Facebook-led tech slump dims broader gains for US stocks
A plunge in Facebook shares erased $119 billion of the social media giant’s market value Thursday, snapping a three-day winning streak for the S&P 500 index.
Facebook’s 19 percent tumble was the worst in the company’s history and led a sell-off in technology companies that offset solid gains in other areas of the market, including industrial and energy stocks and consumer goods companies.
The broader gains reflect another round of strong company earnings and fresh optimism among investors that trade tensions between the United States and the European Union may be on the mend.
‘‘It’s a shock what happened to Facebook, but that little improvement in the trade picture and the continuation of the earnings results have just been spectacular,’’ said Ted Theodore, portfolio manager at TrimTabs Asset Management.
Facebook’s plunge weighed on broad market indexes. The S&P 500 dropped 0.3 percent, to 2,837.44. The Nasdaq Composite, which is heavily weighted with technology companies, lost 1 percent, to 7,852.18.
The Dow Jones industrial average, whose 30 members don’t include Facebook, had a much better day, rising 0.4 percent, to 25,527.07.
The Russell 2000 index of smaller-company stocks gained 0.6 percent, to 1,695.36.
The S&P 500, the market’s benchmark, is still on track for its fourth weekly gain in a row.
Facebook, which closed at a record high of $217.50 Wednesday, sank to $176.26 after warning investors that it sees slower revenue growth ahead, and that its user base and revenue grew more slowly than expected in the second quarter.
The slower growth came about as the company grappled with privacy scandals. All told, $119 billion of its value was wiped out, nearly as much as McDonald’s is worth.
‘‘For such a big company to suffer such a significant decrease in price is really amazing to watch,’’ said Erik Davidson, chief investment officer at Wells Fargo Private Bank.
Investors have been focused on the mostly favorable run of quarterly earnings the past couple of weeks. At the same time, they’re wary of global trade tensions, which have ratcheted up in recent weeks. But talks held late Wednesday between President Trump and a European Union delegation gave markets cause for encouragement after both sides agreed to work to dismantle trade barriers.
A number of companies reported positive earnings on an unusually busy day for second-quarter results.
D.R. Horton jumped 10.9 percent after the home builder’s earnings and revenue easily beat Wall Street’s forecasts. It also announced a $400 million share repurchase program.
Qualcomm vaulted 7 percent after the chip maker reported earnings that exceeded analysts’ expectations and said it would abandon a bid to acquire NXP.
Mondelez International climbed 4.3 percent after its quarterly earnings and revenue topped estimates. Traders also bid up shares in rival Hershey, which gained 7.4 percent.
Several airlines traded higher, contributing to industrial sector gains. Alaska Air Group surged 9.6 percent, while Southwest Airlines jumped 8.4 percent. American Airlines added 4.8 percent.
Ford lost 6 percent on a sharp drop in quarterly profit. It said it would undertake a restructuring that will cost $11 billion over three to five years.
Mattel also slumped, dropping 4.2 percent. It reported a loss larger than analysts were expecting and said it would eliminate more than 2,200 jobs.
Benchmark US crude rose 31 cents to settle at $69.61 per barrel in New York. Brent crude, used to price international oils, added 61 cents to close at $74.54. The higher prices gave a boost to some energy stocks. Marathon Petroleum climbed 7.3 percent.
Bond prices fell, sending yields higher. The yield on the 10-year Treasury rose to 2.98 percent from 2.97 percent.