US futures wobble as midterms return mixed verdict: Markets Wrap

US futures wobble as midterms return mixed verdict: Markets Wrap

(Bloomberg) — U.S. stock index futures have fluctuated between gains and losses as corporate performance showed signs of stress and midterm elections failed to produce a Republican breakthrough that investors had been expecting.

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December contracts on the Nasdaq 100 and S&P 500 indices were little changed, a day after US stocks ended a three-day rally. news corp and Walt Disney Co. each fell at least 8% in premarket New York trading after posting disappointing results. A sell-off in cryptocurrencies deepened, sending Bitcoin into its biggest four-day plunge since June. Oil slid out of China on sluggish demand prospects.

Stock and bond investors had been hoping for a Republican comeback in Congress, with the best result seen as GOP control in both the House and Senate. But US voters gave a mixed verdict, with Republicans heading for control of the House by a smaller margin than expected and the race for the Senate still wide open. That left Thursday’s inflation report as the next catalyst for markets.

“The Republican goal of controlling both houses is hanging by a thread,” wrote Chris Beauchamp, chief market analyst at IG Group in London, in a note. “A divided house could mean that partisan squabbles over spending and the debt ceiling aren’t quite as dramatic or caustic, but that’s unlikely to brighten the policy outlook appreciably. Instead, the focus will likely return to the Federal Reserve and the US economy.”

Republicans made progress in their bid to take control of Congress, but many of the closest races had yet to be called. The final result may not be known for days or even weeks if the results are as close as the polls suggest and if the losers question the results.

The optimism for equities was supported by a history of robust performance after interim results. Stocks have tended to thrive in times when government has been constrained and polls suggested Republicans could make gains, calling Democratic politics into question.

news corp tumbled 9.3% in premarket trading after posting first-quarter adjusted earnings that fell short of the average analyst estimate. Walt Disney lost 8% as quarterly results were missed across the board.

Of the 452 S&P 500 companies to report earnings so far this season, 110 have fallen short of analysts’ forecasts. Meanwhile, 12-month blending forward estimates for earnings at the gauge’s companies are down 2.7% since mid-September.

Government bonds fluctuated between gains and losses on Wednesday. The dollar halted a three-day slide and posted a modest gain.

In Europe, the equity benchmark fell for the first time in four days, dragged by travel and auto industry stocks. Chinese developers are up the most in eight months as a regulator expanded funding support for the sector.

Cryptocurrencies continued to slide as Binance Holdings Ltd.’s potential acquisition of embattled rival exchange FTX.com highlighted how tensions in the digital asset industry are shaking some of its top players. Bitcoin traded as much as 7.7% lower.

Thursday’s CPI data could be the next event risk for the Fed’s interest rates, following core consumer prices rising more-than-expected to a 40-year high in September. Even if prices ease, the CPI is well above the central bank’s comfort zone.

“The market will still be fixated on inflation, which will remain high and persistent for at least the next few quarters,” Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs Asset Management, told Bloomberg Television.

Important events this week:

  • EIA Oil Inventory Report, Wednesday

  • US Wholesale Inventories, MBA Mortgage Applications, Wednesday

  • Fed officials John Williams and Tom Barkin speak at events on Wednesday

  • US CPI, US Initial Jobless Claims, Thursday

  • Fed officials Lorie Logan, Esther George and Loretta Mester speak at events on Thursday

  • University of Michigan consumer sentiment, Friday

Some of the key movements in the markets:

Stocks

  • Futures on the S&P 500 were little changed at 6:21 am New York time

  • Futures on the Nasdaq 100 were little changed

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 fell 0.4%

  • The MSCI World Index has hardly changed

currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.0060

  • The British pound fell 0.7% to $1.1466

  • The Japanese yen was little changed at 145.62 per dollar

cryptocurrencies

  • Bitcoin fell 4.6% to $17,835.44

  • Ether fell 9% to $1,215.75

Bind

  • The 10-year government bond yield rose one basis point to 4.13%

  • The 10-year German government bond yield fell four basis points to 2.25%

  • The UK’s 10-year yield was little changed at 3.55%

raw materials

  • West Texas Intermediate Crude fell 0.5% to $88.48 a barrel

  • Gold futures fell 0.2% to $1,712.50 an ounce

–With support from Vildana Hajric, Muyao Shen and Tassia Sipahutar.

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