Wall St ends winning run as Facebook forecast halts tech-led recovery
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[February 04, 2022] By
David French
(Reuters) - Wall Street snapped a
four-session winning streak on Thursday, with all three benchmarks
ending lower after Facebook-owner Meta Platforms' dour forecast sent its
stock plummeting and halted a nascent recovery built on upbeat earnings
from other big tech.
Meta shares sank 26.4%, wiping around more than $200 billion off its
market value, according to Reuters calculations, as it blamed Apple's
privacy changes and increased competition from rivals such as TikTok for
its disappointing outlook.
The decline in market capitalization was the largest ever recorded by a
U.S. company in a single session, eclipsing when Apple Inc shed $180
billion on Sept. 3, 2020.
In turn, Meta's performance eliminated 0.9% of the Nasdaq's value and
cut the S&P 500's combined worth by 0.6%, according to Reuters
calculations. The exchanges, respectively, suffered their worst daily
falls since September 2020 and February 2021.
Shares of other social media companies also took a beating. Twitter Inc
dropped 5.6%, while Pinterest Inc and Snap Inc slumped 10.3% and 23.6%
respectively ahead of reporting their own earnings after the bell.
Big tech stocks such as Alphabet Inc and Microsoft Corp fell more than
3%, while Amazon.com Inc slumped 7.8%, before it was scheduled to
release results.
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"As we've gotten numbers in recent days, what we're seeing is the
delivery of earnings being rewarded or penalized, and if you continue to
deliver strong earnings growth, the market will reward that," said
Maxwell Grinacoff, U.S. equity & derivatives strategist at BNP Paribas.
"In a rising rate environment, as we progress through the year, we
expect to see more divergence between the higher quality names, such as
the megacaps, and lower quality names which are not making any money."
Financial technology companies saw a second day of selling, after PayPal
Holdings Inc's disappointing earnings on Tuesday caused investors to
question if these firms - which benefited significantly from the
pandemic advancing the shift to digital payments - would justify steep
valuations in 2022.
PayPal dropped 6.2%, while peers Block Inc, Affirm Holdings Inc and SoFi
Technologies slipped between 4.9% and 11%.
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The Wall Street sign is pictured at the New York Stock exchange
(NYSE) in the Manhattan borough of New York City, New York, U.S.,
March 9, 2020. REUTERS/Carlo Allegri/File Photo
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Tech stocks have enjoyed a dominant period amid low interest rates, as
investors sought out high growth, but with inflation rising and the U.S.
Federal Reserve signaling an aggressive rate-hike stance to rein it in,
money managers are having to adjust portfolios accordingly.
"People are going to start increasing allocations to value stocks, and
to do that they will have to sell their growth stocks, even if they are
down 15% to 30%," said Jack Murphy, co-chief investment officer of
Easterly Investment Partners.
The Dow Jones Industrial Average fell 518.17 points, or 1.45%, to
35,111.16, the S&P 500 lost 111.94 points, or 2.44%, to 4,477.44 and the
Nasdaq Composite dropped 538.73 points, or 3.74%, to 13,878.82.
Communication services was the worst performer of the major S&P 500
sectors, weighed by Meta's performance.
One of the few bright spots among its sector constituents was T-Mobile
US Inc, which advanced 10.2% after posting both positive numbers and
outlook.
The CBOE volatility index, Wall Street's fear gauge, moved up after
hitting a near three-week low in the previous session.
Adding to the market's woes was a second rate hike by the Bank of
England and a hawkish pivot by the European Central Bank's President
Christine Lagarde.
Meanwhile, 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.
Volume on U.S. exchanges was 10.85 billion shares, compared with the
12.37 billion average for the full session over the last 20 trading
days.
The S&P 500 posted 29 new 52-week highs and six new lows; the Nasdaq
Composite recorded 34 new highs and 149 new lows.
(Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru and
David French in New York; Additional reporting by John McCrank; Editing
by Lisa Shumaker and Marguerita Choy)
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