QCOM QUALCOMM Inc

By Michael Wursthorn and Ben St. Clair 
   -- Facebook stock leads S&P 500 lower 
 
   -- European autos gain ground 
 
   -- ECB leaves rates unchanged 

Tumbling shares of Facebook pulled the S&P 500 lower Thursday after disappointing earnings results rocked investor confidence in one of Wall Street's most popular trades.

Shares of Facebook suffered their steepest decline since the social-networking giant's stock-market debut six years earlier. The losses erased about $100 billion in value from Facebook, as the firm suffered the biggest single-day decline in market cap ever.

The selloff started after Facebook said late Wednesday that revenue grew slower than expected in the second quarter and warned that it expected growth to decline over the rest of the year. Shares closed Thursday down $41.24, or 19%, to $176.26.

Investors say the lackluster results have renewed concerns that the massive growth in revenue and profits among some of tech's stalwarts may not be sustainable -- posing another hurdle for a stock market already grappling with trade tensions and concerns over a possible policy misstep by the Federal Reserve.

The frantic rise in growth stocks like Facebook in recent years has "been a concern for a while," said Matthew Forester, chief investment officer of BNY Mellon's Lockwood Advisors, who added that Facebook's misstep could be another sign that the stock market is nearing the end of its rally. "In a late cycle, you would typically see concerns about momentum stocks, and I'd put a lot of the technology names in that category."

Facebook is one of the more popular holdings among investors and fund managers, so much so that traders have given the firm and others the moniker, FANG, which represents Facebook, Amazon.com, Netflix and Google parent Alphabet. And the price drop is expected to be felt widely among the investment community, said Mr. Forester.

Still, Facebook's plight was mostly contained within the tech and consumer discretionary sectors, while the broader market appeared to weather the selloff, thanks in part to a 1% gain among S&P 500 energy companies.

The S&P 500 fell 8.63 points, or 0.3%, to 2837.44 to snap a three-day winning streak, while the tech-heavy Nasdaq Composite shed 80.05 points, or 1%, to 7852.18. The Dow Jones Industrial Average, however, added 112.97 points, or 0.4%, to 25527.07.

Shares of Amazon.com fell 55.61, or 3%, to 1,808 during Thursday's session, but shares rose 2.3% in after-hours trading as the e-commerce giant reported stronger-than-expected earnings results. Netflix added 22 cents, or less than 0.1%, to 363.09, but the streaming service remains down 7.2% so far this month after posting slower-than-expected subscriber growth last week.

"We have continually expressed concern about such narrow large-cap leadership, especially in the names where valuation is not a consideration," said Mike O'Rourke, chief market strategist with JonesTrading, in a research note. "This appears to be the beginning of the end of the FANG era," he added of the commonly known Wall Street acronym representing Facebook, Amazon.com, Netflix and Google parent Alphabet.

Elsewhere, the Stoxx Europe 600 added 0.9% as investors cheered an agreement between the U.S. and the European Union to hold off on new tariffs. Asian stocks fell, dragged lower by declines in tech companies.

However, analysts at Citigroup called the truce "more optics than substance" in a note to investors Thursday, noting the tentative nature of the agreement and the limited discussion of autos.

In Asia, losses in the tech sector contributed to declines in the Shanghai Composite Index and Hong Kong's Hang Seng, which were down 0.7% and 0.5%, respectively. Japan's Nikkei Stock Average was off 0.1%.

While trade tensions eased on the European front, worsening U.S.-China trade relations hit another snag Wednesday, when Qualcomm said it would abandon its $44 billion purchase of Dutch chip maker NXP Semiconductors NV after failing to secure approval in China.

Shares of Qualcomm rose 4.16, or 7%, to 63.58 Thursday.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

July 26, 2018 16:57 ET (20:57 GMT)

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