Nov 9 (Reuters) – Wall Street tumbled on Wednesday as Republican gains in the midterm elections looked more modest than some expected, with investors also focusing on upcoming inflation data that will provide clues on the severity of future interest rate hikes.
Major indexes added lower as Treasury yields rose further after a poor auction of 10-year notes by the US Treasury.
Republicans were still favored to take control of the House of Representatives, but key races were too close to be called, with better-than-expected performance by Democrats diminishing the prospect of a so-called red wave of Republican gains.
“What was really more expected in the market was a red wave,” said Jay Hatfield, CEO of Infrastructure Capital Management in New York. “I think we were in a unique situation where the more Republicans gained, the better the market would have been. At least there would have been a strong rally in some stocks, like defense and energy stocks.”
Also hurting sentiment, Walt Disney Co (DIS.N) fell about 13% after the entertainment heavyweight reported more losses from its push into video streaming.
Tesla Inc (TSLA.O) fell around 6% to its lowest level in two years after chief executive Elon Musk revealed on Tuesday night that he had sold $3.95 billion worth of shares in the electric vehicle maker days after closing the $44 billion deal for Twitter. Inc.
Of the 11 S&P 500 sector indices, 10 fell, led by energy (.SPNY), down 3.75%, followed by a 2.74% loss in consumer discretionary (.SPLRCD).
Clean energy stocks, which typically benefit under Democratic leadership, rose with ETF Invesco Solar (TAN.P) adding 0.8%.
Wednesday’s decline on Wall Street ended a three-day rally in which the S&P 500 gained nearly 3%.
With the election outcome still uncertain, investors turned to October inflation data due out Thursday, which could shed more light on the Fed easing its aggressive stance on interest rate hikes. interest.
“The CPI is one of the most important inputs into the inflation environment. You would be hard pressed to find many investors willing to put a big bet ahead of (the report),” said strategist Art Hogan. market leader. at B. Riley Financial.
Traders are divided on whether the Fed will raise rates by 50 basis points or 75 basis points in December, according to CME Group’s Fedwatch tool.
In afternoon trading, the S&P 500 was down 1.55% at 3,768.63 points.
The Nasdaq fell 1.97% to 10,407.33 points, while the Dow Jones Industrial Average fell 1.51% to 32,658.81 points.
Investors have also raised concerns about the health of top cryptocurrency exchange FTX, with some wondering if a bailout deal from biggest rival Binance will materialize, as the company has reportedly been part of a regulatory probe.
Meta Platforms Inc (META.O) jumped 5.9% after Facebook’s parent company said it was cutting 13% of its workforce, or more than 11,000 employees, in one of the biggest layoffs technology this year.
Declining stocks outnumbered rising stocks in the S&P 500 (.AD.SPX) by a ratio of 5.4 to one.
The S&P 500 posted 10 new highs and 15 new lows; the Nasdaq recorded 53 new highs and 377 new lows.
Reporting by Noel Randewich in Oakland, California Additional reporting by Devik Jain, Bansari Mayur Kamdar and Amruta Khandekar in Bengaluru Editing by Arun Koyyur and Matthew Lewis
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