Benchmarks end four-day win streak
U.S. stock indexes closed lower on Thursday, ending a four-day win streak as shares of Facebook’s parent fell 26.4% after a weak outlook from Meta Platforms Inc.
Investors also digested a rate rise by the Bank of England and a significant hawkish shift by the European Central Bank, and weekly U.S. data on employment and business activity.
How did stock benchmarks do?
- The Dow Jones Industrial Average DJIA, -0.06% fell 518.17 points, or 1.5%, to end at 35,111.16.
- The S&P 500 index SPX, +0.52% dropped 111.94, or 2.4%, closing at 4,477.44.
- The Nasdaq Composite Index COMP, +1.58% slumped 3.7%, or 538.73 points, to finish at 13,878.82, with the shares of Meta Platforms serving as a drag on the market-cap weighted index.
Stocks rose Wednesday, and all three indexes gained ground over the past four sessions, with the Nasdaq surging 8% over that time span.
What’s drove markets
Stock benchmarks finished significantly lower Thursday, as investor sentiment shifted to a more guarded stance on Wall Street, and with a bad day from one of the biggest names in the equity market.
In corporate news, Meta Platforms FB, -0.28% closed 26.4% lower, after the Facebook parent not only missed sales and growth estimates for the fourth quarter but warned inflation and competition from the likes of TikTok would weigh on first-quarter results.
“This is insane,” said Michael Batnick, director of research at Ritholtz Wealth Management. “[Meta] was down like $240 billion in market cap, the biggest one day loss prior was $180 billion.”
That market cap loss also was more than double the total market cap of other social media companies, Twitter TWTR, +7.13%, Pinterest PINS, +11.18%, and Snap SNAP, +58.82% combined, according to Dow Jones data.
Thursday also marked the Nasdaq’s worst one-day percentage decline since Oct. 28, 2020.
“The air was coming out of the high growth firms for the last 12 months, but now it’s coming for [Meta],” said Batnick. “Robinhood could go to zero and the Nasdaq wouldn’t blink, but it’s a different deal with [Meta]. A lot of people are reassessing, and What can Amazon AMZN, +13.54% possibly say to make the stock go up?”
Amazon was set to report earnings after Thursday’s closing bell.
Recent quarterly updates from corporations, weaker-than-expected economic data and a lowered forecast for growth by central bankers was helping to cast a pall on the investing landscape.
“Macroeconomists across the Street are starting to trim their growth expectations,” wrote Steven Ricchiuto, U.S. chief economist at Mizuho Securities in a Thursday research note.
ECB President Christine Lagarde declined to rule out a rate increase in 2022 and acknowledged that inflation risks for the eurozone are “tilted to the upside,” signaling that policy makers were likely to offer more detailed guidance when they meet in March. Lagarde had previously pushed back on market expectations for a rate increase this year.
Europe’s policy update came after the Bank of England raised its key interest rate from 0.25% to 0.5%, justifying the move by citing rising inflation and the tight conditions of the U.K. labor market. Its interest-rate increase was the first back-to-back hike for the BOE since 2004.
Meanwhile, a barometer of U.S. business conditions at service sector companies such as restaurants and retailers touched the lowest level since February 2021. The Institute for Supply Management’s index of service companies that employ most Americans slid 2.4 points in January to a 11-month low of 59.9%, ISM said Thursday, during a record coronavirus outbreak that sapped the economy.
In other economic reports, U.S. jobless claims dropped 23,000 to 238,000 on the week as omicron receded, data show. Meanwhile, unit labor costs rose at a 0.3% rate in the fourth quarter of 2021, data show.
Which companies were in focus?
- Snapchat parent Snap Inc. SNAP and Pinterest PINS both saw pressure after the Meta Platforms results, with both companies set to report results after the close. Shares of Snap were down 23.6%, and those for Pinterest fell 10.3%.
- Spotify Technology SPOT also was reeled after issuing a light subscription forecast. Its stock was down 16.8%.
- GameStop Inc. GME, +3.13% gave back early gains to close down 0.8% after disclosing it had entered into a partnership for its long awaited NFT platform.
How did other assets fare?
- The yield on the 10-year Treasury note TMUBMUSD10Y rose about 6 basis points to around 1.825%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six rivals, was down 0.6%, as the British pound GBPUSD, -0.51% and euro EURUSD, +0.10% rose following the decision from the Bank of England and an update from the ECB.
- West Texas Intermediate crude for March delivery CLH22 rose $2.01, or 2.3%, to settle at $90.27 a barrel on the New York Mercantile Exchange. Gold’s April futures contract GCJ22 fell by $6.20, or 0.3%, to settle at $1,804.10 an ounce.
- Bitcoin BTCUSD was down 1.5%, at around $36,960.
- In European equities, the Stoxx Europe 600 SXXP fell 1.8%, while London’s FTSE 100 UKX UKX shed 0.7%.
- The Nikkei 225 NIK NIK closed down 1.1% and Korea’s Kospi Index 180721, +1.57% rose 1.7%. Markets in China and in other parts of Asia are closed for Lunar New Year.