Facebook weakness ripples across tech sector, punishes North American stock markets

TORONTO — A big earnings miss from Facebook’s parent company rippled across the technology sector as Canadian and U.S. stock markets fell for the first time in five days even as crude oil surpassed US$90 a barrel for the first time since 2014.

Meta Platforms Inc. shares plunged 26 per cent Thursday, lopping more than US$215 billion off the company’s stock market value.

The move came after the social media giant’s latest results fell short of expectations and it issued a downcast revenue guidance for the current quarter.

“At the end of the day, Facebook is growing slower, the social media platforms that whole area is becoming more competitive,” said Anish Chopra, managing director with Portfolio Management Corp. 

The company is facing increased competition from social media platforms like TikTok while privacy changes for iPhones and Android smartphones have made it more difficult for Facebook to target users, he said.

Several technology companies saw their share prices fall Thursday, punishing the Nasdaq composite index and the S&P 500.

In New York, Nasdaq composite lost 538.73 points or 3.7 per cent at 13,878.82, while the S&P 500 was down 111.94 points at 4,477.44 or 2.4 per cent. 

The sentiment spread across markets with the Dow Jones industrial average losing 518.17 points at 35,111.16. 

The S&P/TSX composite index closed down 268.35 points or 1.3 per cent to 21,094.01 for its second worst day of the year. 

“So today Facebook was the main company that had issues around earnings, but if you look at the last number of weeks, the market as a whole has been weak and that’s continuing today,” Chopra said in an interview.

Technology was the biggest laggard among 10 sectors on the TSX that fell. Shares of Shopify Inc. lost 8.4 per cent while Lightspeed Commerce Inc. was down 4.0 per cent.

The prospect of rising interest rates and an increase in bond yields are added headwinds for the sector that thrived during the pandemic as more people worked from home. High growth pushed up company valuations so high. But as growth slows there’s rapid downward adjustments on value.

Health care, industrials, consumer discretionary and materials were among the biggest losers on the day.

Health care dropped 3.3 per cent as cannabis producers fell with Aurora Cannabis Inc. off 6.9 per cent.

Lower metals prices hurt the materials sectors as shares of Centerra Gold Inc. decreased 5.3 per cent and Osisko Mining Inc. was 4.5 per cent lower.

The April gold contract was down US$6.20 at US$1,804.10 an ounce and the March copper contract was down 2.5 cents at US$4.47 a pound. 

Energy also fell even though crude oil surpassed US$90 a barrel as natural gas prices dropped.

The March crude oil contract was up US$2.01 at US$90.27 per barrel and the March natural gas contract was down 61.3 cents at US$4.89 per mmBTU.

A strong run-up in oil prices has improved the profitability of producers and prompted some investors to crystallize profits, Chopra said.

Suncor Energy Inc. shares dropped 3.5 per cent even though the Calgary-based producer beat expectations by earning $1.53 billion in the fourth quarter with revenues surging 68 per cent to $11.1 billion.

The Canadian dollar traded for 78.87 cents US compared with 78.88 cents US on Wednesday. 

Telecommunications was the lone sector to be up on the day. It climbed with Telus Corp. and BCE Inc. each up about one per cent after the parent company of Bell Canada raised its dividend on improved quarterly results.

This report by The Canadian Press was first published Feb. 3, 2022. 

Companies in this story: (TSX:BCE, TSX:T, TSX:SU, TSX:ACB, TSX:SHOP, TSX:LSPD, TSX:CG, TSX:OSK, TSX:GSPTSE, TSX:CADUSD=X) 

Ross Marowits, The Canadian Press

Note to readers: This is a corrected story. An earlier version had incorrect numbers for the S&P 500.