Facebook's Data-Driven Sell-Off Weighs On The Markets

All eyes on Wall Street were focused on Facebook Inc FB Monday after reports that data from more than 50 million users was improperly shared during the 2016 campaign season. The news sent Facebook’s FANG peers tumbling as well, perhaps on fears that their data-driven businesses could soon be threatened by harsher regulations.

What Happened?

Cambridge University professor Aleksandr Kogan reportedly shared user data collected by his Facebook personality test app with Cambridge Analytica, a company that worked to develop social media ads for the Trump campaign. Kogan wasn't authorized by Facebook to share the data, which Facebook believed had been destroyed.

Here’s a look at how the FANG stocks traded on Monday:

• Facebook fell 6.7 percent to close at $172.56;
• Amazon.com, Inc. AMZN fell 1.7 percent;
• Netflix, Inc. NFLX fell 1.6 percent; and
• Alphabet Inc GOOGLGOOGL fell 3 percent.

'Not Going Away Anytime Soon'

CNNMoney digital correspondent Paul La Monica discussed the fallout on Monday's PreMarket Prep trading show.

“I think the concern on the part of investors is whether or not Facebook has done enough to really prevent anything like this from happening in the future,” La Monica said. He said investors may be starting to question CEO Mark Zuckerberg’s leadership.

He also said Facebook investors could be dealing with this story for a while.

“Given all the controversies regarding [President Trump’s] election to begin with, the polarization that I think we have politically in the country and how that’s manifested on Facebook, I really don’t think this is going away anytime soon.”

Facebook said in a blog post it hired digital forensics firm Stroz Friedberg to conduct a "comprehensive audit" of Cambridge Analytica.

Market Sells Off

Alphabet and Facebook were the two hardest hit of the FANG stocks. As leaders in online advertising, both companies' ad businesses are heavily reliant on user data, and collection and storage methods may soon be under the regulatory spotlight.

Europe has already taken steps to help protect internet data with the General Data Protection Regulation, which will be implemented in May.

FANG stocks have led the market higher throughout most of the nine-year bull market, so it’s not surprising the Dow Jones Industrial Average tumbled more than 330 points (1.3 percent) on Monday, while the S&P 500 fell about 42 points (1.5 percent). Considering the size and market weighting of the FANG group, a FANG problem is also a problem for almost all U.S. stock investors.

The iPath S&P 500 VIX Short Term Futures TM ETN VXX jumped more than 8 percent on fears that bearish market volatility is returning to the market.

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