Why Facebook stock slipped on Tuesday

Shares of the social media titan fell along with the broader market.

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Image source: Facebook

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Facebook (NASDAQ: FB) slipped on Tuesday along with a broader pullback in the market on a weak retail sales report. That was likely the culprit for the social media giant as the performance of its advertising business is closely tied to overall consumer spending. Also on Tuesday, Facebook said it would take down Taliban or pro-Taliban content, deeming the group a terrorist organization following its takeover of Afghanistan in recent days.

Facebook stock closed the day down 2.2%, while the S&P 500 edged down 0.7% and the Nasdaq lost 0.9%.

So what

Overall retail sales were worse than expected in July. The Census Bureau reported that total retail sales fell 1.1% from June to July with particular weakness in autos, clothing stores, and e-commerce. The biggest takeaway from the report seems to be that the delta variant of COVID-19 has become at least a modest headwind on reopening, delaying the return to offices and possibly dissuading Americans from other activities like travel.

Meanwhile, other sectors that had surged earlier in the pandemic like autos and e-commerce, two key sources of advertising revenue for Facebook, now seem to be normalizing as the pandemic-related tailwinds that they enjoyed start to fade.

Separately, the company said it was proactively removing pro-Taliban content, though the question of what to ban on the platform and how to do it has been a thorny one in the past. The Washington Post, for instance, reported that Taliban members have used WhatsApp to send out messages to Afghan citizens, and those incidents could be an eyesore for Facebook if they continue.

Now what

Facebook's 2% drop isn't something that should change any investor's thesis on the stock since such swings are normal, especially given the news about retail sales and the broader market sell-off. The company is also coming off an outstanding earnings report in the second quarter, and is likely to perform well in the third quarter as it laps the period last year that included the Facebook boycott.

That event is a reminder that Facebook faces some political risk, so investors may want to pay attention to how it handles the situation in Afghanistan.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Jeremy Bowman owns shares of Facebook. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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