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.

The social-media giant fell 19% in recent trading, putting it on pace for its steepest decline since its shares started trading six years earlier. 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.

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 -- and that could put another hurdle in front of a stock market already grappling with trade tensions and concerns of 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."

Besides that, Facebook is a popular holding among investors and fund managers, and the drop in share price is expected to be felt widely, Mr. Forester added.

Facebook's plight was felt in some corners of the tech industry; however, the broader market appeared to weather the selloff.

The S&P 500 fell 0.1% in recent trading, while the tech-heavy Nasdaq Composite shed 0.8%. The Dow Jones Industrial Average, however, added 152 points, or 0.6%, to 25568.

Shares of Amazon.com, which reports quarterly results after the market closes Thursday, slipped 1.3% in recent trading, while Netflix fell 0.9% to extend its decline so far this month to 8.2%. Netflix, one of the best-performing stocks this year, has struggled since it missed its own forecasts by more than a million subscribers in the second quarter.

"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 after Facebook released results late Wednesday. "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.

In Europe, markets posted gains as investors cheered an agreement between the U.S. and the European Union to hold off on to new tariffs. Asian stocks fell, dragged lower by declines in tech companies.

The Stoxx Europe 600 added 0.8%, led by the auto sector.

European auto companies had been under pressure after President Trump's threats to impose tariffs on imports. However, following Wednesday's meeting between Mr. Trump and European Commission President Jean-Claude Juncker, the two sides agreed to hold off on such measures.

The two leaders also agreed they would talk through their differences and begin discussions to ease existing tariffs as well, although no schedule was set to complete talks.

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. The deal had been approved by eight other regulatory bodies, but was held up by China's antitrust authority.

Shares of Qualcomm rose 4.2% Thursday.

Qualcomm's decision to walk away from a planned NXP takeover followed a round of last-minute lobbying on the company's behalf by senior U.S. officials, including Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross.

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

(END) Dow Jones Newswires

July 26, 2018 11:41 ET (15:41 GMT)

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