(Reuters) - U.S. stocks sank on Monday, with the Dow Jones Industrial Average shedding nearly 400 points, as Facebook led a selloff in technology stocks on reports that the social media company’s user information was misused.
Facebook shares tumbled 7.1 percent on reports that a political consultancy that worked on President Donald Trump’s campaign gained inappropriate access to data on more than 50 million users, sparking broader concerns about data privacy and security.
The stock was set for its worst day since September 2012 and was down about 13 percent from its all-time high hit on Feb. 1, entering what is called correction territory.
KIM FORREST, SENIOR PORTFOLIO MANAGER, FORT PITT CAPITAL, PITTSBURGH
“What’s chilling to an investor is whether Facebook will be able to get advertisers to pay for the rich data they pay for today,”
“Investors are not only concerned about losing advertising dollars. They’re also concerned these companies might come under relatively heavy regulation.”
ROBERT PAVLIK, CHIEF INVESTMENT STRATEGIST, SENIOR PORTFOLIO MANAGER, SLATESTONE WEALTH LLC, NEW YORK
“It’s the strength that technology has provided through much of the year, and now the weakness in Facebook is just migrating over to the other tech-related names especially the FANG names... those are particularly weak today. But I think eventually this news will pass; it’s just the uncertainty that’s surrounding the market as it relates to everything at the White House, and that’s just coming together with the pressure that Facebook is feeling.
“Investors were using technology as their one sort of safe haven to bank on for performance out of the entire market, and now it’s taken a major hit just because of this Facebook news, so they’re giving up on technology, at least for today, and if you can’t rely on tech to carry you, then what’s left to carry you. But...it’s largely based on the algorithm and high frequency traders that are machine dependent.”
“That’s the problem with (tech sector) momentum. Momentum outperforms on the upside but outperforms on the downside too. So you have a lot more beta in play when it starts to pull back.”
“That’s without even talking about the Fed and what they may do to interest rates, the Mueller investigation and the chaos in White House. Away from all that, it’s just the technology focus pressure today and those are the three main culprits. That and the fact they are sort of sit in a place where they’ve had some pretty strong relative success versus the broader market.”
ROBERT PHIPPS, DIRECTOR, PER STIRLING CAPITAL MANAGEMENT, AUSTIN, TEXAS
“Most of the weakness is centered around tech. Tech has outperformed so dramatically this year. It hasn’t backed off when other sectors have. So it needed some catalyst to adjust down some. Apple announced that it is building out vertical capacity. It’s building screens for its phones. That affects the companies that supply those tech components overseas...Then there’s the news related to Facebook and the data mining during the Trump campaign.”
“I also think there’s some nervousness about how close the Russia investigation is getting to the White House. The market hates uncertainty more than anything else, and there’s a lot of uncertainty emanating out of the White House. Some of that is turnover, and some of it is Trump’s tweets. He was tweeting like crazy over the weekend.”
TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST, INVERNESS COUNSEL, NEW YORK
“It’s really traceable to the Facebook news. Maybe there’s a little concern about Apple, iPhone demand. The European Union’s proposed tax on digital revenue is certainly contributing to concerns about the tech sector today as well. It’s a ‘pile on technology’ day. The Facebook issue has high visibility because of the connection to the election and the concern about Russian meddling. This could drag out for a while...But I don’t think regulation of the internet is likely. It would be tough to enforce.”
SHAWN CRUZ, SENIOR TRADING SPECIALIST, TD AMERITRADE, CHICAGO
“There are three things that are playing out now and will play out this week. We get Jerome Powell’s first meeting as the head of the Fed and I think a lot of market watchers are expecting his rhetoric a little more hawkish in terms of outlook for monetary policy. People want to see how those forecasts change.”
“Second, we start the G20, I’d expect there are quite a few headlines related trade and tariffs and what the potential response is going to be and if you get major headlines out of that, that could really the industrial and material stocks to move around.
“Facebook is drawing scrutiny for improper use of data and that’s dragging a lot of those FAANG stocks down because at the end of the day, really what a lot of those companies did is they were taking a lot of those data and used algorithms to dial in their products. They are going to get a lot more scrutiny over what data they are collecting and how they are using it and I think there’s a lot of uncertainty as to how that’s going to play out.
JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT IN TULSA, OKLAHOMA
“There’s the thought that the government might try to regulate tech. You open a slippery slope. If you regulate Facebook what’s to say that wouldn’t have a domino effect. Google, maybe Uber?”
“What’s to stop the government for getting its fingers in all these areas. People have thought right now the tech growth rate has no boundaries, no ceiling. Today people are beginning to question that. If it’s the case now, will it still be the case in the future.”
MARK LUSCHINI, CHIEF INVESTMENT STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA
“Obviously this week we’re going to have the (Federal Open Market Committee) meeting, and its (Fed Chairman) Jerome Powell’s first time presiding over it, and there’s some belief that they may come out with a reconfiguration of the dot plot that could indicate a more hawkish stance. The market’s perhaps trying to square to that a little bit.
“The other thing too here is obviously much has been made of the rally in tech stocks, and the fact that they’ve been driving the market as they represent 25 percent of the S&P 500 and obviously led the Nasdaq to all-time highs and a full recovery from the correction which no other index has done. If they start to decay, then it may leave investors wondering what’s left to become the new leader to resume the bulls’ advance.”
STOCKS: The S&P 500 was down 1.84 percent, the tech-heavy Nasdaq was down 2.46 percent and the Dow was down 1.72 percent.
BONDS: The 10-year Treasury bond yield was lower than the previous day’s close and stood at 2.8372 percent and the two-year Treasury note yield fell to 2.2909 percent.
The U.S. dollar index was off 0.44 percent.
The Cboe volatility index rose to 21.65, a gain of 37 percent, on track for its biggest daily percent jump since Feb 5, when the index was spiking to 50.
Compiled by Alden Bentley