Stocks fell on Wednesday, following recent market gains, as midterm election results still did not provide clear answers about who would control Congress.
The Dow Jones Industrial Average fell 224 points, or 0.7%. The S&P 500 fell 0.6% and the Nasdaq Composite fell 0.7%.
The stock is coming off three straight days of gains in the election, where Wall Street expected Republicans to gain ground and block any future tax and spending plans. The Dow rose 333 points on Tuesday for its third straight session of gains of more than 1%.
But Congressional control was not clear. NBC News was not yet projecting control of the House of Representatives with an NBC estimate suggesting Republicans could win 220 seats, which would be a narrow majority.
In one of the key races that could determine control of the Senate, Democrat John Fetterman defeated Republican Mehmet Oz for the key Senate seat in Pennsylvania, according to an NBC News projection. Oz was backed by former President Donald Trump, whose endorsed candidates saw patchy levels of success across the country. Critical Senate races in Georgia and Nevada were not resolved.
“The election results are still uncertain, but the red wave that models, investors and betting markets predicted did not materialize, and in the short term, this will add to already high volatility,” wrote Dennis DeBusschere in a Wednesday note.
While the election captured the market’s attention, investors may want to move on as the Federal Reserve raises interest rates to reduce inflation, which could send the economy into recession .
The political landscape “will fascinate the chatterbox in Washington, but for markets, the focus will be on whether a recession is looming, whether the Fed will end its tightening this winter and whether a truce and negotiations in the war are possible of Ukraine”. wrote Greg Valliere, chief US policy strategist at AGF Investments.
The recent market rally came at the end of a strong seasonal period. Historically, stocks tend to rise after midterm elections and the political clarity that comes with them, and the last two months of the year are considered a bullish period for investors.
Shares in Facebook parent Meta Platforms rose more than 5% after the social media giant announced it will lay off more than 11,000 workers. Founder and CEO Mark Zuckerberg said he was too optimistic about growth and now needs to streamline the company.
One stock that weighed on futures was Disney, which fell more than 11% in early trading after the entertainment giant missed top- and bottom-line estimates for its fiscal fourth quarter.