Wall Street slides on weak forecast at LinkedIn

Wall Street extended a sharp sell-off in afternoon trading after data showing the US unemployment rate had hit an eight-year low in January revived the prospect of a Fed rate hike this year, and tech stocks sold off heavily following weak forecasts.

Despite the expected slowdown in job growth, the unemployment rate fell to 4.9 per cent, the lowest since February 2008, and average hourly earnings increased 0.5 per cent, suggesting the labour market recovery remains firm.

“That . . . serves as a caution to markets that it is too early to take a Federal Reserve March hike completely off the table,” said Mohamed El-Erian, chief economic adviser at Allianz.

Technology stocks sold off heavily following weak forecasts from LinkedIn and Tableau Software.

Big names such as Amazon, Facebook and Microsoft were among the biggest drags on the Nasdaq and the S&P 500.

"The market right now seems to be in a spot where the ice is a little bit thin and investors seem to be punishing stocks that are falling out of favour, whether it is caused by direct earnings or guidance," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

Disruption

“LinkedIn and Tableau are names that are leaders. Those two names are important names, widely held, widely followed, and the disruption we saw in those prices affected stocks in that sector, without a doubt.” LinkedIn shares plunged after it forecast first-quarter revenue and profit below Wall Street estimates as growth slows in its ads business and its hiring services face pressure outside North America.

LinkedIn closed 43.6 per cent weaker at $108.38 after earlier shedding 46.5 per cent of its value, wiping out about $11 billion of market value. The operator of the world’s largest online network for professionals reported its slowest growth in quarterly online ad revenue in more than two years. Online ad revenue growth slowed to 20 per cent in the fourth quarter from 56 per cent a year earlier as automated ads offered by Alphabet’s Google make its traditional ad displays less attractive to advertisers.

LinkedIn has been spending heavily on expansion by buying companies, hiring sales personnel and growing its presence in China and other markets outside the United States as it tries to strengthen its core recruitment services business. The business, which connects recruiters and job seekers, is now facing pressure in Europe, the Middle East, Africa and Asia-Pacific due to "current global economic conditions", chief financial officer Steve Sordello said on Thursday. – (Reuters)