What happened

Shares of the major technology stocks, collectively referred to as FAANG, tumbled on Monday as the broader market suffered a steep sell-off. All the major U.S. stock indexes were down nearly 10% at 2:10 p.m. EDT following an emergency rate cut from the Federal Reserve over the weekend.

The response to the novel coronavirus pandemic in the U.S. has escalated quickly in recent days. Some states and cities have ordered dine-in service at restaurants to cease, public schools have been closed in many places, and people capable of working from home are increasingly doing so. All of this will have a negative impact on the economy in the short term.

The FAANG stocks -- Facebook, Apple, Amazon, Netflix, and Google parent Alphabet -- were not immune to the pessimism on Monday. Here's where these large tech stocks stood in the afternoon:


% Change

Facebook (NASDAQ:FB)










Data source: Yahoo! Finance.

So what

The pandemic may not have much of an impact on usage of Facebook's apps, but advertising sales could fall dramatically as businesses temporarily shut down to slow the spread of the virus. The travel industry has already been hit hard, and other industries like entertainment and retail are going to feel a lot of short-term pain. Analysts at Needham estimate that advertising spending for travel, retail, packaged goods, and entertainment account for as much as 45% of Facebook's revenue.

Apple is heavily exposed to the pandemic. Its supply chain, largely based in China, was turned upside down when the virus was mostly confined to that country. Now, demand for its products in other countries grappling with outbreaks could dry up. The company has closed all its retail stores outside of China until March 27, and it's anyone's guess how badly the pandemic will hurt sales of iPhones, iPads, and other gadgets.

A man holding his head looking at charts on a screen.

Image source: Getty Images.

With Amazon's retail business being mostly online, the company may be in a better position than traditional retailers to weather the storm. However, surging demand is already delaying some deliveries, and there's always the chance that some distribution centers will need to close if a warehouse worker tests positive for COVID-19. Amazon may be less exposed than Apple, but there's still plenty of uncertainty.

Netflix could benefit from more people staying home. There's just one problem: Creating more content is going to be tricky for a while. The company has temporarily shut down all TV and movie production for two weeks, and that shutdown could last much longer if the pandemic isn't brought under control. Netflix may have to make do with its existing content library for a while, potentially leading to increased churn as subscribers dump the service at an increased rate.

Like Facebook, Alphabet's Google could see advertising spending on its platform plummet as demand for a wide variety of products and services dries up. Usage of its services, particularly YouTube, could surge as more people stay home. But that won't matter much if companies are unable or unwilling to shell out for advertising.

Now what

The novel coronavirus pandemic will impact the U.S. economy in a variety of ways. There will be first-order effects, like tumbling demand for air travel, and second-order effects, like lower demand for advertising from travel companies. There will also be plenty of unforeseen consequences that make predicting anything very difficult.

All the FAANG companies, except for Netflix, have strong balance sheets and will be able to weather pretty much any storm. How long this storm lasts, and how bad it gets, is the trillion-dollar question.