US stocks fell sharply on Wednesday and the dollar rose as investors awaited both the outcome of the US midterm elections and key consumer price data that could influence the Federal Reserve’s interest rate policy. The deal for major cryptocurrency exchange FTX fell late in the session as larger rival Binance said it was pulling out, news that raised concerns about the sector’s stability.
Stocks in Europe and Wall Street fell after the outcome of midterm elections remained unclear as a better-than-expected showing by Democrats muddied the outlook for spending and financial regulation. “After several days of positive market activity, the fact that there is uncertainty about the outcome of the midterm elections today is causing it to decline,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“Markets need certainty, they don’t have it yet.” Stock markets have performed better under a divided government.
According to data analyzed since 1932 by RBC Capital Markets, the average annual return of the S&P 500 was 14% in a divided Congress and 13% in a Republican-controlled Congress under a Democratic president. That compares to 10% when Democrats controlled both the presidency and Congress. “The market is going to get what it wants: it’s going to get a divided government. That means the shutdown is going to be the agenda for the next two years,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“It doesn’t change costs dramatically, but it also prevents any material increase in costs,” he said. On Wall Street, the Dow Jones Industrial Average was down 1.95%, the S&P 500 was down 2.08% and the Nasdaq Composite was down 2.48%.
MSCI’s broadest global index fell 1.64% and the pan-European STOXX 600 fell 0.30%. Stocks rose overnight in Asia after election results came in. Walt Disney Co fell 13.16%, its biggest one-day decline in 21 years, after reporting a costly entertainment loss from its broadcast to video, while Meta Platforms Inc. gained 5.18% after the Facebook parent said it would cut 13% of its workforce.
Investors cheered Meta’s decision to cut costs, but a weak ad market points to a tough economic outlook for the company as the Fed steps up efforts to tame inflation. Data on the US consumer price index (CPI) is due on Thursday, and economists polled by Reuters expect both the monthly and annual numbers to fall to 0.5% and 6.5% respectively in October.
Many in the market believe the U.S. central bank could cut its target lending rate if the data shows a slowdown in inflation, but others see that, as Fed Chairman Jerome Powell indicated last week, it will be “long-term.” higher”. “Obviously investors are hoping that the pace of inflation is going to start to change, and if that doesn’t happen, I think that’s going to cause additional volatility in the markets,” Arone said.
Federal fund futures show that the Fed’s target rate will reach 5.096% next June, indicating that policymakers will need to raise rates by more than 125 basis points from the current range of 3.75-4.0%. Bitcoin, the largest cryptocurrency by market cap, fell 13.42% to $16,061.00, which was last seen in November 2020.
The euro fell 0.59% to $1.0013, down from $1.0096 overnight, its highest level since September 13. The yen was up 0.45% against the dollar at 146.36, after weakening overnight to 145.17, its lowest level against the Japanese currency. this month
The yield on 10-year Treasury notes decreased by 3.1 basis points and amounted to 4.097%. Oil prices fell after industry data showed U.S. crude stockpiles rose more than expected and worries that a surge in COVID-19 cases in top importer China will hurt demand for the fuel.
U.S. crude futures were down $3.08 at $85.83 a barrel, while Brent crude futures were down $2.71 at $92.65. Gold prices fell after the dollar rose by millions in more than a month.
U.S. gold futures were down 0.1% at $1,713.70.
(This story has not been edited by Devdiscourse staff and is automatically generated from a syndicated feed.)