Stocks rattled by crypto, earnings woes ahead of CPI: Markets Wrap

(Bloomberg) — U.S. stocks fell as a renewed selloff in cryptocurrencies and disappointing earnings weighed on risk sentiment ahead of a key inflation report. The dollar rose for the first time in four days.

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The S&P 500 paid off for a three-day rally, with all 11 major industrial groups in the red. The technology-heavy Nasdaq 100 fell the most among the benchmark indices, closing down 2.4%. The Walt Disney Co. and News Corp. fell after publishing results that did not meet expectations. Bitcoin fell below $16,000 to a level not seen since 2020, amid a growing sell-off in cryptocurrencies as Binance walked away from its planned takeover of FTX.com.

After the midterm elections failed to deliver a Republican victory, attention turned to the closely watched inflation report due Thursday for clues on the path to Federal Reserve policy.

“Elections matter, but other factors matter more to markets and the economy,” Keith Lerner, chief investment officer at Truist Wealth, said in a note. “The path to inflation, interest rates, monetary policy, the economy and earnings will continue to have the biggest influence on markets over the next year.”

Inflation in the US probably eased slightly in October, and the consumer price index and the core measure excluding food and energy were both seen to have cooled on an annual basis. But with the overall annual inflation rate beating forecasts for six of the previous seven months, another upside surprise could dampen hopes of a Fed tapering after four jumbo rate hikes.

On the electoral front, investors had seen the prospect of a Republican comeback in Congress, with the GOP taking control of both the House and Senate. But US voters delivered a mixed verdict, with Republicans edging towards control of the House by narrower margins than forecast and the race for the Senate still open.

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• “Portfolios will assess and adjust their risk as the ‘uncertainty’ of the US midterm elections dissipates,” wrote Craig Johnson, chief market officer at Piper Sandler. “Soon enough, their focus will shift back to this week’s business results and the upcoming October CPI data.”

• “The market is still going to fixate on inflation, which is going to remain high and sticky for at least the next couple of quarters,” Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs Asset Management, said on Bloomberg TV.

Important events this week:

• US CPI, US first unemployment claim, Thursday

• Fed officials Lorie Logan, Esther George, Loretta Mester speak at events Thursday

• US University of Michigan consumer sentiment, Friday

Some of the main features of markets:

Stock

• The S&P 500 was down 2.1% by 4pm New York time

• The Nasdaq 100 fell 2.4 percent

• The Dow Jones Industrial Average fell 1.9 percent

• The MSCI World index fell 1.6 percent

Currencies

• The Bloomberg Dollar Spot index rose 0.6 percent

• The euro fell 0.6% to $1.0011

• The British pound fell 1.7% to $1.1349

• The Japanese yen fell 0.6% to 146.52 per dollar

Cryptocurrencies

• Bitcoin fell 13% to $16,216.08

• Ether fell 13% to $1,163.86

Bonds

• The yield on 10-year government bonds fell two basis points to 4.11%

• Germany’s 10-year yield fell 11 basis points to 2.17%

• UK 10-year yields fell 10 basis points to 3.46%

Raw materials

• West Texas Intermediate crude fell 3.7% to $85.58 a barrel

• Gold futures fell 0.5% to $1,707.80 an ounce

–With assistance from Vildana Hajric, Muyao Shen, Tassia Sipahutar, Srinivasan Sivabalan and Isabelle Lee.

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