Stocks were lower on Wednesday – after recent market gains – as the results of the midterm elections did not yet provide any clear answers about who would lead Congress.
The Dow Jones Industrial Average fell 224 points, or about 0.7%. The S&P 500 lost 0.6%, while the Nasdaq Composite slipped 0.7%.
Stocks are coming off three straight days of gains heading into the election, where Wall Street expected Republicans to gain ground and block any future tax and spending plans. The Dow climbed 333 points on Tuesday to gain its third straight session of more than 1%.
But Congress’ ruling was not clear. NBC News was not yet projecting control of the House of Representatives with NBC’s estimate suggesting Republicans could win 220 seats, which would be a slim majority.
In one of the key races that could decide control of the Senate, Democrat John Fetterman defeated Republican Mehmet Oz for the central Senate seat in Pennsylvania, according to NBC News projections. Oz had the support of former President Donald Trump, whose endorsed candidates saw impressive levels of success across the country. Crucial Senate races in Georgia and Nevada were unresolved.
“Election results are still uncertain, but the red wave that models, investors, and betting markets expected did not come, and near term, which will add to already elevated volatility,” wrote Dennis DeBusschere in a note on Wednesday.
While the election caught the market’s attention, investors may want to move on now as the Federal Reserve raises interest rates to reduce inflation, which could send the economy into recession.
The political landscape “will be interesting for Washington’s chattering class, but for the markets, the focus will be on whether a recession is on the cards, whether the Fed will end its tightening this winter, and whether a ceasefire and negotiations are possible in the Ukraine war ,” wrote Greg Valliere, chief US policy strategist at AGF Investments.
The market’s recent rally took place at the front end of a strong seasonal period. Historically, stocks tend to rise after midterm elections and the policy clarity it brings, and the last two months of the year are considered a bullish period for investors.
Facebook parent shares 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 weighing on the future is Disney, which fell more than 11% in early trading after the entertainment giant missed estimates on both the top and bottom lines for its fiscal fourth quarter.