Tech Stocks Drop, Sending Markets Lower, as Meta Shares Fall Further

Spirit Airlines
Courtesy of Spirit Airlines

U.S. equity markets are dropping to begin the new week, led lower by shares of Facebook parent Meta Platforms Inc. (FB) and other tech stocks.

Key Takeaways

  • Tech stocks, led by Facebook parent Meta Platforms, Google parent Alphabet, and Apple, declined, pushing markets lower.
  • Spirit Airlines rose after it agreed to be bought for $6.6 billion by Frontier, creating the fifth largest U.S. carrier.
  • Bond yields advanced past 1.9% and crude oil slipped after last week's gains.

Meta shares are 5% lower, adding to steep losses that erased more than a quarter of the company's market value after the company last week said that it had lost daily active users for the first time. Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Google parent Alphabet Inc. (GOOG) all fell.

 Hasbro (HAS) shares are falling on its earnings report. Shares of Verizon Communications Inc. (VZ) are down as the company announced it would now only offer three-year phone contracts. 

Tyson Foods Inc. (TSN) is the best-performing stock in the S&P 500 following the release of its earnings report. Its shares are at an all-time high. Shares of airlines are moving higher on word Frontier Group Holdings Inc. (ULCC) is buying Spirit Airlines Inc. (SAVE) (more below). Also helping lift airlines shares is news that COVID-19 cases in the U.S. are declining. Shares of cruise lines and other travel-related companies are up as well. Peloton Interactive Inc. (PTON) shares are soaring 20% on reports the interactive exercise company might be sold.  

Oil futures are lower for the first time in seven sessions, trading below $92 a barrel. The yield on the 10-year Treasury note advanced to 1.93%. The dollar was stronger against the euro. Major cryptocurrencies are rallying, with the price of Bitcoin above $43,000.

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Chart of the Day: Not So Green

Corporations Aren't Living Up to Greenhouse Gas Cut Claims.

An analysis of business climate change pledges indicated many major corporations are not living up to their claims about how much they’re reducing greenhouse gas emissions.  

The Corporate Climate Responsibility Monitor conducted by the non-profit NewClimate Institute in collaboration with Carbon Market Watch evaluated 25 large firms across different sectors and geographies. It found those companies have only actually committed to cutting carbon emissions by an average of 40%, not the 100% they suggest by their “net zero” and “carbon neutral” statements. 

No firms received a grade of “high integrity” for their pledges. Shipping company Maersk was the only one to get a “reasonable integrity” designation. Apple, Sony, and Vodafone were rated “moderate integrity.” Amazon and Walmart were some of the companies in the “low integrity” category, while CVS Health and Unilever were among those that came in at “very low integrity.”

Claims Lack Substance

The report noted as pressure rises on businesses to act on climate change, “their ambitious-sounding headline claims all too often lack real substance,” which can mislead both consumers and regulators. It said even firms that are doing relatively well exaggerate their assertions.  

Gilles Dufrasne of Carbon Market Watch argued governments and regulators need to take action to “end this greenwashing trend.”

Stock of the Day: Spirit Airlines (SAVE)

The two biggest discount airlines in the U.S. are joining forces. 

Frontier Airlines owner Frontier Group Holdings is buying Spirit Airlines in a deal valued at $6.6 billion. The merger will make the new firm the fifth largest U.S. carrier, offering more than 1,000 flights a day. 

The two companies said Spirit shareholders would receive 1.9126 shares of Frontier stock, plus an additional $2.13, for every share they own. They indicated that gives Spirit shares an implied value of $25.83 each at Frontier’s Friday closing price of $12.39. That would represent a 19% premium over Spirit’s closing price on Friday of $21.69.  

Name and CEO to be Determined

The agreement would have current Frontier investors holding a 51.5% stake in the combined company, with Spirit shareholders having a 48.5% stake. The name of the airline and the CEO are yet to be determined. Current Frontier Chairman William Franke will remain in that position after the merger. 

The companies noted both their boards have agreed to the purchase, and they expect it to be completed in the second half of this year. 

Shares of Spirit Airlines are flying 13% higher, while Frontier Group Holdings shares are up 3%.

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