Markets finished in the red on Monday following concerns over Facebook’s policies regarding privacy of user data. The stock slumped to its worst level in the last four years to simultaneously drag the broader tech sector lower. Three major benchmarks also nosedived with the Dow falling to negative territory in 2018. Meanwhile, market watchers also speculated over the possibility of a rate hike post the culmination of the Fed’s two-day FOMC meet on Wednesday.
The Dow Jones Industrial Average (DJI) decreased 1.4% to close at 24,610.91. The S&P 500 lost 1.4% to close at 2,712.92. The tech-laden Nasdaq Composite Index closed at 7,344.24, decreasing 1.8%. The fear-gauge CBOE Volatility Index (VIX) increased 16.6% to close at 18.42. A total of 6.9 billion shares were traded on Thursday, lower than the last 20-session average of 7.2 billion shares. Decliners outnumbered advancers on the NYSE by a 3.71-to-1 ratio. On Nasdaq, a 2.68-to-1 ratio favored declining issues.
Facebook Data Debacle Drags the Markets Lower
Shares of Facebook, Inc. (FB - Free Report) declined 6.8% in a single session on Monday to post its worst dip in a day since March 26, 2014. Shares of the tech behemoth nosedived following reports that the political analytics firm Cambridge Analytica was able to easily gather information from over 50 million user profiles without their consent. Such an incident raises questions over Facebook’s data management and protection from unauthorized third party access which is a direct breach of privacy.
Interestingly, the analytics firm had worked with President Trump during his election campaign in 2016 and Facebook ads were widely used in the process. Additionally, lawmakers from the U.S. and Britain criticized the tech giant severely over the weekend for not divulging more information as to how Cambridge Analytica could access such critical data without the users’ consent.
Further, Massachusetts Attorney General Maura Healey announced on Saturday that she was launching an investigation into the matter. Slamming Facebook, she said in a tweet that the residents of Massachusetts deserve to know what the truth is and Facebook and Cambridge Analytica must divulge further details. Such a turn of events led to a sell-off in tech shares and the overall tech sector witnessed a decline.
What are the Benchmarks Doing?
The Dow lost 335.6 points to finish in the negative territory, with all of its 30 components save for Boeing (BA - Free Report) , finishing in the red. With this decline the blue-chip index turned negative for 2018, trading at -0.4% currently. Shares of Caterpillar (CAT - Free Report) declined 2.8% and turned out as the worst performing Dow component. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 lost 39.1 points to also finish lower as the tech shares declined. All of the 11 major sectors of the S&P 500 ended in the red, with tech shares leading the decliners. The Technology Select Sector SPDR ETF (XLK) declined almost 2% on Monday.
Losses for both the Dow and the S&P 500 were triggered by a steep decline in the shares of Facebook. In fact, the tech giant turned out to be the worst performing stock of the S&P 500. Meanwhile, the Nasdaq dropped 137.7 points to finish in the red after the tech sector crashed following the Facebook data issue. Additionally, both the S&P 500 and Nasdaq posted their worst daily decline since Feb 8.
Investors Wary of a Likely Rate Hike
Market watchers also kept a close watch on the upcoming two-day Federal Open Market Committee meeting scheduled to start Tuesday. The CME Fed Watch Tool has predicted that the odds of a rate hike by 0.25 percentage points on Mar 21 are around 94.4%. This has kept investors worried as they expect a more hawkish approach from the Fed toward raising the interest rates as well as unwinding its humungous balance sheet.
This would be Jerome Powell’s first conference after taking charge as the Fed’s Chair. A spike interest rates shifts investors’ focus from stocks to bonds as the latter becomes more appealing. Speculations of this nature also weighed on the investors’ sentiments.
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