US STOCKS-Facebook's forecast frightens Wall St, disrupts tech-led recovery

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* Meta set to erase more than a quarter of its market cap

* U.S. stocks on track to snap four-day winning streak

* Indexes down: Dow 0.82%, S&P 1.57%, Nasdaq 2.41% (Updates to early afternoon prices; adds fintechs, analyst)

Feb 3 (Reuters) - The Wall Street benchmarks slumped on Thursday after Facebook-owner Meta Platforms’ dour forecast sent its stock plummeting, abruptly ending a nascent recovery built on upbeat earnings from big tech companies.

Meta shares sank 26% in what could be the worst single-day wipeout here in market value for a U.S. company, as it blamed Apple's privacy changes and increased competition from rivals such as TikTok for its disappointing outlook here.

The share slump is set to wipe out more than $200 billion from Meta’s market cap, which would shave off about 0.9% from Nasdaq’s market value and about 0.5% from the S&P 500.

The tech-heavy Nasdaq fell 2.4% as shares of other social media companies also took a beating. Twitter Inc and Pinterest Inc fell more than 5%, and Snapchat lost 21.1% ahead of its own earnings report after the bell.

Big tech stocks such as Alphabet Inc and Microsoft Corp fell about 1.3% and 2.3%, respectively, while Inc, scheduled to report results later in the day, declined 6.5%.

“This is definitely shaking investors’ resolve around the recent relief rally that we’ve been seeing in tech,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

Financial technology companies saw a second day of selling, after PayPal Holdings Inc’s disappointing earnings on Tuesday caused investors to question if these firms - which benefited significantly from the pandemic advancing the shift to digital payments - would justify steep valuations in 2022.

PayPal dropped 5.8%, while peers Block Inc, Affirm Holdings Inc and SoFi Technologies slumped between 3.1% and 10%.

Tech stocks have enjoyed a dominant period amid low interest rates, as investors sought out high growth, but with inflation rising and the U.S. Federal Reserve signaling an aggressive rate-hike stance to rein it in, money managers are having to adjust portfolios accordingly.

“People are going to start increasing allocations to value stocks, and to do that they will have to sell their growth stocks, even if they are down 15% to 30%,” said Jack Murphy, chief investment officer of Easterly Investment Partners.

By 1:36 p.m. ET (1836 GMT), the Dow Jones Industrial Average fell 293.58 points, or 0.82%, to 35,335.75, the S&P 500 lost 72.03 points, or 1.57%, to 4,517.35 and the Nasdaq Composite dropped 347.35 points, or 2.41%, to 14,070.20.

All but one of the major S&P 500 sectors were trading down, with communication services dropping 5.7% and leading losses - mostly on the back of Meta’s performance.

One of the few bright spots among its sector constituents was T-Mobile US Inc, which advanced 10.7% after posting both positive numbers and outlook.

The CBOE volatility index, Wall Street’s fear gauge, ticked up to 23.88 after hitting a near three-week low in the previous session.

Adding to the market’s woes was a second rate hike by the Bank of England and a hawkish pivot by the European Central Bank’s President Christine Lagarde.

Nearly half of the S&P 500 companies have reported results so far during this earnings season, and 78.5% of them have beaten analysts’ earnings estimates, compared with an average of 84% over the past four quarters, according to Refinitiv data.

The number of Americans filing new claims for unemployment benefits fell more than expected last week as COVID-19 infections subsided, suggesting that an anticipated slowdown in job growth in January was likely temporary.

Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru and David French in New York; Additional reporting by John McCrank; Editing by Saumyadeb Chakrabarty and Lisa Shumaker