US open: Tech stocks falter as investors 'unfriend' Facebook on data worries

Trading started weaker on Wall Street with technology shares facing steep selling pressure amid fresh worries tied to Facebook's policies over user data management emerged, even as investors wait on the latest policy announcement and expected rate hike from the Federal Reserve on Wednesday

Facebook shares dropped 6.75%, its worst daily decline in almost two years, cutting its market capitalisation to $537.67bn, following news that Cambridge Analytica managed to acquire data on more than 50m users of the social media platform and used it to conduct micro-targeted political campaigns thought to have contributed to the election of Donald Trump and the UK's Brexit vote.

On top of that, on Monday morning news broke that US Senators Amy Klobuchar and John Kennedy had issued a joint call to Senate Judiciary Committee chairman Chuck Grassley asking for a hearing with the chief executives of Facebook, Google and Twitter on their use of client data.

Against that backdrop, as at 1500 GMT the Dow Jones Industrial Average and S&P 500 were both down 0.92% - with the drop in Facebook accounting for half the fall on the latter - while the tech-heavy Nasdaq dropped a full 1.41%.

From a sector standpoint, the worst performing sectors were: Internet (-4.65%), Durable Household Products (-2.78%), Semiconductors (-2.78%), Software& Computers (-2.52%) and Technology (-2.46%).

Commenting on the pressure that was bearing down on tech stocks at the start of the week, Jasper Lawler at LCG said: "The latest data scandal might well be the straw that breaks the camel’s back for tighter industry regulation. Tighter regulation of how data is collected and used will inevitably curb growth for tech and social media companies that use the data to attract advertisers. Reports that Apple is secretly developing its own micro LED screens for the iPhone has hurt the share prices of existing parts suppliers, notably in Asia."

Traders were also keeping a close eye on the two-day G-20 finance ministers meeting that kicked-off earlier on Monday, in Buenos Aires.

On that note, Craig Erlam, senior market analyst at Oanda, pitched-in: "Tariffs are likely to be the main topic of conversation at the G20 meeting at the start of the week after the European Union released details of counter-measures against Donald Trump’s steel and aluminium tariffs. The list totalled around €6.4bn and will be intended to dissuade Trump from implementing tariffs on the EU, although given what’s been said previously by the US President, further counter-tariffs could be more likely. The question is whether the measures announced by the EU are sufficiently targeted so as to hurt the Republicans in the mid-term elections later this year.

"Despite what he says, I’m not sure that a trade war is what Trump actually wants from these tariffs or that he’ll find much support for one within his party."

As far as the Fed's latest interest rate decision due on Wednesday was concerned, Fed funds futures were implying an 80% chance of a 25 basis points increase. With a rate hike expected, according to analysts the main focus was likely to be on what the dot plot suggested the Fed might do going forward.

Rabobank said much would be read into Fed chair Jerome Powell's interpretation of the economic outlook and how he chooses to address the fact that the Fed still remains some way from reaching its inflation goals.

"The fact that the Fed has already admitted it remains somewhat bewildered as regards the slow development of wage pressures in spite of a low headline unemployment may temper a more hawkish tone from the new Fed Chair. That said, the minutes for the January meeting showed increased confidence in the economy while Powell’s testimony confirmed this optimism."

In other corporate news, Bloomberg reported that Apple was secretly developing its own micro-LED technology to equip displays on its electronic devices.

shares of Newell Brands dropped 5.56% after saying it will appoint four directors to its board picked by billionaire investor Carl Icahn. Icahn revealed on Friday that he had taken a 6.9% stake in the Sharpie pen maker.

Elsewhere, Dana was down 1.06% after upping its 2018 sales outlook to between $7.75bn and $8.05bn and its adjusted earnings per share guidance to between $2.75 and $3.05.

On a more positive note. chip equipment manufacturer KLA Tencor forked out $3.4bn for Israeli outfit Orbotech in a cash and shares deal that implied a 15% premium.

There were no major US economic data releases due out on Monday.