US stocks fall as Meta’s disappointing forecast disrupts tech recovery

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

Meta shares sank 25% in what could be the worst single-day wipeout in market value for a US company, as it 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 $200bn from Meta’s market capitalisation, 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  and Pinterest  fell more than 5%, while Snapchat lost 20.6%.

Big tech stocks such as Alphabet Inc and Microsoft Corp fell about 0.8% and 1.7%, respectively, while Amazon.com Inc, scheduled to report results later in the day, declined 6.8%.

“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   in New York.

“There’s also a bigger problem going on, and that is higher interest rates and inflation.”

Ten of the 11 major S&P 500 sectors declined in early trading, with communication services dropping 5% and leading losses.

The Dow Jones industrial average was down 278.06 points, or 0.78%, at 35,351.27, the S&P 500 was down 68.33 points, or 1.49%, at 4,521.05, and the Nasdaq Composite was down 342.95 points, or 2.38%, at 14,074.60 before the close.

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 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.

Nearly half of the S&P 500 companies have reported results so far during this earnings season, and 78.5% 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.

Reuters