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Dow closes more than 600 points lower after indecisive midterms, crypto selloff

PIMCO's Libby Cantrill breaks down what the midterm results mean for markets

Stocks were lower on Wednesday — following recent market gains — as results of the midterm elections provided no clear answers about who would control Congress yet. A crypto selloff also weighed on markets.

The Dow Jones Industrial Average fell 646.89 points, or about 1.95%, to 32,513.94. The decline was led by Disney, which fell 13.2% after the entertainment giant missed analysts’ estimates on the top and bottom lines. The S&P 500 shed 2.08% to 3,748.57, and the Nasdaq Composite slid 2.48% to 10,353.17.

Stocks fell to session lows during Wednesday afternoon as the price of bitcoin dropped to a new bear market low. The declines occurred after crypto exchange Binance said it’s backing out of plans to acquire its rival FTX, citing the results of a due diligence exam, as well as recent reports of mishandled customer funds and alleged U.S. agency investigations of FTX. The decision weighed on overall risk sentiment and dragged down the tech sector.

The stock market came off of three-straight days of gains into the election, where Wall Street was expecting Republicans to gain ground and block any future tax and spending plans. But control of Congress was not clear. NBC News was not yet projecting control of the House of Representatives with an NBC estimate suggesting Republicans could win 222 seats, which would be a narrow majority.

In one of the key races that could determine Senate control, Democrat John Fetterman defeated Republican Mehmet Oz for the pivotal Senate seat in Pennsylvania, according to an NBC News projection. A key Senate race in Georgia between Democratic Sen. Raphael Warnock and Republican former NFL player Herschel Walker will head to a Dec. 6 runoff, according to Secretary of State Brad Raffensperger. A critical Senate race in Nevada is unresolved.

“Election results are still uncertain, but the red wave that models, investors, and betting markets anticipated did not materialize, and near-term, that will add to already elevated volatility,” Dennis DeBusschere of 22V Research wrote in a Wednesday note.

Investors were also weary ahead of the October consumer price index report due out on Thursday morning at 8:30 a.m. ET. Economists polled by Dow Jones anticipate that headline CPI grew by 7.9% from the prior year, down slightly from September’s gain of 8.2%.

“Inflation is enemy number one for the Fed, and if you see the core CPI print creep up, I believe that the market would have a negative reaction to that,” Allianz Investment Management’s Johan Grahn said.

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