Facebook-led tech slump dims broader gains for U.S. stocks
A plunge in Facebook shares erased almost $120 billion of the social media giant’s market value Thursday, snapping a three-day winning streak for the S&P 500 index.
Facebook’s tumble was the worst-ever single-day drop in value for a U.S. company, and led a sell-off in technology companies that offset solid gains in other areas of the market, including industrial and energy stocks and consumer goods companies.
The broader gains reflect another round of strong company earnings and fresh optimism among investors that trade tensions between the U.S and European Union may be on the mend.
The huge loss in Facebook’s value weighed on broad market indexes. The S&P 500 index dropped 8.63 points, or 0.3 percent, to 2,837.44. The Nasdaq composite index, which is heavily weighted with technology companies, lost 80.05 points, or 1 percent, to 7,852.18.
The Dow Jones Industrial Average, whose 30 members don’t include Facebook, had a much better day, rising 112.97 points, or 0.4 percent, to 25,527.07.
The Russell 2000 index of smallerstocks gained 10.16 points, or 0.6 percent, to 1,695.36. More stocks rose than fell on the New York Stock Exchange.
The S&P 500, the market’s benchmark index, is still on track for its fourth weekly gain in a row.
Facebook, which closed at an all-time high of $217.50 on Wednesday to $176.26, after warning investors that it sees slower revenue growth ahead, and that its user base and revenue grew more slowly than expected in the second quarter. The 19 percent drop was the biggest decline for the company since it went public in 2012.
The slower growth came about as the company grappled with privacy scandals. All told, $119 billion of its value was wiped out, eclipsing a $91 billion loss for Intel in September 2000, according to Birinyi Associates.
Investors have been focused on the mostly favorable run of company quarterly earnings the past couple of weeks. At the same time, they’re wary of global trade tensions, which have ratcheted up in recent weeks as the U.S. and some of its trading partners imposed tariffs and threatened to impose more.
But talks held late Wednesday between President Donald Trump and a European Union delegation gave markets cause for encouragement after both sides agreed to work on a pact to dismantle trade barriers.
A number of companies reported positive earnings on an unusually busy day for second-quarter earnings.
Qualcomm vaulted 7 percent to $63.58 after the chipmaker reported earnings that beat analysts’ expectations and said it would abandon a bid to acquire NXP.
Mondelez International, which sells Oreo cookies and Cadbury chocolate, climbed 4.3 percent to $43.27 after the company’s latest quarterly earnings and revenue topped analyst estimates. Traders also bid up shares in rival Hershey, which gained 7.4 percent to $99.66.
Several airlines traded higher, contributing to industrial sector gains. Alaska Air Group surged 9.6 percent to $64.76, while Southwest Airlines jumped 8.4 percent to $56.70. American Airlines added 4.8 percent to $40.02.
Besides Facebook, several other bigname companies turned in disappointing reports.
Ford lost 6 percent to $9.89 after the automaker disclosed a sharp drop in quarterly profits and said it would undertake a restructuring that will cost $11 billion over the next three to five years.
Benchmark U.S. crude rose 31 cents to settle at $69.61 per barrel in New York. Brent crude, used to price international oils, added 61 cents to close at $74.54.
The pickup in oil prices gave a boost to some energy stocks. Marathon Petroleum climbed 7.3 percent to $80.16.
Bond prices fell, sending yields higher. The yield on the 10-year Treasury rose to 2.98 percent from 2.97 percent.
In other energy futures trading, heating oil rose 3 cents to $2.18 a gallon. Wholesale gasoline added 4 cents to $2.16 a gallon. Natural gas added a penny to $2.78 per 1,000 cubic feet.