(Bloomberg) — US equity-index futures fluctuated between gains and losses as corporate performance showed signs of stress and midterm elections failed to yield a Republican sweep that investors had anticipated.
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December contracts on the Nasdaq 100 and S&P 500 indexes were little changed, a day after US stocks capped a three-day rally. News Corp. and Walt Disney Co. tumbled at least 8% each in premarket New York trading after posting disappointing results. A selloff in cryptocurrencies deepened, sending Bitcoin toward the biggest four-day slump since June. Oil slid on sluggish demand outlook from China.
Equity and bond investors had hoped for a Republican comeback in Congress, with the best outcome seen as GOP control of both the House of Representatives and Senate. But US voters delivered a mixed verdict, with Republicans heading for control of the House by smaller margins than forecast and the race for Senate still wide open. That left Thursday’s inflation report the next catalyst for markets.
“The Republican aim of controlling both houses hangs by a thread,” Chris Beauchamp, the chief markets analyst at IG Group in London, wrote in a note. “A divided House might mean the partisan battles over spending and the debt ceiling are not quite as dramatic or vitriolic, but this is unlikely to brighten the policy outlook markedly. Instead, the focus will likely return to the Federal Reserve and the US economy.”
Republicans made gains in their drive to take control of Congress but many of the closest races had yet to be called. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results.
Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies.
News Corp. plunged 9.3% in premarket trading after posting first-quarter adjusted earnings that missed the average analyst estimate. Walt Disney lost 8% as quarterly results missed across the board.
Of the 452 S&P 500 companies that have reported earnings so far this season, 110 have failed to meet analyst forecasts. Meanwhile, 12-month blended forward estimates for profit at the gauge’s companies have fallen 2.7% since mid-September.
Treasuries fluctuated between gains and losses Wednesday. The dollar halted a three-day slump and posted a modest advance.
In Europe, the equity benchmark fell for the first time in four days, dragged by travel- and automotive-industry shares. Chinese developers jumped the most in eight months as a regulator expanded financing support for the sector.
Cryptocurrencies slipped further as Binance Holdings Ltd.’s potential takeover of embattled rival exchange FTX.com highlighted how strains in the digital-asset industry are buffeting some of its top players. Bitcoin traded as much as 7.7% lower.
Thursday’s consumer-price-index data may be the next event risk for the Fed’s policy rate and comes on the heels of core consumer prices rising more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the central bank’s comfort zone.
“The market is still going to fixate on inflation, which is going to stay high and sticky at least over the next couple of quarters,” Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs Asset Management, said on Bloomberg Television.
Key events this week:
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EIA oil inventory report, Wednesday
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US wholesale inventories, MBA mortgage applications, Wednesday
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Fed officials John Williams, Tom Barkin speak at events, Wednesday
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US CPI, US initial jobless claims, Thursday
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Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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Futures on the S&P 500 were little changed as of 6:21 a.m. New York time
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Futures on the Nasdaq 100 were little changed
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Futures on the Dow Jones Industrial Average fell 0.2%
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The Stoxx Europe 600 fell 0.4%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro fell 0.1% to $1.0060
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The British pound fell 0.7% to $1.1466
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The Japanese yen was little changed at 145.62 per dollar
Cryptocurrencies
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Bitcoin fell 4.6% to $17,835.44
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Ether fell 9% to $1,215.75
Bonds
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The yield on 10-year Treasuries advanced one basis point to 4.13%
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Germany’s 10-year yield declined four basis points to 2.25%
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Britain’s 10-year yield was little changed at 3.55%
Commodities
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West Texas Intermediate crude fell 0.5% to $88.48 a barrel
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Gold futures fell 0.2% to $1,712.50 an ounce
–With assistance from Vildana Hajric, Muyao Shen and Tassia Sipahutar.
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