Wall Street falls as Facebook’s forecast disrupts tech recovery

U.S. shares fell on Thursday, with the Nasdaq diving more than 2%, as Facebook-owner Meta Platforms’ dour forecast jolted the broader tech sector and threatened to upend a nascent recovery in stock

Meta shares sank 24.5% and were set for their biggest single-day decline ever, as the company blamed Apple’s privacy changes and increased competition from rivals such as TikTok for its disappointing outlook.

The share slump is set to wipe out more than $200 billion from Meta’s market cap, which would shave off about 0.9% from Nasdaq’s market value and about 0.5% from S&P 500.

The tech-heavy Nasdaq fell 2.2% as shares of other social media companies also took a beating. Twitter Inc and Pinterest Inc fell more than 6%, while Snapchat lost 18.8%.

Big tech stocks such as Alphabet Inc and Microsoft Corp fell about 0.5% and 1.0%, respectively, while Amazon.com Inc, scheduled to report results later in the day, declined 6.3%.

“This is definitely shaking investors’ resolve around the recent relief rally that we’ve been seeing in tech,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

“There’s also a bigger problem going on, and that is higher interest rates and inflation. This is sort of shaking out the weak hands that have been around trying to ride this bounce that’s been going on in tech.”

All 11 major S&P 500 sectors declined in early trading, with communication services dropping 5.2% and leading losses. At 10:04 a.m. ET, the Dow Jones Industrial Average was down 278.64 points, or 0.78%, at 35,350.69, the S&P 500 was down 63.68 points, or 1.39%, at 4,525.70, and the Nasdaq Composite was down 317.90 points, or 2.20%, at 14,099.65.

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The CBOE volatility index, Wall Street’s fear gauge, ticked up 1.57 points to 23.66 after hitting a near three-week low in the previous session.

Adding to market’s woes was a second rate hike by the Bank of England and a statement by European Central Bank’s President Christine Lagarde that any decision to raise rates would be “data-dependent”, moving away from her long-standing insistence that the ECB was “very unlikely” to hike rates this year.

Nearly half of the S&P 500 companies have reported results so far during this earnings season, and 77.1% of them have beaten analysts’ earnings estimates, compared with an average of 84% over the past four quarters, according to Refinitiv data.

The number of Americans filing new claims for unemployment benefits fell more than expected last week as COVID-19 infections subsided, suggesting that an anticipated slowdown in job growth in January was likely temporary.

A measure of U.S. services industry activity dropped to an 11-month low in January as a resurgence in COVID-19 infections hurt demand at high contact businesses and kept workers at home. Declining issues outnumbered advancers for a 6.03-to-1 ratio on the NYSE and a 4.05-to-1 ratio on the Nasdaq. The S&P index recorded 17 new 52-week highs and six new lows, while the Nasdaq recorded 11 new highs and 69 new lows.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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