Market report

Facebook at head of market slide

Firm’s stock sinks 6.8% on reports of user-data breach

Traders work Monday on the floor of the New York Stock Exchange, where 29 of the 30 stocks in the Dow Jones industrial average posted losses for the day.
Traders work Monday on the floor of the New York Stock Exchange, where 29 of the 30 stocks in the Dow Jones industrial average posted losses for the day.

NEW YORK -- Facebook on Monday plunged to its worst loss in four years and led a rout in technology companies.

The social media company's stock fell after reports that a data mining firm improperly obtained data on 50 million Facebook users. That data was said to have underpinned the firm's later work for Donald Trump's 2016 presidential campaign.

The Standard and Poor's 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.

The drop in Facebook stock came after the company said Cambridge Analytica improperly obtained data from some of the social media site's 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 Facebook's response, and investors wondered whether 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 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."

Facebook said late Friday that it had 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. Sen. Amy Klobuchar, D-Minn., said Facebook Chief Executive Officer Mark Zuckerberg should testify before the Senate Judiciary Committee. Legislators in Britain and the European Union also called for inquiries.

On Monday, Facebook said it hired an outside firm to audit Cambridge. Facebook's 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 shares fell $34.35, or 3 percent, to $1,100.07.

Larger technology companies, including Apple and Microsoft, fared worse than smaller ones Monday. Another market favorite, Amazon, also dropped, and health care stocks fell more than the rest of the market.

Twenty-nine of the 30 Dow stocks finished the day with losses. The only exception was airplane maker Boeing.

Elsewhere, 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 past few days and that 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.

U.S. 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, fell 16 cents to $66.05 per barrel in London.

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.

Business on 03/20/2018

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