Skip to main content

Stocks on Wall Street tumbled Thursday, with Meta, the parent company of Facebook, leading the way with a drop of 26.4%, a loss that erased more than US$250 billion off its market value.

The losses weighed on the tech-heavy Nasdaq composite, which fell 3.7%. The broader S&P 500 declined about 2.4%. It was that index’s biggest one-day decline since February 2021.

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.

The TSX also closed lower, with tech stocks similarly under the most pressure.

Meta said Wednesday that changes made last year by Apple that made it harder for apps to track iPhone users’ digital habits would cost it about $10 billion in ad revenue this year. The privacy features that Apple added are a blow to advertisers, who would track consumers’ online behavior and use data to target them with pitches for products they might be interested in.

The company’s CEO, Mark Zuckerberg, said that it was having trouble competing with TikTok, the short-video app, and that Facebook lost users globally for the first time. The company spent US$10 billion building augmented and virtual reality hardware as it changes its focus to the metaverse, a theoretical vision for the internet.

Other social media companies also slid. Twitter dropped 5.5%. Snap and Pinterest report earnings Thursday after the market close, and before that, Snap fell 23.6% while Pinterest was down more than 10.5%.

“If a company like Facebook comes out saying it has a significant earning die-down, it’s going to impact the stock perhaps more than other companies that are more reliant on economic growth,” said Saira Malik, chief investment officer at Nuveen, a global investment manager. “Technology companies are very reliant on their own structural growth drivers, so if those start to go away or fade, it’s going to be an issue on the stock.”

The sentiment over Meta’s discouraging earnings went beyond social media companies. Shares of Apple, Microsoft and Google were all lower Thursday.

Amazon fell 7.8% before its earnings report. The five biggest tech companies, including Facebook, account for about 20% of the S&P 500′s value, meaning their declines have a stronger effect on the index.

Technology stocks — which have proved sensitive to changing views on interest rates — have already been contending with a sell-off since the start of the year. Traders are feeling discouraged to invest in riskier assets, like stocks, because higher interest rates impede the potential for larger returns in the future. The S&P 500 is down about 6.1% this year.

Also lower Thursday was Spotify, which tumbled 16.8% after the company said it expected subscriber growth to slow in 2022 and said it would “no longer plan to issue annual guidance.” The audio streaming platform said it did not expect the number of premium users to be affected by the controversy over accusations that its most popular personality, Joe Rogan, had used his podcast to spread misinformation about COVID-19 and vaccines.

Canada’s main stock index pulled back from a two-week high the day before, as a slump in U.S. technology shares spilled over to the Toronto market.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 268.35 points, or 1.3%, at 21,094.01, after four straight days of gains.

On Wednesday, the TSX notched its highest closing level since Jan. 17.

The TSX’s technology sector fell 4.7%, including a 8.4% decline for Shopify Inc, the stock with the third largest market capitalization on the Toronto market.

Industrials lost 2.1%, while the energy sector ended 0.8% lower even as the benchmark U.S. crude oil price broke above US$90 a barrel for the first time since 2014.

Energy was pressured by a 3.5% decline in the shares of Suncor Energy Inc after the company missed earnings expectations.

The TSX materials group, which includes precious and base metals miners and fertilizer companies, ended down 1.1%.

The sell-off Thursday ended a four-day rebound for U.S. stocks, which had been bouncing back from a plunge in January. That drop had more to do with concerns about the economy, and what higher interest rates mean for businesses, consumers and stock investors — as the Federal Reserve gears up to start increasing borrowing costs to cool down inflation.

On the economic front, the Labor Department reported another dip in initial jobless claims Thursday, falling 23,000 to 238,000 last week. The data signals the omicron wave is receding.

But the major economic news for the week will be the jobs report Friday, which will offer a more detailed look at hiring in January — when the latest coronavirus wave was at its most disruptive. Highlighting the uncertainty around this month’s report, forecasts range from a gain of 250,000 jobs during the month to a loss of 400,000.

“The surge in COVID cases is expected to result in a decline in payroll employment in January,” Nancy Vanden Houten, an economist at Oxford Economics, wrote in a note. “But we expect the interruption in the labor market recovery to be short-lived.” The forecasting and research group expects a loss of 45,000 jobs in January.

European stock indexes also fell Thursday, with the Stoxx Europe 600 down 1.8%. The European Central Bank bank said Thursday that it would keep interest rates unchanged, as inflation rises at its fastest pace in three decades. The annual inflation rate rose to 5.4% in December, and many traders believe rate increases are necessary to cool down rising prices.

Separately, the Bank of England raised interest rates Thursday, in efforts to cool down persistent inflation, after the bank raised interest rates in December for the first time in 3 1/2 years.

Volume on U.S. exchanges was 10.85 billion shares, compared with the 12.37 billion average for the full session over the last 20 trading days.

The S&P 500 posted 29 new 52-week highs and six new lows; the Nasdaq Composite recorded 34 new highs and 149 new lows.

Reuters, The New York Times, Globe staff

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe