US stocks record worst day in almost a year after downbeat tech results

Stocks on Wall Street slid by the most in almost a year on Thursday after a disappointing earnings report from Facebook parent Meta reverberated through the market.

The S&P 500 index fell 2.4 per cent, its biggest drop since February 2021, driven largely by falls in tech stocks that dominate the blue-chip US index. The slide ended a four-day rally and took the S&P’s declines this year to 6.1 per cent.

The losses for the tech-heavy Nasdaq Composite were more intense, with the index that counts Meta and Amazon as members, declining 3.7 per cent, its worst day since September 2020.

Investors were shaken by Wednesday’s results from Meta, sending the company’s shares down 26.4 per cent and wiping more than $230bn off its valuation, an unprecedented single-day loss for a listed company.

Meta overnight reported its first decline in daily active users and warned of increased competition from rivals such as ByteDance’s TikTok platform.

Shares of PayPal fell 6 per cent, bringing their total decline to just under 30 per cent since the closing bell on Tuesday when the payments company warned that a weakening ecommerce environment would slow its growth rate. Music streaming platform Spotify also delivered a weak outlook for first-quarter subscriber growth, sending its shares down 17 per cent on Thursday.

Line chart of Year-to-date performance (%) showing Meta's poor results ricochet across Wall Street

Shares in many tech companies rose during the pandemic, fuelled by a combination of coronavirus lockdowns keeping customers at home and ultra-low interest rates increasing the appeal of more speculative investments.

But this year, some traders have started to think that the coronavirus is becoming milder and the US central bank has signalled that it is poised to rapidly raise borrowing costs, casting a pall over Wall Street’s big tech groups.

“Fingers have been hovering over the sell trigger for the tech sector,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham. “So when you get an announcement like [Meta’s], investors see the beginning of the end.”

The earnings figures from Meta sparked manic shifts in the market with investors punishing Snap and Amazon as a result. But results from the two companies, released late on Thursday, prompted an immediate about-face. Snap, which had fallen 24 per cent during the trading day, rallied nearly 40 per cent in after-hours trading.

For Amazon, an 18 per cent surge in after-hours trading helped more than reverse the entirety of its 8 per cent decline it registered in the session.

In Hong Kong on Friday, the benchmark Hang Seng index rose 2.6 per cent as the city’s bourse reopened following a three-day holiday. Electric vehicle and battery maker BYD led gains with a climb of 6.3 per cent.

Chinese tech leaders Alibaba and rose 4.5 and 1.5 per cent, respectively, helping push the Hang Seng Tech index up 2.2 per cent.

“It’s a bit of catch-up rally for Hong Kong because during the [lunar new year] holiday, the US did quite well,” said Louis Tse, managing director at Hong Kong-based brokerage Wealthy Securities. “But of course now there’s been a sell off for Meta.”

In Europe, the regional Stoxx 600 share index fell 1.8 per cent, with its tech sub-index dropping 3.5 per cent.

The yield on the UK’s benchmark 10-year gilt climbed 0.11 percentage points to 1.36 per cent, representing a significant fall in the price, after the Bank of England raised interest rates by a quarter point to 0.5 per cent and bumped up its inflation forecast to an April peak of 7.25 per cent.

Germany’s equivalent Bund yield rose 0.10 percentage points to 0.14 per cent, after Christine Lagarde, European Central Bank president, in a press conference, declined to rule out lifting interest rates this year. Eurozone inflation hit a record of 5.1 per cent in January.

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