Facebook‘s sudden and stunning vulnerability threatens to undercut the foundation of the stock market rally since Donald Trump was elected president.

The social media giant has been the cornerstone of the FAANG trade — Facebook, Amazon, Apple, Netflix and Google parent Alphabet. Just by itself, Facebook has gained more than 80 percent since Trump’s November 2016 victory. The S&P 500 more broadly is up some 35 percent during the time period.

But a disappointing earnings report Wednesday, particularly regarding the growth forecast, had investors fleeing the company Thursday and pulling down tech stocks in general. Other market indexes were not impacted as strongly.

Facebook was off more than 18 percent Thursday morning, costing the company more than $120 billion off its market cap. The Facebook loss pulled down the technology sector broadly, with the Nasdaq index losing more than 1 percent.

Of the other FAANG components, Apple shares were slightly positive while Amazon fell 2.2 percent and both Netflix and Alphabet also were negative.

Since the election, information technology stocks on the S&P 500 have gained 63.8 percent, easily the best among all sectors on the index, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

As those gains have occurred, the FAANG stocks have assumed outsized positions in many broad-market index funds.

For instance, the top four holdings in the $266 billion SPDR S&P 500 Trust ETF are Apple, Microsoft, Amazon and Facebook. Together, the four companies comprise more than 10 percent of the index’s weighting.

“This is just another example of a classic, late-cycle development often found in tired bull markets – the hot money chase indeed,” Larry McDonald, author of the Bear Traps Report newsletter, said in a recent post. “As more and more capital flows into passive index funds, more and more FAANG shares MUST be owned. Returns appear far better than the rest of the market’s offerings, so even more capital flows in – it’s a toxic, self-fulfilling cycle – when broken the declines will be HISTORIC.”

McDonald said he expects the FAANG stocks to be targeted by the government, which will have to fund new tax revenue to pay for underfunded entitlement programs.

The good news is that the rest of the market was generally undisturbed for now. In fact, the Dow industrials, of which Facebook is not a member, surged some 150 points early on, boosting the bluechips by more than 0.5 percent. Even the S&P 500, which does have Facebook exposure, was off only fractionally.

Originally published at CNBC

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