This is one of those times when a "fan favorite" has taken it on the chin. But it's more than just Meta Platforms (FB) that has done that. It's a cumulative effect now.
Remember that a year ago the first big removal of speculation arrived in February. Then we began a bottoming process where there was a lot of sifting through the rubble and in May we saw growth/tech stocks lift again. Only this time they were more selective than they were in the runup to that February high.
Then came the November decline and once again air was let out of the speculative bubble. Each time, we have seen some of what we might term the second or third-tier stocks go down significantly while the over-owned and over-loved fan favorites kept on going, or at least they hung in there.
However, in the last few weeks we have seen some of these fan favorites get hit hard. It might feel as though Netflix (NFLX) was the first to report slowing growth but even lesser names such as Peloton (PTON) had already reported slowing growth. And if there is one thing growth stocks don't like it is slowing growth.
Then this week PayPal (PYPL) seemingly shocked folks even if the stock had already been cut in half.
Now we have Meta.
I hate to bring up the dot-com bubble bursting, but I recall how the lesser names got taken to the woodshed in the spring of 2000, and while the fan favorites of that time were down, they weren't yet hit in that same fashion. That's part of the explanation of why we care about breadth (the troops) because first they come for the troops and then they come after the generals.
Cisco Systems (CSCO) was definitely a fan favorite in that market of 20+ years ago so I'd like to take a look at it. It peaked in the spring of 2000 but was making quite a comeback during that summer. The leakage was there heading into the fall, though, similar to Meta now. Then, in December, Cisco reported a poor/slowing quarter and the stock finally broke down. It never recovered its luster.
Meta peaked in September even though Nasdaq peaked in November, but despite coming down, it has been hanging in there. And now it is set to open down near the bottom of the page. Sure, maybe it will rally after it regroups for a few days but it has now left 10 months of resistance overhead.
So where is it going on the upside? Nowhere special would be my view.
I have said that I think the market has changed over the course of the last year and it has accelerated since November. I would consider this to be part of the changing nature of the market. A year ago this sort of news would have been forgiven quickly and now it is not.
As for the overall market on Wednesday, the big indexes rallied but breadth was negative. Sentiment hasn't changed much and my guess is the Meta news will not do much to change sentiment. I still think that a few days of pullback should still lead to another rally attempt.