S&P 500 Drops Back As Meta’s Earnings Hammer Equity Sentiment

The S&P 500 slumped back below the 4500 level on Thursday, dropping over 2.0% on the day. Equity market sentiment took a battering after dour earnings guidance from tech giant Meta Platforms (Facebook). Focus has shifted to Amazon earnings after the closing bell and Friday’s US jobs report.

Major US equity indices turned sharply lower on Thursday after an ugly earnings report from Facebook combined with hawkish surprises from the BoE and ECB soured global equity market sentiment and shattered recent positive momentum.

The S&P 500 fell back under the 4500 level, a drop of more than 2.0% on the day, with Wednesday and Tuesday’s healthy gains and more now having been given back. The index still trades higher by about 1.3% on the week, but now trades more than 2.0% below Wednesday’s intraday highs near 4600.

Meta Platforms (formerly Facebook) tanked a staggering more than 25%, wiping more than $200B off of the company’s market capitalization. If Meta shares close at current levels, that would mark the largest single-day valuation drop (in market cap terms, not percent) ever.

The tech giant posted a weaker-than-expected earnings forecast, blaming new privacy changes on Apple devices and increasing competition from the likes of TikTok and YouTube. Meanwhile, for the first time in the company’s history, daily active users declined QoQ to 1.929B from 1.93B.

The more than 25% drop in Facebook’s share price on its own shaved 0.5% off the value of the S&P 500 index. But a contagion effect has seen other publicly traded social media companies also take a battering, with Twitter losing over 5.0%, Pinterest losing over 10% and Snapchat losing over 20%.

Sentiment in other major tech/growth stocks, which had recovered well in recent days (spurred in part by good Alphabet earning on Tuesday) also soured. Microsoft was down about 3.0%, Alphabet (Google) was down just under 2.5%, Netflix was down 5.3%, Apple was down 0.7% and Amazon tanked 7.5% ahead of its Q4 earnings release which comes after the closing bell.

The underperformance of tech and growth names meant that the Nasdaq 100 index faired the worst of the major US indices, dropping 3.8% to nearly erase all of its gains for the week. The Dow also suffered dropping 1.3%. The S&P 500 CBOE volatility index or VIX jumped back to 25.0 from Wednesday’s lows just above 20.0. Equity investors now await the aforementioned earnings from Amazon ahead of the US labour market report on Friday.

Tech/growth stocks have been suffering in recent weeks on Fed tightening fears and equity investors will be nervously watching the upcoming jobs report in the context of how it influences market expectations as to the timing and pace of Fed hikes/QT this year.