Facebook, tech shares drag S&P 500, Nasdaq lower

US stocks opened lower on Thursday with a Facebook-led tumble in tech shares dragging the Nasdaq and the S&P 500 lower, according to a Financial Times (FT) report seen by business a.m.

According to the report, the S&P 500 was 0.3 per cent lower in early trading falling to 2,839.26, while the Nasdaq Composite was down 1 per cent from the previous day to 7,857.29. The 30-member share-price weighted Dow Jones Industrial Average, of which Facebook is not a member, bucked the pain to rise 0.5 per cent to 25,557.06.

Facebook shares, which were down as much as 20 percent in the opening minutes of trade rebounded slightly after the open, and were down 18 percent in recent trading.

Still, the social-media platform had the steepest after-market drop since 2014 for any of the so-called FAANGs — Facebook, Apple, Amazon, Netflix, and Google (now Alphabet) — according to George Pearkes, an analyst with Bespoke Research.

There has only been one sharper market response to an earnings miss since the NYSE FANG+ Index was created to track the group, according to Bespoke. That was in October of 2014, when Netflix opened 26 per cent lower after missing earnings forecasts.

In the time since the index was created, Pearkes found that a large earnings miss “typically leads to periods of underperformance for the entire group,” he wrote. Average one-week returns have been negative following high-profile earnings misses, and average one-month returns have been lower than normal, he found.

“It’s likely that FB’s big miss will clip returns for this group at least somewhat in the short term,” he said.