A historic drop in the share price of Facebook’s parent company helped to push other tech stocks on Wall Street on Thursday, abruptly ending a four-day winning streak for the market.
The 26.4% wipeout of meta platforms, as the Facebook owner is now known, wiped out more than $230 billion ($322 billion) in market value, by far the biggest one-day loss history for an American company. Shares of other social media companies, including Twitter and Snap, also fell.
Because Meta is valued so highly, a spike in its share price could cause broader market indices to fall or rise. The S&P 500 fell 2.4%, its biggest drop in almost a year. The tech-focused Nasdaq Composite fell 3.7%, its biggest drop since September 2020. The Dow Jones Industrial Average, which excludes metaplatforms, fell 1.5%. The Australian stock market is poised to fall, with futures at 7:59 am ET pointing to a 1.1% drop at the open.
Meta sank after forecasting revenue well below analysts’ expectations for the current quarter following Apple’s privacy changes and increased competition from TikTok. It was a disappointment for a company that investors have grown used to showing spectacular growth. Meta also reported a rare decline in profit due to a sharp rise in expenses as it invests to transform itself into a VR-based company.
The sharp drop weighed on social media company Twitter, which fell 5.6%. Snapchat’s parent company Snap sank 23.6% and Pinterest lost 10.3%. Snap is up 54% and Pinterest is up 28% in aftermarket trades after each reported better-than-expected results. Amazon.com jumped 18% in after-hours trading after reporting strong fourth-quarter results despite supply chain issues.
Big tech and communications companies have played a big part in driving profits for the broader market during the pandemic and much of the recovery in 2021, but the market appears to have shifted, said Brad McMillan, chief investment officer of the Commonwealth Financial Network .
“There’s a general sense that what’s been moving the market higher is not going to take us to the next level,” McMillan said. “The question is where is the next growth engine coming from.”
Small stocks also fell. The Russell 2000 index lost 38.48 points, or 1.9 percent, to 1991.03.
The S&P 500 fell 111.94 points to 4,477.44. The Dow dropped 518.17 points to 35,111.16. The Nasdaq slid 538.73 points to 13,878.82.