Dow falls 1,000 points as recession fears fuel calls for interest rate cut
(NEW YORK) — Stocks plummeted on Monday as markets worldwide reckoned with a disappointing jobs report last week that fueled concern of a possible recession.
The major stock indexes in the U.S. fell more than 2% in early trading. The S&P 500 fell about 4%, while the tech-heavy Nasdaq dropped more than 6%. The Dow Jones Industrial Average fell roughly 1,000 points, or nearly 3%.
The market downturn triggered calls for a large interest rate cut at the Federal Reserve’s next meeting in September. Some investors voiced an even more urgent request for a rare emergency rate cut as soon as this week.
Japan’s main Nikkei 225 stock index dropped more than 12%, its worst day of trading since 1987.
In early U.S. trading, chipmaker Nvidia plunged more than 14%. Apple fell more than 8%.
“Investors are feeling massive pain globally,” Dan Ives, a managing director of equity research at investment firm Wedbush, said in a note to clients.
U.S. markets, he added, are “trading heavy in the red across the board.”
Employers hired 114,000 workers in July, falling well short of economist expectations of 185,000 jobs added, U.S. Bureau of Labor Statistics data on Friday showed. The unemployment rate climbed to 4.3%, the highest level since October 2021.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
On Sunday, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%.
(NEW YORK) — An outage caused by a software update distributed by cybersecurity firm CrowdStrike triggered a wave of flight cancellations at several major U.S. airlines – but the disruption was most severe and prolonged at Delta Airlines.
In all, the carrier canceled more than 2,500 flights over a period that stretched from last Friday, when the outage began, into the middle of this week.
The U.S. Department of Transportation opened an investigation into Delta this week over its uniquely severe flight disruptions.
“All airline passengers have the right to be treated fairly,” Transportation Secretary Pete Buttigieg said on Tuesday in a post on X.
In a statement on Tuesday, Delta said it is fully cooperating with the investigation. “Across our operation, Delta teams are working tirelessly to care for and make it right for customers impacted by delays and cancellations as we work to restore the reliable, on-time service they have come to expect from Delta,” the company said.
The company also issued an apology on Wednesday for the outage-related problems.
“Please accept our sincere apologies for the disruption to your recent travel plans caused by a vendor technology outage affecting airlines and companies worldwide,” the airline said in a statement.
“It’s a surprise that a multi-billion-dollar corporation like Delta would allow this to happen,” Henry Harteveldt, a travel industry analyst at Atmosphere Research Group, told ABC News.
“I’m hopeful that the worst is behind us now. While we can breathe a sigh of relief, I think a lot of people are understandably nervous about flying Delta,” Harteveldt added.
Delta did not immediately respond to an ABC News request for comment.
Airline and cybersecurity experts spoke to ABC News about what made the CrowdStrike outage so disruptive, and why it took days for Delta to resume normal service.
What made the CrowdStrike outage so disruptive for Delta
The CrowdStrike outage was so impactful because of the severity of the IT failure and the scale of its reach within the internal operating systems at Delta, experts told ABC News.
“For a company such as Delta, they rely on countless partner services for everything from scheduling pilots and planes to providing meal service and snacks to allowing customers to select their seats,” David Bader, a professor of cybersecurity and the director of the Institute of Data Science at the New Jersey Institute of Technology, told ABC News.
“The CrowdStrike bug disrupted many of those critical services that keep the airline running at full capacity,” Bader added.
Mark Lanterman, the chief technology officer at the cybersecurity firm Computer Forensic Services, said the outage resulted from a faulty software update initiated by CrowdStrike. The resulting computer bug interrupted core services because of the degree to which CrowdStrike pervades the Delta operating systems, he added.
“The CrowdStrike update is deep inside the operating system. When that was installed, there was bad code inside of this update. And when Windows came across the bad code, it panicked and it crashed,” Lanterman said.
The outage, which affected CrowdStrike clients that use Windows operating systems, disrupted a critical system that ensures each flight has a full crew, Delta said in a statement on Monday.
“Upward of half of Delta’s IT systems worldwide are Windows based,” Delta said.
Why did it take days for Delta to resume normal service?
The reason for the prolonged recovery from the outage was because the CrowdStrike update disruption required a manual fix at each individual computer system, experts told ABC News. While each fix can be completed in no more than 10 minutes, the vast number of Delta’s digital terminals required significant manpower to address, expert said.
“This isn’t a fix that could be done automatically; IT resources can’t just sit at a computer and push out an update and everything is fixed,” Lanterman said. “It took so long because Delta has a lot of computers and likely they have limited IT resources to go from computer to computer.”
In a statement on Tuesday, the airline acknowledged the challenge posed by the manual fix requirement.
“The CrowdStrike error required Delta’s IT teams to manually repair and reboot each of the affected systems, with additional time then needed for applications to synchronize and start communicating with each other,” Delta said.
(NEW YORK) — After several of its brightest stars declared support for former President Donald Trump last month, Silicon Valley has now come out in force for Vice President Kamala Harris.
Though Silicon Valley remains a stronghold of support for Democrats, the Biden’s administration’s hawkish approach to tech has alienated many in the industry, and in recent months a number of high-profile entrepreneurs and investors including Elon Musk have backed Trump. But Harris, a Bay Area native with ties to the industry, could forge a stronger relationship with the Valley and has already received pledges of support from a new group called VCs for Harris — representing hundreds of prominent venture capitalists.
Leslie Feinzaig, the venture capitalist who started VCs for Harris, said she recently wrote a pledge and bought a URL to host its site without expecting much.
Within days, billionaire entrepreneur and television personality Mark Cuban and LinkedIn co-founder Reid Hoffman joined the group.
“I basically haven’t slept since,” Feinzaig said.
Feinzaig’s efforts have resulted in more than 700 pledges of support for Harris, and could signal a friendlier relationship between the vice president and the Valley than Biden has had.
“Silicon Valley had no friends in Washington during the Biden administration,” said Georgetown Law Center professor and technology regulation expert Anupam Chander. “You have the Department of Justice, which has filed those antitrust lawsuits. You have the White House and the U.S. Trade Representative, who have been retreating from efforts to ensure free flow of data across the world.”
And, of course, Chander said, you have Federal Trade Commission Chair Lina Khan, who has gained an army of fans — and detractors — for leading an ambitious effort to regulate giants such as Amazon and Meta.
The Biden administration did, however, work to pass the CHIPS Act, which allocated billions to onshore the production of semiconductors used in many electronics — an achievement celebrated by the leading tech industry advocacy group as “a major victory.”
Still, leading venture capitalists Marc Andreessen and Ben Horowitz, the co-founders of investment fund Andreessen Horowitz, cited concerns about Biden’s policies in a podcast episode announcing their support for Trump.
“The future of our business, the future of technology, new technology and the future of America is literally at stake,” Horowitz said.
Despite continuing frustrations with the Biden administration, according to industry insiders, Democrats appear to retain the support of most in Silicon Valley.
“Many of us are frustrated with Biden administration’s sort of anti-technology, anti-business stance,” said Silicon Valley investor and entrepreneur Merci Grace.
Grace said voting against Trump would be “pretty easy” for her and most of her peers, 70 or 80 percent of whom she estimates will ultimately support Harris.
Feinzaig said some of the high-profile figures in the industry who have come out in support of Trump “weren’t speaking for the full industry.”
Still, Trump has made inroads in certain corners of Silicon Valley. In June, a fundraiser hosted by tech billionaire David Sacks in coordination with Republican vice presidential nominee JD Vance — a former venture capitalist with ties to another prominent conservative tech mogul, Peter Thiel — raised $12 million for the former president’s campaign.
Trump has also received endorsements from a number of prominent entrepreneurs in the cryptocurrency sector, promising in his 2024 platform to “end Democrats’ unlawful and unAmerican Crypto crackdown.” Also, he spoke at the annual Bitcoin Conference in late July.
The former president has taken a stern stance on big tech companies, calling them “too big” and “too powerful” in a July interview with Bloomberg, but saying “I don’t want to destroy them.”
Some expect Harris, meanwhile, to assuage concerns in the Valley by taking a more dovish approach than the Biden administration, though they say her policy views on tech remain an open question.
“I would expect to return to a more technocratic stance,” said Rob Merges, a law professor at U.C. Berkeley who spent several decades working in the tech industry. “A traditional Clinton, Obama — you know, friendly to the benefits of technology, reasonable in regulation, and cautious to not go too far in any one direction.”
Chander said he thinks Harris is “someone who recognizes the importance of innovation, but also worries about some of the harms that might follow.”
But, he noted, “because Harris didn’t go through a regular primary, we haven’t seen her stake out positions on some issues.”
Since Biden announced he would not seek reelection on July 21, Harris has not mentioned the tech industry in public campaign remarks and her campaign declined to comment on whether she would keep Khan at the head of the FTC (high-profile donors including Hoffman have recently urged her to do the reverse).
But the Valley needs no introduction to the vice president.
Harris dealt with the tech industry as California’s attorney general and has headed some of the Biden administration’s efforts surrounding artificial intelligence, working with top AI companies to agree on voluntary guidelines for the responsible use of generative AI. The vice president’s brother-in-law, Tony West, also serves as chief legal officer for Uber, headquartered in San Francisco. In remarks about AI in November, she said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.”
Grace said she gets the sense that Harris is “a reasonable person who is very intelligent, and we can have a discussion with her.” She added that Trump “is just someone who you can’t trust.”
“It’s not worth the temporary alignment to make a little bit more money on top of the billions that you already have — to get in bed with someone who you can’t trust,” Grace said.
Feinzaig also shared her trust in Harris.
“I feel like we have a candidate that is listening,” Feinzaig said.
(NEW YORK) — The Department of Justice and Boeing have finalized their plea agreement — the manufacturer will plead guilty to conspiracy to defraud the United States and pay a fine of $243.6 million, according to a court filing.
Boeing will also serve a three-year term of organizational probation; invest $455 million in compliance, quality and safety programs; and the board of directors will meet with the families of victims of the two MAX crashes. An independent compliance monitor will also be appointed.
This is not a done deal until it is approved by U.S. District Judge Reed O’Connor in the Northern District of Texas, who can either approve the deal or reject it.
According to court documents, “the plea agreement will not provide Boeing with immunity for any other conduct, including any conduct that may be the subject of any ongoing or future Government investigation of the Company.”
In a statement, Boeing said, “Boeing and the Justice Department have filed a detailed plea agreement in federal court, which is subject to court approval. We will continue to work transparently with our regulators as we take significant actions across Boeing to further strengthen our safety, quality and compliance programs.”
Lawyers representing the families of MAX crash victims have voiced their displeasure to ABC News.
Paul Cassell, who represents 15 MAX crash victim families, said: “The proposed plea has all the problems in it that the families feared it would have. We will file a strong objection to the preferential and “sweetheart” treatment Boeing is receiving within seven days with Judge O’Connor. We will strongly urge him to reject this proposed plea.”
Mark Lindquist, who also represents victim families, said: “Most importantly this plea agreement fails to acknowledge that the charged crime of Conspiracy to Defraud caused the death of 346 people. This is a sore spot for victim families who want accountability and acknowledgment.”
Boeing was accused of misleading the Federal Aviation Administration about aspects of the Max before the agency certified the plane for flight. Boeing did not tell airlines and pilots about the new software system, called MCAS, that could turn the plane’s nose down without input from pilots if a sensor detected that the plane might go into an aerodynamic stall.
Max planes crashed in 2018 in Indonesia and 2019 in Ethiopia after a faulty reading from the sensor pushed the nose down and pilots were unable to regain control. After the second crash, Max jets were grounded worldwide until the company redesigned MCAS to make it less powerful and to use signals from two sensors, not just one.