Market snapshot: social media stocks hit hard

A Congressional review of social media has unsettled the tech sector. What next for Twitter and Co?

Markets touched on the brakes as political concerns weighed in the US and as big tech gave up some recent gains.

Whether the incumbent President will face consequences after last week’s unrest remains to be seen, but in any event the spotlight is being shone on social media, despite the likes of Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) having banned his account. The feared outcome of a Congressional review of social media underlined the broader concern that for big tech, increased regulation is on the way. The technology laden Nasdaq index lost 1.25% as the implications were digested, and were also coupled with some profit-taking after another record high for the index last week.

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Other asset classes paint a mixed picture. The US dollar has had a strong few days which would normally underline its status as a haven currency, but its inverse relationship with the oil price has temporarily broken as black gold’s strong start to the year also continued given the intended supply-side restrictions.

Yet optimism surrounding the vaccine rollout remains, and with the new President expected to unveil a significant boost to spending in the coming weeks, sentiment is generally positive. The impending fourth-quarter reporting season is likely to highlight those pockets of the economy which are in particular distress, which would add further fuel to the stimulus fire.

In the UK, the arguably important psychological level of 7,000 for the FTSE 100 remains out of reach for now, as the index has faltered slightly after a sparkling start to the year. Even so, it is still ahead by 5% overall in the first few days of trading this year, although the wider concerns being felt by many economies, as another lockdown bites, have taken some of the shine off sentiment.

By the same token, opportunities continue to arise from the present situation. Another strong showing from Kingfisher (LSE:KGF) underlines the benefits of both a well-run mix of online and physical retailing operation, coupled with customer demand playing into its hands during the pandemic. A 35% increase in the share price over the last year compares with a decline of 10% for the wider FTSE 100, and is reflective of its impressive trading momentum.