US stocks dropped on Monday, with the S&P and Nasdaq suffering their worst day in just over five weeks, as concerns over increased regulation for large tech companies was spearheaded by a plunge in Facebook shares, Reuters reports.
Facebook shares tumbled 6.8 percent, wiping nearly US$40 billion off its market value, as chief executive Mark Zuckerberg faced calls from both US and European lawmakers to explain how a consultancy that worked on President Donald Trump’s election campaign gained access to data on 50 million Facebook users.
The stock had its worst day since March 2014 and was down 10.8 percent from its closing record hit on Feb. 1, to put the stock squarely in correction territory, a drop of 10 percent from its high.
Facebook’s plunge weighed heavily on the S&P technology sector, down 2.11 percent, as well as the Nasdaq, off more than 2 percent. Both indexes had their worst daily performance since Feb. 8.
Other major companies with large tech businesses also dropped as recent concerns over regulation in the arena increased. Apple lost 1.53 percent while Alphabet fell 3 percent and Microsoft declined 1.8 percent.
“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,” said Kim Forrest, a senior portfolio manager at Pittsburgh-based Fort Pitt Capital.
“Investors are not only concerned about losing advertising dollars. They’re also concerned these companies might come under relatively heavy regulation.”
The Dow Jones Industrial Average fell 335.6 points, or 1.35 percent, to close at 24,610.91, the S&P 500 lost 39.09 points, or 1.42 percent, at 2,712.92 and the Nasdaq Composite dropped 137.74 points, or 1.84 percent, to 7,344.24.
The S&P once again fell below its 50-day moving average, seen as a technical support level, for the first time since early March. The Nasdaq came about 2 points from its 50-day before paring losses.
Investors were also cautious ahead of a two-day monetary policy meeting at the US Federal Reserve starting on Tuesday.
The market believes the Fed is set to raise interest rates on Wednesday as Thomson Reuters data shows traders expect a quarter-percentage-point hike to be a certainty. Investors are now grappling with the question of whether an improving economy could lead to more hikes than anticipated.
Facebook said on Monday it had hired forensic auditors from the firm Stroz Friedberg to investigate and determine whether the consultancy, Cambridge Analytical, still had the data.
“Auditors from Strop Friedberg were on site at Cambridge Analytic’s London office this evening,” the company said in a statement late Monday. “At the request of the UK Information Commissioner’s Office, which has announced it is pursuing a warrant to conduct its own on-site investigation, the Strop Fried berg auditors stood down.”
Also on Monday, a source said that Facebook head of security, Alex Stamps, plans to leave the company over disagreements about the company’s policies on misinformation.
He had been a strong advocate for an aggressive approach to alleged Russian activity on the platform aimed at manipulating elections. His departure was first reported by the New York Times. Facebook declined immediate comment.
In a tweet, Stamps did not deny he was leaving but said: “Despite the rumors, I’m still fully engaged with my work at Facebook. It’s true that my role did change.”
The criticism of Cambridge Analytical presents a new threat to Facebook reputation, which is already under attack over Russia’s alleged use of Facebook tools to sway US voters with divisive and false news posts before and after the 2016 election.
London-based Cambridge Analytical said it strongly denied the media claims, and that it deleted all Facebook data it obtained from a third-party application in 2014 after learning the information did not adhere to data protection rules.
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