Facebook’s parent plunges 26.4% and pulls down tech
A historic plunge in the stock price of Facebook’s parent company helped yank other tech stocks lower on Wall Street Thursday, abruptly ending a four-day winning streak for the market.
The 26.4% wipeout in Meta Platforms, as Facebook’s owner is now known, erased more than $230 billion in market value, easily the biggest oneday loss in history for a U.S. company. The stocks of other social media companies including Twitter and Snap also fell.
Because Meta is valued so highly, a big swing in its stock price can also sink or lift broader market indexes. The S&P 500 fell 2.4%, its biggest drop in nearly a year. The tech-focused Nasdaq composite gave up 3.7%, its biggest loss since September 2020. The Dow Jones Industrial Average, which does not include Meta Platforms, fell 1.5%.
Meta sank after forecasting revenue well below analysts’ expectations for the current quarter, following privacy changes by Apple and increased competition from Tiktok. It was a disappointment for a company that investors have become accustomed to delivering spectacular growth. Meta also reported a rare decline in profit because of a sharp increase in expenses as it invests in transforming itself into a virtual realitybased company.
The steep drop weighed on fellow social media company Twitter, which fell 5.6%. Snapchat’s parent company Snap sank 23.6% and Pinterest lost 10.3%. Snap and Pinterest surged in after-market trading after reporting better-thanexpected results.
Big technology and communications companies played a big role in driving gains for the broader market throughout the pandemic and much of the recovery in 2021, but the market seems to have shifted, said Brad Mcmillan, chief investment officer for Commonwealth Financial Network.
“There’s a general sense that what’s been moving the market higher is not going to take us to the next level,” Mcmillan said. “The question is where is the next growth engine coming from.”
The S&P 500 fell 111.94 points to 4,477.44. The Dow dropped 518.17 points to 35,111.16. The Nasdaq slid 538.73 points to 13,878.82.
Small company stocks also fell. The Russell 2000 index lost 38.48 points, or 1.9%, to 1,991.03.
Communications and technology stocks had some of the biggest losses.
Bond yields rose sharply on Thursday.
The yield on the 10-year Treasury note, which is used as a benchmark to set interest rates on mortgages and many other kinds of loans, rose to 1.84% from 1.76% late Wednesday.
Wall Street anticipates the Federal Reserve’s first interest rate hike to come in March and is cautiously watching for how the central bank paces future increases to help fight rising inflation.
“It’s not a perfect path, it’ll be bumpy, but the direction is pretty clear,” said Guy Lebas, chief fixed income strategist at Janney Capital Management.
In Europe, the Bank of England raised interest rates for the second time in three months, moving more quickly to tame inflation than the Fed and the European Central Bank.
Spotify slumped 16.8% after the leading musicstreaming service gave investors a weak forecast for a closely watched measure of its earnings. The company has come under pressure after Neil Young pulled his music from its platform to protest the spreading of COVID-19 misinformation by Spotify’s star podcaster, Joe Rogan. Other musicians have followed.
Some earnings reports did draw positive reaction Thursday. Wireless carrier T-mobile rose 10.2% after reporting strong results. Health insurer Humana rose 6.2% and upscale clothing company Ralph Lauren rose 3.5% after also reporting encouraging financial results.
But outside of those bright spots, the slump for stocks was broad. Retailers, industrial companies and energy companies also fell. Household and personal goods makers eked out gains.
Investors are also preparing for the latest update on the recovering jobs market. The Labor Department will release its monthly report for January on Friday.