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Meta Meltdown Drags Wall Street Lower at Open; Dow Down 220 Pts

By Geoffrey Smith — U.S. stock markets fell sharply at the opening on Thursday, pulled down by a slump in Meta Platforms (NASDAQ:FB) stock after its disappointing earnings update on Wednesday.

The Facebook owner opened down 26%, reversing all its gains of the last 20 months, after the company reported its first-ever quarterly decline in active users and forecast a squeeze on profits this year from heavy investment plans and from Apple (NASDAQ:AAPL)’s privacy policy changes that came into effect last year. Absent a recovery, that will be the biggest one-day loss in market capitalization for any company ever.

By 9:40 AM ET (1440 GMT), the Nasdaq Composite was down 1.9%, while the S&P 500 was down 1.2%. The Dow Jones Industrial Average, less exposed to longer-duration growth stocks such as Meta, fell only 218 points, or 0.6%, to 35,412. 

The main indices had enjoyed a four-day winning streak prior to Thursday.

Meta’s report revived familiar fears about the stretched valuations of many technology stocks, illustrating that the kind of collapse that has become commonplace in ‘profitless tech’ is also possible even in stocks that have consistently thrown out cash in recent years. Meta’s slump comes only a week after streaming giant Netflix (NASDAQ:NFLX) issued a similar shock warning, and only a day after PayPal (NASDAQ:PYPL) fell by over 20% in response to a profit warning of its own. PayPal stock shed another 3.8% in early trading on Thursday. 

Almost inevitably, Meta’s results had their most direct impact on Snap (NYSE:SNAP) stock. The Snapchat parent has faced similar issues of slowing growth and is still unprofitable. Its stock had fallen over 20% in response to its previous quarter’s results, and it fell another 20% on Thursday. Spotify (NYSE:SPOT) stock also fell 18% to a 21-month low after warning of a coming slowdown in user growth.

Snap reports after the close, along with Amazon. Amazon (NASDAQ:AMZN) stock, which peaked in November, fell another 6.2% as investors adjusted for the risk of a similar disappointment. Analysts have fretted that rising labor costs and the reopening of the retail sector may pressure the fourth quarter’s earnings for the e-commerce giant. However, like Microsoft (NASDAQ:MSFT), it has a highly profitable Cloud-hosting division to prop up earnings. 

On a more positive note, data released earlier suggested that the labor market was on track to put behind it the soft patch caused by the wave of Omicron-variant Covid-19 in January. Initial jobless claims fell by more than expected to 238,000, their lowest in three weeks, while unit labor costs rose by much less than expected in the fourth quarter, alleviating fears of entrenched inflation. ULCs across the economy rose only 0.3% from the third quarter, rather than the 1.2% rise expected.  There was also a slight drop in the prices paid component of the Institute for Supply Management’s non-manufacturing index, suggesting that inflationary pressures may be close to peaking. 

Also defying the gloom was T-Mobile (NASDAQ:TMUS) stock, after the cellular carrier reported a buoyant fourth quarter and upgraded its estimate for savings from its merger with Sprint. T-Mobile rose as much as 10% before retracting to be up 8.8%. 


© Reuters.

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