The Times Herald (Norristown, PA)
Facebook tech slump dims gains for 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 19 percent tumble was the worst in the company’s history 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.
“It’s a shock what happened to Facebook, but that little improvement in the trade picture and the continuation of the earnings results have just been spectacular,” said Ted Theodore, portfolio manager at TrimTabs Asset Management.
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 smaller-company stocks 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, sank 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 slower growth came about as the company grappled with privacy scandals. All told, $119 billion of its value was wiped out, nearly as much as McDonald’s is worth.
“For such a big company to suffer such a significant decrease in price is really amazing to watch,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank.