Nasdaq ends 3.7% lower as US stocks drop on weak earnings

Traders work on the floor of the New York Stock Exchange in New York City. PHOTO: AFP

NEW YORK (AFP) - Nasdaq plunged more than 3 per cent on Thursday (Feb 3), following weak earnings from Facebook parent Meta as stocks resumed their downward shift amid worries over tightening monetary policy.

All three major indexes finished with losses, snapping a four-day winning streak, with the Nasdaq falling 3.7 per cent to 13,878.82.

The Dow Jones Industrial Average dropped 1.5 per cent to 35,111.16, while the broad-based S&P 500 shed 2.4 per cent to 4,477.44.

Thursday's session shows that rallies are "fragile," said SoFi head of investment strategy Liz Young.

"The reason that it's fragile is because we are going into a tightening cycle. And things like earnings are going to be scrutinised that much more closely."

Meta late on Wednesday had reported weaker-than-expected profits following a loss of one million daily users globally on its signature social media platform.

Shares finished 26.4 per cent lower, but Meta was not the only company to be punished after disappointing results.

Spotify Technology sank 16.8 per cent as it issued a lacklustre forecast while facing questions over its handling of podcaster Joe Rogan's comments discouraging Covid-19 vaccines.

Dow members Honeywell International and Merck dropped 7.6 per cent and 3.7 per cent after results.

Also weighing on markets on Thursday was the latest sign that central banks were ready to sharply pivot their policies to counter rising inflation.

The Bank of England lifted its main interest rate for the second time in a row, while European Central Bank chief Christine Lagarde opened the door to rate hikes later this year.

"The central bank factor was in play today as another negative on top of the Facebook news," said analyst Patrick O'Hare.

"What it has done has redirect peoples' attention back to idea that policy tightening is going to be a headwind for the market for this year."

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