more certain of a September cut by the Fed and that Donald Trump will win the US presidential election, according to Bank of America Corp. strategists.

US equity funds absorbed about $45 billion — the fourth-largest inflow on record — in the week through Wednesday, a team led by Michael Hartnett wrote in a note, citing EPFR Global data. Small-cap funds had $9.9 billion of inflows, the second-largest ever, while large-cap funds received $27.4 billion.

Hartnett also said its likely stocks will slide after the Fed rate cut, calling it a “buy rumor, sell fact” opportunity. His team is also bullish on bonds as he expects any new tariffs enacted by Trump over the next 12 months to be “deflationary than inflationary,” as opposed to market expectations.

There’s a risk of a setback for the equities this summer, according to Goldman Sachs Group Inc. strategists, who say the market is more more likely to see a correction than a bear market in the second half.

That could result from “the combination of weaker growth data, already more dovish central bank expectations and rising policy uncertainty into the US elections,” strategists led by Christian Mueller-Glissmann wrote.

Corporate Highlights:

American Express Co. warned it’s planning to increase spending on marketing in the coming months after billings growth on the payments giant’s credit cards slowed in the second quarter.
Eli Lilly & Co.’s Mounjaro gained Chinese regulatory approval for weight less than a month after a similar therapy from Novo Nordisk A/S, fueling competition in a nation that’s among the world’s most severely hit by obesity.
Hawaiian Electric Industries Inc. is among the companies that have tentatively agreed to pay more than $4 billion to resolve hundreds of lawsuits over the wildfires that ripped through Maui last year, according to people familiar with the deal.
Netflix Inc. extended its lead over the streaming competition, adding 8.05 million customers in the second quarter and raising estimates for annual sales and profit margins.

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