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Market Snapshot: U.S. stocks stumble as shares of Facebook parent suffer post-earnings meltdown

U.S. stock indexes tumbled Thursday, putting in jeopardy a four-day win streak, pressured by the weak outlook from Meta Platforms Inc., the parent of social-media giant Facebook.

Investors also were digesting a rate rise by the Bank of England and a significant hawkish shift by the European Central Bank, and weekly U.S. data on employment and business activity.

How are stock benchmarks trading?

The Dow Jones Industrial Average DJIA, -0.90% fell around 260 points, or 0.7%, to 35,370
The S&P 500 index SPX, -1.72% dropped 1.4% to trade near 4,526.
The Nasdaq Composite Index COMP, -2.67% slumped 2.2%, or 320 points, to around 14,097, with the former Facebook serving as the biggest drag on the market-cap weighted index.

Stocks rose Wednesday, and all three indexes gained ground over the past four sessions, with the Nasdaq surging 8% over that time span.

What’s driving markets

Stock markets were facing selling pressure as sentiment shifted from bullish to a more guarded stance on Wall Street.

Recent quarterly updates from corporations, weaker-than-expected economic data and a lowered forecast for growth by central bankers was helping to cast a pall on the investing landscape.

“Macroeconomists across the Street are starting to trim their growth expectations,” wrote Steven Ricchiuto, U.S. chief economist at Mizuho Securities in a Thursday research note.

ECB President Christine Lagarde declined to rule out a rate increase in 2022 and acknowledged that inflation risks for the eurozone are “tilted to the upside,” signaling that policy makers were likely to offer more detailed guidance when they meet in March. Lagarde had previously pushed back on market expectations for a rate increase this year.

Europe’s policy update came after the Bank of England raised its key interest rate from 0.25% to 0.5%, justifying the move by citing rising inflation and the tight conditions of the U.K. labor market. Its interest-rate increase was the first back-to-back hike for the BOE since 2004.

Meanwhile, a barometer of U.S. business conditions at service sector companies such as restaurants and retailers touched the lowest level since February 2021. The Institute for Supply Management’s index of service companies that employ most Americans slid 2.4 points in January to a 11-month low of 59.9%, ISM said Thursday, during a record coronavirus outbreak that sapped the economy.

In corporate news, Meta Platforms FB, -25.48% traded 25% lower, as the Facebook parent not only missed sales and growth estimates for the fourth quarter but warned inflation and competition from the likes of TikTok would weigh on first-quarter results.

“Disappointing earnings and an uncertain outlook for Meta, the firm behind names such as Facebook and Instagram, darkened the mood in the markets, generating some anxiety over the tech sector as a whole,” said Ricardo Evangelista, senior analyst at ActivTrades.

In other economic reports, U.S. jobless claims dropped 23,000 to 238,000 on the week as omicron receded, data show. Meanwhile, unit labor costs rose at a 0.3% rate in the fourth quarter of 2021, data show.

Which companies are in focus?

Snapchat parent Snap Inc. SNAP and Pinterest PINS both saw pressure after the Meta Platforms results, with both companies set to report results after the close. Shares of Snap were down 21%, and those for Pinterest were off 8%.
Spotify Technology SPOT also reeled after issuing a light subscription forecast. Its stock was down almost 15%. AMZN will be the last of the megacap tech giants to report results after the close of trading. Shares of the company were down 6.6%.

How are other assets faring?

The yield on the 10-year Treasury note TMUBMUSD10Y rose about 7.3 basis points to around 1.84%. Yields and debt prices move opposite each other.
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six rivals, was down 0.7%, as the British pound GBPUSD, +0.16% and euro EURUSD, +1.22% rose following the decision from the Bank of England and an update from the ECB.
West Texas Intermediate crude for March delivery CLH22 rose 0.5%, to trade at $88.74 a barrel. Gold’s April futures contract GCJ22 declined 0.2% to around $1,807 an ounce.
Bitcoin BTCUSD was down 0.1, at around $36,875.
In European equities, the Stoxx Europe 600 SXXP fell 1.8%, while London’s FTSE 100 UKX UKX shed 0.7%.
The Nikkei 225 NIK NIK closed down 1.1% and Korea’s Kospi Index 180721, +1.67% rose 1.7%. Markets in China and in other parts of Asia are closed for Lunar New Year.

—Steve Goldstein contributed to this article.

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