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 (GOOGL.O) and Microsoft Corp fell more than 3%, while Amazon.com Inc slumped 7.8%, before it was scheduled to release results.
“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%.
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.
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