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Facebook Suffers Worst One-Day Drop Ever
26-Jul-18 16:20 ET
Dow +112.97 at 25527.07, Nasdaq -80.05 at 7852.19, S&P -8.63 at 2837.18

https://www.briefing.com/investor/markets/stock-market-update/2018/7/26/facebook-suffers-worst-oneday-drop-ever.htm

[BRIEFING.COM] The major averages had a mixed outing on Thursday, with Facebook (FB 176.26, -41.24, -19.0%) pulling the Nasdaq away from its all-time high. The tech-heavy index loss 1.0%, while the benchmark S&P 500 declined 0.3%. The Dow Jones Industrial Average outperformed, adding 0.4%, as did the small-cap Russell 2000 (+0.6%).

Facebook plunged 19.0%, marking its worst one-day drop since going public in 2012, after the social media giant's Q2 earnings report showed lower-than-expected revenue, slowing user growth, and weaker-than-expected guidance. Fellow FAANG stock Amazon (AMZN 1808.00, -55.61, -3.0%) also declined in front of its Thursday evening earnings release, but most other FAANGs held up relatively well. The top-weighted technology sector, which houses Facebook, finished way behind the ten other groups, closing lower by 1.6%.

Elsewhere within the tech space, Visa (V 142.50, -0.14, -0.1%) finished roughly flat despite beating earnings and revenue estimates, while chipmakers rallied after Qualcomm (QCOM 63.58, +4.16, +7.0%) reported its quarterly results and announced the end of its attempt to acquire NXP Semi (NXPI 92.81, -5.56, -5.7%) due to complications with Chinese regulators. Advanced Micro (AMD 18.35, +2.30, +14.3%) also rose on better-than-expected earnings.

In addition to technology, the consumer discretionary (-0.5%), health care (-0.2%), and financials (-0.1%) sectors also finished in negative territory. McDonald's (MCD 156.14, -2.75, -1.7%) weighed on the consumer discretionary group despite an upbeat earnings report, and Biogen (BIIB 344.74, -39.09, -10.2%) weighed on the health care space despite positive trial results for an Alzheimer's drug that it's working on with Japanese pharma firm Eisai.

As for the remaining seven sectors, they all finished in the green. The energy (+1.0%), and utilities (+1.1%) groups were the top performers, followed closely by the industrial space (+0.8%). Within the industrial group, airlines rallied following better-than-expected earnings from Southwest Air (LUV 56.70, +4.41, +8.4%) and Alaska Air (ALK 64.76, +5.65, +9.6%). Dow components 3M (MMM 207.96, +3.58, +1.8%), Caterpillar (CAT 142.58, +2.1%), and Boeing (BA 359.32, +3.40, +1.0%) also had strong outings.

Elsewhere, U.S. Treasuries sold off on Thursday, sending yields higher across the curve; the benchmark 10-yr yield, for instance, climbed four basis points to 2.98%, its highest level in two months. The U.S. Dollar Index jumped 0.6% to 94.56 amid the rise in rates, and WTI crude futures ticked up 0.4% to $69.58 per barrel.

In Europe, the ECB decided to keep its key policy rate unchanged, as expected. The central bank also reiterated that net asset purchases will likely cease at the end of December, with the reinvestment of principal payments continuing for an extended period of time thereafter.

Reviewing Thursday's economic data, which included Durable Goods Orders for June, weekly Initial Claims, and the advance readings for June Wholesale Inventories and International Trade in Goods:

June durable goods orders rose 1.0%, which is less than the 3.2% increase expected by the Briefing.com consensus. The prior month's reading was revised to -0.3% (from -0.6%). Excluding transportation, durable orders increased 0.4% (Briefing.com consensus +0.4%) to follow the prior month's revised reading of +0.3% (from -0.3%).
The key takeaway from this report, however, was that orders and shipments for nondefense capital goods orders, excluding aircraft, were up 0.6% and 1.0%, respectively, which is a good indication for business spending and a positive input for Q2 GDP forecasts.
The latest weekly initial jobless claims count totaled 217,000, while the Briefing.com consensus expected a reading of 215,000. Today's tally was above the revised prior week count of 208,000 (from 207,000). As for continuing claims, they declined to 1.745 million from a revised count of 1.753 million (from 1.751 million).
The key takeaway from this report is that initial claims remain low and consistent with a tight labor market.
The Advance report for International Trade in Goods for June showed a deficit of $68.3 billion, and the Advance report for Wholesale Inventories for June was flat at 0.0%.

Looking ahead, investors will receive on Friday the advance reading of Q2 GDP and the final reading for the July University of Michigan Consumer Sentiment Index.

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