Facebook drags technology companies down as stocks slide
NEW YORK (AP) — Facebook plunged to its worst loss in four years Monday and led a rout in technology companies. The social media company's stock fell following reports that a data mining firm working for the Trump campaign improperly obtained data on 50 million Facebook users.
The drop in Facebook stock came after the company said Cambridge Analytica improperly obtained data from some of its users. The New York Times and the Guardian reported that Cambridge was able to tap the profiles of more than 50 million Facebook users without their permission. Legislators in the U.S. and Europe criticized the company's response, and investors wondered if companies like Facebook and Alphabet will face tighter regulation as a result.
Daniel Ives, chief strategy officer and head of technology research for GBH Insights, said Facebook is in a crisis, and it will have to work hard to reassure users, investors and governments.
"This is a defining moment for them," he said. "It either becomes a blip on the radar and it helps the platform mature... or it becomes the start of something broader."
Elsewhere, the British pound rose and European stocks slumped after Britain and the European Union said they are getting closer to a deal that will complete Britain's departure from the EU in March 2019.
The S&P 500 index sank 39.09 points, or 1.4 percent, to 2,712.92. The benchmark index took its biggest loss since Feb. 8, when it tumbled almost 4 percent as investors worried that rising inflation would slow the progress of the market and the U.S. economy.
The Dow Jones industrial average fell 335.60 points, or 1.3 percent, to 24,610.91. During the day it fell as much as 493 points. The Nasdaq composite gave up 137.74 points, or 1.8 percent, to 7,344.24. The Russell 2000 index of smaller-company stocks declined 15.49 points, or 1 percent, to 1,570.56.
Larger technology companies including Apple and Microsoft fared worse than smaller ones. Another market favorite, Amazon, also dropped, and health care stocks fell more than the rest of the market.
Representatives of Britain and the European Union said they made progress on the terms of Britain's departure from the bloc. British envoy David Davis said important steps have been made in the last few days and he thinks EU leaders will back them in a meeting Thursday and Friday. Britain is scheduled to officially leave the EU on March 29, 2019.
The pound rose to $1.4050 from $1.3938. The British FTSE 100 index fell 1.7 percent and Germany's DAX fell 1.4 percent. France's CAC-40 was 1.1 percent lower.
Facebook said late Friday that it suspended Cambridge Analytica and its parent company. It said Cambridge obtained data from 270,000 people who downloaded a purported research app that was described as a personality test. A former employee said Cambridge was able to get data from tens of millions of other users who were friends with the people who downloaded that app.
Facebook first learned of the breach more than two years ago but hadn't disclosed it. Senator Amy Klobuchar of Minnesota said Facebook CEO Mark Zuckerberg should testify before the Senate Judiciary Committee while legislators in Britain and the European Union also called for inquiries.
On Monday Facebook said it hired an outside firm to audit Cambridge. Its stock sank $12.53, or 6.8 percent, to $172.56, its biggest one-day loss since March 2014.
Ives, of GBH, said Wall Street is more concerned about the latest situation than it was about issues like Facebook's platform spreading fake news. That's because Cambridge reportedly got access to the personal data of a large number of users, and the backlash suggests Facebook may face more regulation and could lose users, advertisers or advertising revenue.
He estimated that $5 billion in annual revenue for Facebook might be a risk and said the situation could create problems for other tech companies, especially Twitter and Alphabet's YouTube unit. Alphabet lost $34.35, or 3 percent, to $1,100.07.
Twenty-nine of the 30 Dow stocks finished the day with losses. The only exception was airplane maker Boeing.
Bond prices gave up an early gain. The yield on the 10-year Treasury note remained at 2.85 percent.
Benchmark U.S. crude fell 28 cents to $62.06 a barrel in New York. Brent crude, used to price international oils, lost 16 cents to $66.05 per barrel in London.
Wholesale gasoline lost 2 cents to $1.92 a gallon. Heating oil remained at $1.91 a gallon. Natural gas fell 4 cents to $2.65 per 1,000 cubic feet.
Gold added $5.50 to $1,317.80 an ounce. Silver rose 5 cents to $16.33 an ounce. Copper lost 2 cents to $3.08 a pound.
Tokyo's Nikkei 225 fell 0.9 percent and Hong Kong's Hang Seng edged up less than 0.1 percent. Seoul's Kospi lost 0.8 percent.
The dollar slipped to 105.97 yen from 106.10 yen. The euro rose to $1.2357 from $1.2284.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP . His work can be found at https://apnews.com/search/marley%20jay