Facebook slams Nasdaq futures, EU-U.S. trade deal offers relief

(Reuters) – A $150 billion slump in Facebook shares set the tech-heavy Nasdaq on track to shed more than 100 points at the open on Thursday, while S&P and Dow futures got a boost from signs the United States and the European Union will negotiate on trade.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 24, 2018. REUTERS/Brendan McDermid

Facebook (FB.O) shares plunged 20.6 percent in premarket trading after the social network said profit margins would plummet for several years due to the costs of improving privacy safeguards and slowing usage in its biggest advertising markets.

The warning weighed on the high-growth FAANG group of stocks. Netflix (NFLX.O) declined 1.8 percent, Alphabet (GOOGL.O) dropped 1.3 percent. Amazon.com (AMZN.O), due to report results after the bell, fell 1.7 percent, while Apple (AAPL.O) slipped 0.6 percent.

Spotify (SPOT.N), which also reported results, fell 4.5 percent. Twitter (TWTR.K), due to report on Friday, dropped 3.6 percent.

At 7:25 a.m. ET, Nasdaq 100 e-minis NQc1 were down 58.25 points, or 0.78 percent, and S&P 500 e-minis ESc1 were down 4.75 points, or 0.17 percent. The Dow e-minis 1YMc1 were up 39 points, or 0.15 percent.

The declines in the high-growth technology stocks threatened to overshadow the boost to optimism after the United States and EU agreed to work toward eliminating tariffs on industrial goods and increasing U.S. exports of liquefied natural gas, soybeans.

That announcement just ahead of the market’s close on Wednesday, sparked a late rally that pushed the S&P to its highest closing level since Jan. 29.

“With the economy picking up steam thanks to the benefits of fiscal policy, this was one more worry that was holding back stocks,” said Ryan Detrick, senior market strategist for LPL Financial in Charlotte, North Carolina.

“Investors can now focus on what should be a very strong corporate earnings season.”

Of the 148 S&P 500 companies that have reported earnings so far, 85.8 percent have topped estimates. If the beat rate holds, it will be the highest on record, dating back to the first quarter of 1994, according to Thomson Reuters I/B/E/S.

However, earnings reports since late Wednesday have not been as buoyant.

Ford (F.N) fell 3.3 percent after the automaker lowered its full-year profit forecast due to slumping sales and trade tariffs in China and its struggling business in Europe.

Mattel (MAT.O) dropped 11 percent, while Visa (V.N) dipped 0.5 percent after results.

Amid the tech sell-off, chipmakers stood out.

Advanced Micro Devices (AMD.O) rose 6.9 percent after it beat estimates on strong sales of its processors and graphic chips. Xilinx (XLNX.O) jumped 9.2 percent after topping quarterly estimates and raising its full-year forecast.

Qualcomm (QCOM.O) gained 5.3 percent after ending its $44-billion pursuit of NXP Semiconductors (NXPI.O) after failing to win Chinese regulatory approval. NXP slipped 8.4 percent.

Economic data on tap includes the Labor Department jobless claims report at 8:30 a.m. ET that will likely show initial claims rose to 215,000 in July from 207,000 in June.

Durable goods data at 8:30 a.m. ET expected to show a 3 percent rise in June after dipping 0.4 percent in May.

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