Wall St slides as tight race in midterm election blurs outcome


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U.S. stock indexes fell on Wednesday as the outcome of a tightly contested midterm election remained unclear, with investor focus shifting to inflation data on Thursday for clues on the path of future interest rate hikes.

Republicans were still favored to win control of the House of Representatives but key races were too close to call, with a better-than-expected showing by Democrats diminishing the prospect of a “red wave.”

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“It is simply uncertainty that (the) Wall Street does not like since a lot of the races have yet to be fully concluded… you don’t get a clear idea as to who has majority in the Senate,” said Sam Stovall, chief investment strategist at CFRA Research in New York. The S&P 500 and the Dow were also weighed down by a 12.6% drop in Walt Disney Co as the entertainment giant racked up more losses from its push into streaming video. The energy sector was the top loser among the 11 major S&P sectors, down 2.9%, on lower oil prices. Real-estate and health care were the only gainers.

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Clean energy shares, which typically benefit under a Democratic leadership, rose with the Invesco Solar ETF adding 2.2%.

A split government, with a Democrat in the White House, has historically been favorable for stock markets as it paves the way for partisan standoffs on contentious policy changes such as the federal debt limit.

However, a surprise victory for Democrats could raise concerns about tech-sector regulation as well as budget spending that could add to red-hot inflation, according to market strategists.

With the election outcome still uncertain, investors were focusing on Thursday’s inflation data, which is expected to shed more light on whether the Fed could soften its aggressive stance on interest rate hikes.

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“CPI is one of the more important inputs in terms of the inflation environment. You’d be hard pressed to find many investors that want to make a big bet in front of (the report),” said Art Hogan, chief market strategist at B. Riley Financial.

Traders now see a 57% chance of that the Fed would raise rates by 50 basis points in December, according to CME Group’s Fedwatch tool.

At 12:39 p.m. ET, the Dow Jones Industrial Average was down 346.52 points, or 1.04%, at 32,814.31, the S&P 500 was down 37.92 points, or 0.99%, at 3,790.19, and the Nasdaq Composite was down 141.09 points, or 1.33%, at 10,475.12.

Adding to a risk-off mood were continued concerns about the stability of the cryptocurrency sector and the financial health of major exchange FTX despite plans for a rescue deal from bigger rival Binance.

Meta Platforms Inc climbed 7.4% as the Facebook-parent said it would let go of 13% of its workforce, or more than 11,000 employees, in one of the biggest tech layoffs this year.

Declining issues outnumbered advancers for a 2.43-to-1 ratio on the NYSE and for a 2.19-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52-week highs and 14 new lows, while the Nasdaq recorded 48 new highs and 334 new lows.

(Reporting by Devik Jain, Bansari Mayur Kamdar, Amruta Khandekar in Bengaluru; Editing by Savio D’Souza and Arun Koyyur)


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