This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Biden drops out
President Joe Biden on Sunday quit the presidential race against Donald Trump and backed Vice President Kamala Harris as the nominee of the Democratic Party, bowing to pressure from his party members to drop out. Harris said in a statement, "I am honored to have the President's endorsement and my intention is to earn and win this nomination." You can read more on her next steps. Meanwhile, Republican lawmakers are calling on Biden to resign. What does this mean for markets? CNBC's Jesse Pound wrote that the "Trump trade" could stall.
CrowdStrike failure
Nearly 8.5 million devices were affected by a faulty software update from cybersecurity firm CrowdStrike, triggering a global IT outage on Friday. The disruption impacted services across industries, including banking, health care, and airlines. Flights were grounded, and TV broadcasters went offline as businesses scrambled to address the ongoing issue. Delta Air Lines canceled 800 mainline flights on Sunday and offered more pay to crews as it struggles to recover. CrowdStrike's shares plunged 11% on Friday. You can read more on how a software update caused one of the world's biggest IT blackouts. And there's more from CNBC's coverage on how the next IT meltdown is already in the making.
Biggest weekly losses
The S&P 500 and Nasdaq Composite posted their biggest weekly losses since April, sliding nearly 2% and 3.7%, respectively. The rotation out of mega-cap AI-related stocks and into cyclicals in anticipation of an interest rate cut saw the Dow Jones Industrial Average climb 0.7%, while the small cap-focused Russell 2000 advanced 1.7%. The yield on the 10-year Treasury inched higher, while U.S. oil prices slumped over 3%.
Starbucks stake
Activist investor Elliott Management has taken a substantial stake in Starbucks and is engaging with management to boost the company's share price, according to the Wall Street Journal. The size of Elliott's stake and specific demands remain unclear. Starbucks has faced several challenges, including disappointing quarterly results and declining U.S. same-store sales. This latest development adds pressure on CEO Laxman Narasimhan, who was hand-picked by former CEO Howard Schultz to lead the company. Starbucks shares jumped almost 7% on Friday.
Boeing 'disappointed' customers
Boeing's output of 737 Max planes is showing signs of improvement, the new head of its commercial unit said, while admitting that the manufacturer has "disappointed" customers with delayed planes. "We've impacted their business and we haven't met the commitments and lived up to being the partner that they expect and they need us to be," Stephanie Pope said before the Farnborough Airshow, outside of London. However, she expressed confidence in Boeing's path to improving production quality, and cited higher output of the 737 Max to 38 planes a month.
Money Report
[PRO] Post-earnings bump
More than 120 S&P 500 companies, including seven Dow components, are set to report earnings this week, intensifying the second-quarter reporting season. Early results have been promising, with 80% of reporting companies beating earnings estimates. Here are some stocks receiving post-earnings bumps.
The bottom line
Markets are grappling with a new U.S. electoral landscape following Biden's sudden announcement on Sunday that he would end his reelection campaign against Trump. CNBC's Jim Cramer shares his thoughts on why the "Trump trade" is on pause and uncertainty is in the driver's seat.
It is not just politics that has created uncertainty. A worldwide IT outage left organizations and individuals in a tizzy, halting operations and day-to-day work. A faulty CrowdStrike content update triggered a global computer outage, causing the dreaded blue screen of death on countless Microsoft Windows systems. The impact was far-reaching, disrupting flights, medical procedures, and everyday life from New York to New Delhi.
CrowdStrike's stock plummeted, shaving billions off its valuation and tarnishing its reputation. It instantly became a meme on social media. Even Elon Musk tweeted on X that he'd removed CrowdStrike from his computers.
"This is a black-eye moment for CrowdStrike," Wedbush Securities' Dan Ives told CNBC. "The big issue is the brand damage. CrowdStrike becomes a household name but not in a good way."
The incident also fueled concerns about Big Tech's vulnerability, with FTC Chair Lina Khan highlighting the risks of concentrated market power and "fragile systems." "Concentrating production can concentrate risk, so that a single natural disaster or disruption has cascading effects," Khan wrote in a series of posts. Khan stopped short of announcing a formal investigation, however, she drew connections to past actions scrutinizing cloud computing and frequent acquisitions in the tech sector.
While Ives expects CrowdStrike to be called to Washington for hearings, he believes this could likely lead to acquisitions by Big Tech due to "some of the dangers" from third-party updates. "This is something that bodes more positive for M&A between Big Tech and cyber."
Big Tech faces the challenge of rekindling Wall Street's enthusiasm after a $900 billion tech rout. Earnings season kicks off with Alphabet and Tesla this Tuesday, offering a crucial test of whether massive investments in AI by industry giants like Google, Microsoft, and Meta are bearing fruit. Microsoft and Apple will follow with their reports next week, further shaping investor sentiment. CNBC's Fred Imbert has more on the big earnings.
Two economic reports of note that should shed more light on the Federal Reserve's interest rate decision. On Thursday is the first reading of the second-quarter GDP and on Friday, the Fed's favourite inflation measure, core PCE price index. You can read more here on what to expect next week.
— CNBC's Alex Harring, Jesse Pound, Kevin Williams, Leslie Josephs, Josie Rozzelle, Kevin Breuninger, Dan Mangan, Zev Fima, Spencer Kimball and Rohan Goswami contributed to this report.
