Stock futures fall as election results change


U.S. stocks fell on Wednesday after three days of gains, as investors mulled a different decision from midterm election results and much-anticipated inflation data.

The S&P 500 (^GSPC) was down more than 2%, while the Dow Jones Industrial Average (^DJI) was down about 650 points, or about 2%. The tech-heavy Nasdaq Composite ( ^IXIC ) was down almost 2.5%, or 260 points.

In a three-day rally in stocks, investor optimism was built on expectations that Republicans would gain ground and create gridlock in Washington. But the red wave of the Republicans could not materialize in the US mid-term elections. Democrats managed to gain an important seat in the Senate, John Fetterman defeated Mehmet Oz in the Pennsylvania race. As of late Wednesday, control of both the House and Senate remains in the balance.

Meanwhile, Georgia’s US Senate race is heading into a runoff, with none of the major candidates winning a majority of the vote.

According to LPL Financial, the year after a midterm election tends to see the highest equity returns.

“Going back to 1951, a Republican or a Democratic president with a divided Congress, the two most likely scenarios in this election, saw the S&P 500 Index return more than 17%, versus an overall average of just over 12%.” Barry Gilbert, asset allocation strategist at LPL Financial, wrote in a note.

The final outcome of the interim results may not be known for days or weeks, but Wall Street experts do not expect a big move in the markets.

“We expect the impact of the election to turn the market positive, partly because we’re putting it behind us,” Gilbert said. “As far as the markets are concerned, the impact of policy will be minimal and market participants will continue to focus more on central bank policy and inflation.”

Investors will turn their attention to Thursday morning’s inflation report as the Bureau of Labor Statistics releases the Consumer Price Index (CPI) for October. Economists polled by Bloomberg expect headline CPI to come in at an annual rate of 7.9%, up from 8.2% a month ago. Core CPI remains well above the Fed’s comfort zone, even as the report shows prices are starting to moderate.

“We’re still well above that 2% target,” Rebecca Felton, chief market strategist at RiverFront Investment Group, told Yahoo Finance Live on Tuesday. “So we don’t believe the Fed is going to ease any time soon.” So rates will stay higher for longer and it is clear that inflationary pressures will remain higher for longer.

In corporate news Wednesday, Meta Platforms ( META ) said the social media giant will cut more than 11,000 jobs, or about 13% of its workforce, as the company restructures to cope with a declining digital advertising market. Disney ( DIS ) reported weaker-than-expected fourth-quarter earnings on Tuesday, with its streaming business reeling from broader losses that offset strong performance at its theme parks. Disney shares fell more than 13%.

Elsewhere in the markets, the largest US homebuilder DR Horton Inc. (DHI) showed buyers canceled nearly a third of deals in the fourth quarter, the latest red flag for the housing market. Tesla shares also fell on Wednesday after a filing showed CEO Elon Musk sold 19.5 million shares between Nov. 4 and 8. The sale followed his purchase of Twitter for $44 billion.

On the earnings front, Rivian (RIVN), Wynn Resorts (WYNN), and Bumble (BMBL) It is among the companies that will report earnings on Wednesday.

Cryptocurrencies were under pressure as investors digested news that cryptocurrency exchange Binance said it would walk away from an initial bid to acquire rival FTX after reviewing the company’s structure and books. Bitcoin fell more than 10% to its lowest level in two years.

Stocks tied to cryptocurrencies also took a hit. Shares of rival cryptocurrency exchange Coinbase ( COIN ) fell 5.3%. Robinhood Markets (HOOD) lost more than 7%. FTX founder Sam Bankman-Fried bought 7.6% of the company’s Class A shares, according to an SEC filing in May. In an interview with the Wall Street Journal, he said his company is open to a partnership with Robinhood.

In bond markets, the yield on the 10-year Treasury note reached 4.1% on Wednesday. In the oil markets, Brent oil, the international benchmark, dropped 1.1% to $94.35 per barrel, extending its losses for a third day, while the dollar also erased losses.

Dani Romero is a reporter for Yahoo Finance. Follow him on Twitter @daniromerotv

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