Facebook Shares Hammered on Outlook, Driving Markets Lower

U.S. stocks fell after disappointing earnings and guidance from Facebook parent Meta Platforms Inc. (FB) raised concerns about growth prospects for technology companies. The social media giant reported a decline in monthly active users (MAU) for the first time ever.

Facebook fell 26%, wiping out billions of dollars in shareholder value. Shares of other social media companies like Snap Inc. (SNAP) and Twitter Inc. (TWTR) are also falling. Spotify Technology S.A.'s (SPOT) stock price is down after the company’s latest results showed a slowdown in premium subscriber growth.

Key Takeaways

  • Facebook shares dropped 26%, wiping out billions of dollars in shareholder value, after warning of slowing revenue growth. Snap, Twitter and other social media stocks fell as well.
  • The Dow Jones and S&P 500 also fell.
  • Crude oil slipped, and the yield on the 10 year bond widened.
  • The Bank of England announced it would be hiking rates for the second time in less than three months, the last time this occurred was 2004.

The Nasdaq was down nearly 2%. The S&P 500 lost 1.5% and the Dow dropped less than one percent, the losses breaking a 4-day winning streak. Markets had ended higher yesterday, supported by upbeat earnings from Google parent Alphabet Inc. and chip company Advanced Micro Devices Inc.

Today, investors will get earnings from Amazon Inc. (AMZN) after the closing bell. Other companies reporting results include Ford Motor Co. (F), Cigna Corp. (CI), Clorox Co. (CLX), ConocoPhillips (COP), Eli Lilly & Co. (LLY), Honeywell International Inc. (HON), Merck & Co. Inc. (MRK), and Snap Inc. (SNAP).

The Bank of England (BOE) announced it would be hiking U.K. interest rates for the second time in less than three months, moving the rate to .5%. This is the first time the BOE has consecutively raised rates since 2004. The European Central Bank (ECB) announced it will be keeping its short-term interest rates unchanged, despite pressures over rising inflation.

The U.S. Department of Labor reported that the number of Americans filing new claims for unemployment benefits dropped to 238,000 as of Jan. 29, a decrease of 23,000 from the previous week's revised count. 

Later today, the Commerce Department is expected to report that U.S. factory orders edged 0.2% lower in December following a 1.6% gain in November. 

Oil prices edged up after OPEC and its allies stuck to moderate production increases. Light sweet crude is trading just below $87 a barrel. 

Today's Headlines: Quick Hits

Shares of Qualcomm Inc. (QCOM) are sliding despite strong earnings and guidance for future earnings. The chip company says demand remains high for its chips for handsets and cars, with supply shortages improving amid ongoing bottlenecks.

Oil giant Shell plc (SHEL) reported higher energy prices gave a sharp boost to earnings. The company also hiked its dividend and increased its stock buyback program.

T-Mobile US Inc. (TMUS) shares are surging after posting better-than-expected earnings, and predicted strong results for the rest of the year. The mobile phone company added 1.8 million customers in the fourth quarter.

Federal regulators are reviewing an increasing number of Tesla Inc. (TSLA) customer reports of “phantom braking” problems, where vehicles slam on brakes for seemingly no reason. Complaints to regulators rose to 107 complaints in the past three months, compared with only 34 in the preceding 22 months.

Up Next: Amazon

Alphabet Inc. (GOOG) blew away earnings, and Meta Platforms Inc (FB) missed estimates. Now it’s Amazon’s turn

The retail and cloud giant is expected to show a fall in fourth quarter profits hit by rising costs tied to supply chain issues. New costs for logistics investments and other COVID-19-related spending are also expected to hurt profits. Amazon revenues are expected to grow at its slowest pace since the pandemic began, after posting strong sales last year when customers relied on online shopping.

Amazon Estimates vs. Actuals.

One question for Amazon: will it raise the price for its Prime fast delivery service? It may be time. Annual fees for Prime last went up four years ago. Amazon raised the price then from $99 a month to $119. The fees had gone up four years before that, when it was priced at $79. 

Amazon has had to pay higher wages and signing bonuses amid a national labor shortage, and shipping costs have risen. There are 200 million Prime subscribers globally, including a majority of U.S. households. If they are willing to pay more for the fast delivery, that could be worth billions of dollars to Amazon’s bottom line.

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