Stocks fell on Wall Street today as Facebook parent company Meta plunged 24.9%, erasing more than $220 billion in market value, the largest drop in history.
Meta’s lofty stock price, as with several other big communications and technology companies, has an outsize influence on markets because of the company’s huge size. That means a big swing in either direction for such a company can do much to sink or lift the broader market.
The S&P 500 index fell 1.4% as of 11:29 a.m. Eastern and the tech-heavy Nasdaq fell 2.2%. The Dow Jones Industrial Average fell 260 points, or 0.7%, to 35,383.
Meta sank after forecasting revenue well below analysts’ expectations for the current quarter, a disappointment for a company that investors have become accustomed to delivering spectacular growth. It also reported a rare decline in profit due to a sharp increase in expenses as it invests in transforming itself into a virtual reality-based company.
The steep drop weighed on fellow social media company Twitter, which shed 5.4%. Snapchat’s parent company Snap sank 20.5% and Pinterest lost 8%.
Communications and technology stocks had some of the biggest losses. The sectors have been behind much of the choppiness in markets since the beginning of the year as investors shift money in expectation of rising interest rates. Higher rates make shares in high-flying tech companies and other expensive growth stocks relatively less attractive to investors.
Bond yields rose sharply today. 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 1.83% from 1.76% late Wednesday.
Wall Street anticipates the Federal Reserve’s first interest rate hike to come in March and are cautiously watching for how it paces future increases to help fight rising inflation.
Investors also have their eyes on monetary policy updates in Europe. The Bank of England raised interest rates for the second time in three months today, putting the United Kingdom far ahead of the rest of Europe and the U.S. in moving to tame surging inflation that is squeezing consumers and businesses.
In contrast, the European Central Bank doesn’t plan to raise rates until 2023 despite record inflation, blaming it on temporary factors. But it has decided the economic recovery is strong enough to start carefully dialing back some of its stimulus efforts over the next year.
Spotify slumped 13.2% after the leading music-streaming 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.
The losses on Wall Street threaten to end a run of solid daily gains for the major indexes this week, though they are still on track for weekly gains.
Investors had several earnings reports to review, with mixed outcomes for stocks. Wireless carrier T-Mobile rose 10.3% after reporting strong results. Health insurer Humana rose 6.2% and upscale clothing company Ralph Lauren rose 5.3% after also reporting encouraging financial results.
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.
Source: Star
