[New York Stock Market] Tech Stocks Stagger Amid Meta Shock with 26% Plunge... Nasdaq Down 3.74%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The U.S. New York stock market froze once again due to the so-called 'Meta shock.'

On the 3rd (local time), the three major indices of the New York stock market stopped their four-day consecutive rise and closed down across the board. In particular, the stock price of Meta Platforms, the representative tech stock and parent company of Facebook, fell by more than 26%, recording the largest single-day drop in history.

On that day, the Nasdaq index, which is tech-stock centered, closed at 13,878.82, plunging 538.73 points (3.74%) compared to the previous trading day. The Dow Jones Industrial Average fell 518.17 points (1.45%) to 35,111.16, and the S&P 500 index dropped 111.94 points (2.44%) to 4,477.44.

The market focused on corporate quarterly earnings. Meta's stock price plunged by as much as 26.44%, clearly freezing investor sentiment across tech stocks. Ricardo Evangelista, senior analyst at ActiveTrade, said, "Facebook's disappointing earnings and uncertain outlook darkened the market mood," adding, "It caused anxiety across the tech sector."

This is the largest single-day drop since its listing in 2012. It is interpreted as the aftermath of Meta's earnings and future outlook released the previous day falling short of market expectations. Meta forecasted that its revenue would decrease by about $10 billion this year due to Apple's changes in privacy rules. JJ Kinahan, chief market strategist at TD Ameritrade, commented, "The question now is whether this is a problem unique to Meta or a broader issue."

The fallout from Meta's plunge worsened investor sentiment across growth tech stocks. Spotify also closed down 16.76% as investors' disappointment spread over its first-quarter user growth forecast. Similarly, Snap, which heavily relies on advertising revenue like Facebook, saw its stock price drop 23.60%.

Tesla closed down 1.60%, breaking below the $900 mark. Apple (-1.67%), Nvidia (-5.13%), Netflix (-5.56%), and Microsoft (-3.90%) also showed declines.

Just a day earlier, the mood had been upbeat due to strong earnings from Apple and Google Alphabet. Alphabet A (Google), which led the strong market the previous day, closed down 3.32%. Amazon.com, which released earnings immediately after the market close that day, ended trading down 7.81%. The Wall Street Journal (WSJ) evaluated, "Investors are now demanding companies that have seen rapid stock price increases to deliver on their growth promises."

Concerns about early tightening by the U.S. Federal Reserve (Fed) continue. The Bank of England (BOE), the UK's central bank, implemented its second rate hike of the year following December last year. However, the European Central Bank (ECB) kept its policy rate unchanged and maintained its existing stance despite soaring inflation.

The yield on the U.S. 10-year Treasury note rose 5 basis points (1bp equals 0.01 percentage points) from the previous day to around 1.83%. The 2-year yield, sensitive to monetary policy, returned to the 1.2% range.

The fact that West Texas Intermediate (WTI) crude oil, following North Sea Brent crude, surpassed $90 per barrel also adds to inflation concerns.

On that day at the New York Mercantile Exchange, the March WTI price surged $2.01 (2.28%) from the previous session to trade at $90.27 per barrel. This is the first time WTI prices have exceeded $90 per barrel since October 2014. Brent crude, traded on the London ICE Futures Exchange, was also moving at a 1.61% higher level of $90.93. Brent crude had previously surpassed $90 per barrel on January 26. It briefly reached the $91 range during the session.

This is interpreted as the result of increased geopolitical risks due to rising military tensions surrounding Ukraine. Experts predict that the combination of the worsening oil supply and demand caused by the COVID-19 pandemic, added geopolitical crises, and continued high demand despite the spread of the Omicron variant will sustain the price rise for the time being.

The U.S. economic indicators released that day were mixed. The weekly initial jobless claims as of the 29th of last month were 238,000, down 23,000 from the previous week. Labor productivity in the fourth quarter of last year increased at an annual rate of 6.6%, exceeding the market expectation of 4.4%. On the other hand, the January Services Purchasing Managers' Index (PMI) released by the Institute for Supply Management (ISM) was 59.9, the lowest since February last year. Investors are closely watching the nonfarm payroll data for January, which will be announced the following day.