Facebook, other tech stocks plunge as indexes skid
Traders work on the floor of the New York Stock Exchange on Jan. 17. Credit: Getty Images / Spencer Platt
Facebook plunged to its worst loss in four years Monday and led a rout in technology companies.
The Dow Jones industrial average fell 335.60 points, or 1.3 percent, to 24,610.91. During the day it fell as much as 493 points.
The social media company’s stock fell following reports that a data mining firm working for the Trump campaign improperly obtained data on 50 million Facebook users.
The drop in Facebook stock came after The New York Times and the Guardian reported that the firm, Cambridge Analytica, was able to tap the profiles of more than 50 million Facebook users without their permission.
Legislators in the United States and Europe criticized Facebook and said they want more information about what happened. Investors wondered if companies like Facebook and Alphabet will face tighter regulation as a result.
Daniel Ives, chief strategy officer and head of technology research for GBH Insights, said Facebook is in a crisis, and it will have to work hard to reassure users, investors and governments.
“This is a defining moment for them,” he said. “It either becomes a blip on the radar and it helps the platform mature . . . or it becomes the start of something broader.”
The S&P 500 index sank 39.09 points, or 1.4 percent, to 2,712.92. The benchmark index took its biggest loss since Feb. 8, when it tumbled almost 4 percent as investors worried that rising inflation would slow the progress of the market and the U.S. economy.
The Nasdaq composite gave up 137.74 points, or 1.8 percent, to 7,344.24. The Russell 2000 index of smaller-company stocks declined 15.49 points, or 1 percent, to 1,570.56.
Larger technology companies including Apple and Microsoft fared worse than smaller ones. Another market favorite, Amazon, also dropped, and health care stocks fell more than the rest of the market.
Ives said Wall Street is more concerned about the latest situation than it was about issues like Facebook’s platform spreading fake news. That’s because Cambridge reportedly got access to the personal data of a large number of users, and the backlash suggests Facebook may face more regulation and could lose users, advertisers or advertising revenue.
He estimated that $5 billion in annual revenue for Facebook might be a risk and said the situation could create problems for other tech companies, especially Twitter and Alphabet’s YouTube unit. Alphabet lost $34.35, or 3 percent, to $1,100.07.
Twenty-nine of the 30 Dow stocks finished the day with losses. The only exception was airplane maker Boeing.
'We have to do better' Newsday high school sports editor Gregg Sarra talks about a bench-clearing, parent-involved incident at a Half Hollow Hills West basketball game.
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