U.S. stocks fell on Wednesday after three days of gains as investors reflect on a mixed verdict from the midterm election results that challenged expectations about who will control the U.S. House and Senate.
The S&P 500 (^GSPC) lost 1.8%, while the Dow Jones Industrial Average (^DJI) fell 1.6%. The tech-heavy Nasdaq Composite (^IXIC) fell 2.2% during the afternoon session.
Shares rallied for a third straight day on Tuesday, with major indexes wobbling throughout the day but ending higher at the market close.
Investor optimism was built on expectations that Republicans would gain ground and create a stalemate in Washington. But the Republican red wave did not materialize in the US midterm elections. Democrats managed to flip a crucial Senate seat, with John Fetterman beating Mehmet Oz in the race in Pennsylvania. Wednesday morning, the control of the House and the Senate remains in the balance.
The U.S. Senate race in Georgia is heading into a runoff, with neither leading candidate on track to win a majority of votes.
The year following the midterm elections tends to see the highest equity returns, according to LPL Financial.
“Dating back to 1951, a Democratic president with a Republican or split Congress, the two most likely cases in this election, has seen an average S&P 500 index return of over 17% versus an overall average of just a little more than 12%,” Barry Gilbert, asset allocation strategist at LPL Financial, wrote in a note.
The final outcome of the midterm results may not be known for days or weeks, but Wall Street pros don’t expect a big move in the markets.
“We expect the impact of the election to tip the market positive, in part because we will have it behind us,” Gilbert added. “As far as markets are concerned, the policy impact will likely be small and market participants will continue to focus more on central bank policy and inflation.”
At this point, investors will turn their attention to Thursday morning’s inflation report. Economists polled by Bloomberg expect headline CPI at an annual rate of 7.9%, down from 8.2% the previous month. Even though the report shows that prices are beginning to moderate, core CPI remains well above the Fed’s comfort zone.
“We’re still well above that 2% target,” Rebecca Felton, senior strategist at RiverFront Investment Group, told Yahoo Finance Live on Tuesday. “So we don’t think the Fed is going to ease anytime soon in the short term. And so rates will stay higher for longer and inflationary pressures will clearly stay higher for longer as well.
In business news, Meta Platforms said the social media giant would cut more than 11,000 jobs, or about 13% of its staff, as the company restructures to deal with the crashing market digital advertising. Disney (DIS) reported weaker-than-expected fourth-quarter results on Tuesday as the streaming business led to larger losses that offset strong performance at theme parks. Disney stock fell more than 12% in afternoon trading.
On the earnings side, Rivian (RIVN), Wynn Resorts (WYNN) and Bumble (BMBL) are among the companies expected to report results on Wednesday.
Elsewhere, cryptocurrencies were under pressure as investors digested whether crypto exchange Binance would acquire rival FTX. Bitcoin fell more than 15% to trade at its lowest level in two years.
Cryptocurrency-related stocks also took a hit. Shares of cryptocurrency exchange competitor Coinbase (COIN) fell 5.3%. Robinhood Markets (HOOD) fell more than 7%. According to an SEC filing in May, Sam Bankman-Fried, the founder of FTX, purchased 7.6% of the company’s Class A shares. In an interview reported by The Wall Street Journal, he said his company was open to partnerships with Robinhood.
In bond markets, the yield on the 10-year Treasury bill rose slightly to around 4.1% on Wednesday. And in oil markets, Brent crude, the international benchmark, slipped 1.1% to $94.35 a barrel, extending losses for the third straight day, while the dollar also erased losses.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
Click here for the latest stock market news and in-depth analysis, including events moving stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app to Apple Where android
Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedInand Youtube
#Live #stock #market #news #updates #Stocks #fall #congressional #scrutiny #remains #air