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The midterm election is over, only not really. The election day itself is over but the election itself is still going. There are some races that are still too close to call, although reports suggest the GOP is likely to control the House by a slim margin. Meanwhile, it is possible that the Senate outcome might not be determined until December with a potential runoff election in Georgia.
So, it sounds like there will be a split Congress at least that will be labeled as a ticket for legislative gridlock the next few years. That is what the stock market had been expecting, yet it had been led to think by polling data that the GOP would have a larger majority in the House than it likely will.
This will give political pundits a lot to talk about in the days and weeks ahead and it will stir debate about what it could possibly mean for the 2024 presidential race.
What it means right now for the stock market is that the next few years likely won't include any new major spending plans or tax hikes. It could mean, however, since the GOP majority in the House would be so slim, that both parties will feel compelled to work together to avoid the "do-nothing Congress" label that might not sell well in the races that will be a part of the 2024 election.
Time will indeed tell, but if one wanted to be hopeful about these election matters, that would be something about which to think.
What we are seeing in the stock market this morning is some sell-the-news activity. The stock market had a nice, little run leading up to election day based on the gridlock angle. It appears that is going to be the case, so participants are taking some money off the table.
Currently, the S&P 500 futures are down 24 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 81 points and are trading 0.7% below fair value, and the Dow Jones Industrial Average futures are down 208 points and are trading 0.7% below fair value.
This negative disposition, though, isn't just a sell-the-election news response. There is also some selling in response to disappointing earnings news and/or guidance from the likes of Walt Disney (DIS), Affirm Holdings (AFRM), CarGurus (CARG), Roblox (RBLX), and Upstart (UPST), many of which were former growth stock darlings when interest rates were at the zero bound and the economy was roaring back from its pandemic lows.
Disney is the main drag on the Dow Jones Industrial Average futures. It is down 8.0%, feeling the pinch of investors' concerns about rising streaming costs and a possible recession that could adversely affect attendance at its theme parks.
Separately, there is likely some de-risking activity in the mix in relation to the crashy behavior seen in the cryptocurrency market yesterday that has been rooted in liquidity concerns involving FTX. Cryptocurrencies remain under pressure today, which will continue to feed worries about margin calls that could lead to some selling of stocks to meet those calls.
This is all part of the wet blanket that seems to be covering the equity futures market at the moment, not to mention the specter of the October Consumer Price Index tomorrow.
