Election forecast missed: Wall Street lets air

After several days of gains, US stocks are turning again.

Election forecast missed: Wall Street lets air

After several days of gains, US stocks are turning again. The course of the midterm elections so far does not give reason to hope for the forecast change in fiscal policy. And so the eyes turn to the inflation data.

After the results of the midterm elections in the US and before the release of the inflation data for October, the indices on Wall Street fell significantly in the middle of the week. The Democrats probably lost their majority in the House of Representatives in the so-called midterms; but the race was so close that initially no winner was declared. Control of the Senate may not be decided until after a Georgia runoff next month.

Investors had braced themselves for a possible Republican victory. However, the results so far suggest that "there is nothing remotely controversial in Congress, which means we are virtually certain that current fiscal policies will remain in place: no tax cuts and no major spending for the next two years," said Brad McMillan, chief investment officer at Commonwealth Financial Network. "The only really important things are the Federal Reserve, inflation and the job market," said James Athey, investment director at Abrdn.

Investors are hoping for an easing of inflationary pressures ahead of Thursday's highly anticipated October CPI data, which would allow the Fed to slow the pace of monetary tightening.

The Dow Jones index fell 2.0 percent to 32,514 points, closing near its low for the day. The S

In the course of trading, the market had to process a number of company numbers. Among other things, Disney missed expectations with sales and earnings, which pushed the share down 13.2 percent. This made the title the weakest value in the Dow. Meta Platforms gained 5.2 percent after Facebook's parent company confirmed 11,000 job cuts. The reason is falling advertising revenue. In addition, Meta is becoming more cautious about the outlook for investments in the coming year.

The dollar rebounded significantly from the recent drop. The dollar index gained 0.9 percent. The outcome of the midterm elections had little impact. On the other hand, the forthcoming inflation data should also provide an important impetus here.

Bitcoin recorded heavy losses. It fell 12.3 percent to $16,207, a two-year low. Crypto exchange Binance is likely to pull out of a deal to buy collapsing competitor FTX. After Binance conducted due diligence on FTX, the company was caught off guard by a large hole in its books, according to a person familiar with the matter.

Yields on the US bond market showed an inconsistent trend. While 30-year yields hit a two-week high, those at the short end of the market fell. Participants spoke of positioning ahead of the inflation data.

Oil prices came under significant pressure after US weekly crude inventories rose against expectations. Analysts, on the other hand, had expected a slight decline. The uncertainty about demand in China would have had an additional impact. In addition, there is still no concrete evidence of a planned easing of the Covid restrictions in China. Brent and WTI were down as much as 3.8 percent.