(Bloomberg) — U.S. stocks tumbled Thursday as investors digested disappointing results from Facebook-owner Meta Platforms Inc. and concerns about persistently high inflation from the European Central Bank.
The euro spiked higher along with global bond yields as ECB president Christine Lagarde made comments perceived as hawkish, prompting investors to bring forward bets on ECB rate hikes. They now expect the amount of tightening this year to be around 40 basis points from 25 before the latest decision.
U.S. Treasuries followed the euro zone lower and the dollar fell. Meanwhile, the S&P 500 and Nasdaq 100 halted their best run of gains since 2020 as Meta wiped more than $200 billion from its market value.
In late afternoon trading, the S&P 500 extended losses to 1.9% and the Nasdaq 100 shed 3.3%, with traders next looking to results from Amazon.com Inc. after the bell and U.S. payrolls data Friday.
“We got hit with a one-two punch today with the big drop in Facebook and the surprising news that the ECB has become more hawkish,” said Matt Maley, chief market strategist for Miller Tabak + Co. “The stock market had rallied in the afternoon each of the last four days, so traders were hoping that could bail us out again. When the rally didn’t materialize, traders lost a lot of confidence.”
Weak numbers from U.S. tech giants including Spotify Technology SA jolted investors who had bet a strong earnings season would keep equities attractive and counter some of their lingering worries including tighter monetary policy. Markets have swung sharply and stocks are nursing losses this year as officials pare stimulus to curb inflation.
In Europe, the Bank of England hiked its key rate and signaled it would start running down bond holdings. Meanwhile, the ECB held its interest rates and said net buying under its emergency support program will end in March.
Lagarde said inflation would remain elevated for longer but the bank was getting “much closer” to its inflation target. Germany’s two-year yield rose to a 2015 high. The Stoxx Europe 600 fell below its 100-day moving average.
“As markets focus closely on large, developed-market monetary policy stances — and investor sentiment around the globe shifts — economic activity data releases will be key,” said Marilyn Watson, head of global fundamental fixed income strategy at BlackRock.
Growth in the U.S. services sector pulled back in January to the slowest pace in nearly a year. Meanwhile, U.S. initial jobless claims fell more than expected last week to 238,000 ahead of data on payrolls Friday.
“Tomorrow’s jobs report is a reminder that expectations for Fed policy are the key influence on this market right now, and if economic data, especially inflation data, comes in ‘too hot’ then that will rekindle hawkish Fed concerns like in January, and we would expect at least a partial return of the January volatility,” wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. “Bottom line, Fed policy still very much matters to this market.”
For more market analysis, read our MLIV blog.
What to watch this week:
- Earnings are due from Amazon, Ford Motor
- U.S. payrolls report for January, Friday
- Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.9% as of 3:23 p.m. New York time
- The Nasdaq 100 fell 3.3%
- The Dow Jones Industrial Average fell 1%
- The MSCI World index fell 1.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 1.1% to $1.1433
- The British pound rose 0.1% to $1.3595
- The Japanese yen fell 0.4% to 114.93 per dollar
Bonds
- The yield on 10-year Treasuries advanced four basis points to 1.82%
- Germany’s 10-year yield advanced 10 basis points to 0.14%
- Britain’s 10-year yield advanced 11 basis points to 1.37%
Commodities
- West Texas Intermediate crude rose 2.3% to $90.29 a barrel
- Gold futures fell 0.2% to $1,806.70 an ounce
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