On Thursday, Nasdaq 100 futures dropped significantly in the wake of poor third-quarter performance reports posted by Meta Platforms Inc., the parent company of Facebook and Instagram.
Nasdaq 100 futures dropped Thursday as a bleak forecast by Meta fanned worries of a slowdown in earnings, while hopes that the U.S. Federal Reserve will slow the pace of rate hikes limited declines.https://t.co/NANeCgwafr
— Newsmax (@newsmax) October 27, 2022
Meta announced a decline in third-quarter profit and forecasted that earnings would not rebound during the holiday season.
As a result, Meta stock fell 21.7% in premarket trading, for an astounding haircut of $75 billion from its market value.
The Nasdaq had been on a three-day gaining streak when multiple growth companies, including Meta, Microsoft Corp., and Alphabet Inc., announced poor third quarters and forecasted weak fourth quarters.
Laith Khalaf, head of investment analysis at AJ Bell, spoke about the gloomy state of affairs in the big tech market.
“So far Meta is just the latest big tech company to disappoint,” said Khalaf. “After a steady start to the U.S. third-quarter earnings season, things are starting to look a lot less rosy.”
The reports are particularly disappointing since analysts had already set the bar low for the third quarter.
According to Refinitiv data, the aggregate S&P 500 profit growth now stands at 2.3% year-on-year, down drastically from 4.5% at the start of the month.
Weak performance in the big tech industry has fueled concerns over the decision by the Federal Reserve to continually raise interest rates as a means of combating inflation.
There is some hope that the Fed may follow the example of the Bank of Canada, which recently hiked the interest rate less than expected.
Not every industry struggled in the third quarter. After posting a third-quarter profit increase, Caterpillar Inc jumped 4.2% in the stock market. Similarly, McDonald’s Corp. beat its quarterly sales estimates, resulting in a 2.9% rise in stock value.
Merck & Co. Inc. and Honeywell International Inc also joined in on the fun, with both companies outpacing their quarterly projections by a healthy margin. In turn, Merck rose 2.5% in the market, while Honeywell climbed 5.2%.
Following Elon Musk’s visit to Twitter Inc headquarters on Tuesday, Twitter stock saw a 1.1% uptick. Musk is set to acquire the social media company for $44 billion.