[New York Stock Market] Decline Amid US Election Uncertainty and CPI Caution... Nasdaq Down 2.48%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 9th (local time) amid shattered expectations of a Republican landslide in the midterm elections and ongoing vote-counting uncertainties, coupled with cautious sentiment ahead of the Consumer Price Index (CPI) announcement. The price of the cryptocurrency Bitcoin plunged to its lowest level in about two years, sharply freezing overall risk asset appetite.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,513.94, down 646.89 points (1.95%) from the previous session. The large-cap focused S&P 500 index fell 79.54 points (2.08%) to 3,748.57, and the tech-heavy Nasdaq index dropped 263.02 points (2.48%) to 10,353.17.

All sectors of the S&P 500 showed declines. International crude oil prices fell for the third consecutive trading day, highlighting weakness in energy stocks. Occidental Petroleum plunged 9.22% from the previous close. ExxonMobil fell 4.47%, and Chevron dropped 4.0%. This was partly due to expectations that the Biden administration’s pressure on oil companies would increase as the Democrats were expected to hold the Senate following the election.

Technology stocks also underperformed. Tesla fell more than 7% after CEO Elon Musk disclosed the sale of billions of dollars worth of shares. Semiconductor stocks showed weakness as well, with Nvidia and AMD falling 5.66% and 6.16%, respectively.

Among individual stocks, Walt Disney, which released disappointing earnings after the previous day’s close, dropped more than 13%. Lucid Motors fell nearly 17% after reporting a third-quarter loss. Other companies in the same sector, such as Nio (-12.41%) and Rivian (-11.87%), also slid consecutively. On the other hand, Meta closed up 5.18% following announcements of layoffs and extended hiring freezes.

Investors are closely watching the vote-counting situation from the midterm elections held the previous day and awaiting the CPI announcement scheduled for the next day. Disappointment over the absence of the expected red wave, profit-taking after a three-day rally ahead of the election, and caution ahead of the CPI release were interpreted as factors behind the day’s market decline.

Currently, the general consensus is that the Republican Party will secure the majority in the House of Representatives, while the Democrats are expected to hold the narrowly contested Senate due to unexpectedly strong performance. The results are not yet finalized. In the closely contested state of Georgia, the Senate election will proceed to a runoff in December. Dennis Deboucher noted in an investor note, "Although the election results remain uncertain, the red wave expected by prediction models, investors, and betting markets did not materialize, and the heightened short-term volatility is likely to increase."

The market appears to be paying more attention to the CPI data, which could provide hints about the Federal Reserve’s (Fed) future actions, rather than the midterm election results. Traditionally, midterm elections have been favorable for the stock market, but this year, with the Fed’s aggressive tightening continuing amid growing recession concerns, the direct impact of the election on the stock market is considered limited.

James Atti, director at Aberdeen, said, "Historically, midterm elections are favorable for risk assets. That may be true, but the stock market will still decline in the meantime." Johan Grahan of AllianzIM stated, "Inflation is the Fed’s biggest enemy. If core CPI rises, the stock market will react negatively."

The October CPI year-over-year increase, to be released the next day, is expected to slow down from the peak of 9.1% in June and 8.2% in September to 7.9%. If the CPI slowdown is confirmed and it falls below the 8% range, it could support the Fed’s easing of interest rate hikes. The October CPI is forecasted to rise 0.6% month-over-month. Core CPI, excluding volatile energy and food prices, is estimated to have increased 6.5% year-over-year and 0.5% month-over-month. John Williams, president of the New York Federal Reserve Bank, mentioned in a speech that "long-term inflation expectations in the U.S. are generally aligned with the Fed’s target and are quite stable."

In the New York bond market, Treasury yields slightly declined as investors monitored the midterm election results. The yield on the 10-year U.S. Treasury fell to around 4.08%, hitting as low as 4.05% during the session. The 2-year Treasury yield, sensitive to monetary policy, dropped to about 4.58%.

Bitcoin, which plunged sharply the previous day, continued its decline. It fell more than 12% from the previous close, threatening the $16,000 level. The Bitcoin sell-off contributed to a broader flight to safety. The U.S. dollar, a representative safe-haven asset, strengthened. The Dollar Index, which measures the dollar’s value against six major currencies, recovered to the 110 level.

Oil prices fell for the third consecutive trading day. On the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude oil closed at $85.83 per barrel, down $3.08 (3.5%) from the previous session. Uncertainties surrounding China’s zero-COVID policy and rising crude inventories influenced the decline.

This content was produced with the assistance of AI translation services.