WASHINGTON, March 19, 2018: All three major stock averages fell back into the tank Monday morning. CNBC fatuously blamed Trump’s weekend anti-Deep State tweetstorm for the stock market s___storm. But Monday’s epic Facebook Fail (Facebook symbol: FB) gets the primary blame for kicking off today’s stock market bloodbath.
Just past the noon hour ET, we find the Dow Jones Industrial average plunging, down 321 and change for a 1.3 percent loss. The broader-based S&P 500 fared even worse, off 42.71 for an over 1.5 percent loss.
(UPDATING: The Dow is now off over 450 points.)
Worst of all, the tech-heavy NASDAQ found itself under full-scale attack, down a whopping 171+ points as we write this. That comes to a half-day loss of nearly 2.25 percent.
The NASDAQ waterfall decline got kicked off by a barrage of very bad weekend news concerning the latest Epic Facebook Fail. The #NeverTrumpers in the media and elsewhere (according to a Reuters story in Yahoo News) blame the Trump campaign (more specifically, Steve Bannon et. al.) for employing a British data gathering company to datamine Facebook for highly specific user information, re: the 2016 election. (No one ever mentions that the Obama campaigns used the same stuff in its campaigns, actively aided by Facebook.)
Allegedly, this information factored at some point into the success of the Trump campaign in 2016. The idea behind this highly specific datamining involved pinpointing individual voters who might be open to the Trump campaign’s messaging pitch. That’s supposedly a crime. But Obama’s earlier use of the same kind of Facebook data receives little mention. Conclusion: Trump datamining bad. Obama datamining good.
In fact, as best we can ascertain, the Bannon Facebook data operation was never embraced by the Trump campaign,which discarded that approach early in the summer of 2016. However, that hasn’t deterred #NeverTrumpers from using this developing and still incomplete story to open another front against the President.
But the Bannon operation isn’t really why Facebook got hit in today’s market decline. The issue with this internet juggernaut is far more sinister. The Bannon connection with UK-based Cambridge Analytica, which datamined Facebook for the personal information it compiled, was merely taking advantage of the extremely deep database of very personal information Facebook routinely keeps on all its users.
This intimate level of detail on individual users allows Facebook to “sell” minutely detailed lists of users to advertisers. These sliced and diced database nuggets search out only those Facebook users who conform tightly to a given advertiser’s desired customer demographic. Such detailed lists become marketing gold.
Most Facebook users aren’t aware of the extraordinarily detailed personal profiles the company keeps on every one of them. They also aren’t aware of how valuable they are to advertisers. Yet their detailed personal data enables Facebook to earn extraordinary amounts of money for sharing that data.
In other words, Facebook has been and still is peddling our deeply personal data to everyone else. That essentially means that anyone with a Facebook account is bearing his or her very soul to anyone who wants to purchase that information. Now that this news is out, both Facebook and its legion of users will need to confront this outrageous Facebook Fail.
This and related news has been battering Facebook’s shares, and rightly so. It appears that Facebook – not to mention Google (GOOGL) et. al. – is engaged in a massive invasion of individual privacy for fun and massive profit. Who knew?
Speculation is that this news leak – shocking to some – that was meant once again to hurt the Trump administration – has alread led to a massive Facebook Fail. The downside includes massively negative PR and possibly near term damage to the company’s profitability as well.
More details on this story from Reuters, via Yahoo News.
“‘We think this episode is another indication of systemic problems at Facebook,’ said Brian Wieser, analyst at New York-based brokerage Pivotal Research Group, which already has a ‘sell’ rating on a stock that rose 60 percent last year.
“Wieser argued that regulatory risks for the company would intensify and enhanced use of data in advertising would be at greater risk than before.
“He added, however, that it was unlikely to have a meaningful impact on the company’s business for now, with advertisers unlikely to ‘suddenly change the trajectory of their spending growth on the platform.’”
“‘This episode appears likely to create another and potentially more serious public relations “black eye” for the company and could lead to additional regulatory scrutiny,’ said Peter Stabler, analyst at Wells Fargo.
“The losses would be Facebook’s biggest daily fall since a broader market pullback in February. In January, when Facebook announced changes to its newsfeed which it said would hit user engagement in the near term, shares fell 4.5 percent in one day.
“‘It’s clear with more “heat in the kitchen from the Beltway” that further modest changes to their business model around advertising and news feeds/content could be in store over the next 12 to 18 months,’ said Daniel Ives, research analyst at GBH Insights.”
Will Facebook Fail fallout spread? (Hint: It already has)
Sooner or later, an armada of Teddy Roosevelt-style trust busters will ride into Silicon Valley to set things aright. (We hope.) At the moment, such a “bully” cavalry ride remains unlikely. But more hits like this week’s Facebook Fail can change the mood in Washington.
That’s why we see a “Facebook spillover effect” this morning on Wall Street, as Facebook’s problems cascade into other social networking issues. In turn, that gets the investment public thinking about the EU tax issues hitting Google, Apple (AAPL), Microsoft (MSFT) and others. A wall of worry rises quickly.
Oh, yes, Amazon (AMZN) got tagged Monday as well. By the noon hour, investors watched that high flier plummet over $32+ dollars per share, an ugly one-day plunge of 2.15 percent. Reason? Increasing talk in Congress and in state legislators about taking a significant tax-bite out of online sales. Bezos & Co. fought this successfully for well over a decade. But now, even the Bezos moneymaking combine finds itself in the anti-trust crosshairs
With the tech giants under assault from all quarters, the NASDAQ continues to suffer disproportionately. In turn, since the tech giants highly influece the other major averages, their shares quickly swooned today as well. Trump tweet-storms serve at best as a sideshow to this fearful tech carnage.
And then there’s the Fed
Continuing the negative pressure, traders and investors await bad news from the Fed this week. They’ve already baked the virtual certainty of another 0.25 increase in interest rates into the market. But the possibility of a hawkish statement Wednesday from the Fed’s greenhorn Chairman keeps trigger-happy high-frequency trading (HFT) firms close to their very big red SELL buttons.
Meanwhile, this week’s disclosure of that Epic Facebook Fail terrifies investors. Many find themselves too heavily invested in tech. As a result, they’re selling and shorting tech shareswith abandon Monday. Facebook’s stock suffered the worst damage. But the tech casualties could get worse. Today’s Wall Street tech rollover promises to expand.