Day Traders Diary

11/9/22

The major averages closed lower on Wednesday following recent market gains and the results of the midterm elections provided no clear answers about who would control Congress yet. A crypto selloff also weighed on markets. The Dow Jones Industrial Average fell 646 points, or about 1.95%, to 32,513. The decline was led by Disney, which fell 13.2% after the entertainment giant missed analyst estimates on the top and bottom lines. The S&P 500 shed 79 points or 2.08% to 3,748 while the Nasdaq Composite slid 263 points or 2.48% to 10,353.

Stocks fell to session lows during Wednesday afternoon trading as the price of bitcoin dropped to its lowest levels in roughly two years, weighing on overall risk sentiment and dragging down the tech sector.

The stock market is coming off three-straight days of gains into the election, where Wall Street was expecting Republicans to gain ground and block any future tax and spending plans. But control of Congress was not clear. NBC News was not yet projecting control of the House of Representatives with an NBC estimate suggesting Republicans could win 221 seats, which would be a narrow majority.

In one of the key races that could determine Senate control, Democrat John Fetterman defeated Republican Mehmet Oz for the pivotal Senate seat in Pennsylvania, according to an NBC News projection. A pivotal Senate race in Georgia between Democratic Sen. Raphael Warnock and Republican former NFL player Herschel Walker will head to a Dec. 6 runoff, according to Secretary of State Brad Raffensperger. A critical Senate race in Nevada is unresolved.

Investors were also weary ahead of the October consumer price index report due out on Thursday morning at 8:30 a.m. ET. Economists polled by Dow Jones anticipate that headline CPI grew by 7.9% from the prior year, down slightly from September's gain of 8.2%.

Fed could become 'only show in town' on economic policy if U.S. enters a recession with gridlocked government, policy strategist says

A gridlocked government coming out of the U.S. midterm elections that took place Tuesday could impact how the Federal Reserve responds to inflation in the event of a recession, said Brian Gardner, chief Washington policy strategist at Stifel.

NBC News has yet to determine which party will have majorities in each chamber of Congress with key races undecided. But Gardner said a gridlock in federal government, which was widely expected leading up to Election Day, would likely make it harder to pass fiscal policy.

That could pressure the Federal to adjust its policy on interest rate hikes accordingly if a recession takes place, he said. But he said a gridlocked government could still potentially pass smaller pieces of legislation like expanded unemployment benefits or food stamps.

Gold is breaking out while crypto and meme stocks may not be done falling, Strategas' Verrone says

Gold steadied near a one-month peak on Wednesday after being up more than 2% in the previous session and advancing 3% on Friday. It's unclear why, however.

"The yellow metal is waking up to something… what exactly? well, we're unsure at this point," Strategas' Chris Verrone said in a note Wednesday, citing a weaker dollar, inflation, recession worries, central bank pivot anxieties in the market and the crypto fallout as potential signals. "As is often the case in this business, the fundamental or macro justification for a sharp adjustment in price will likely reveal itself in time... It may take a few swings, but we've been warming to long Gold, and continue to do so today."

Roblox, Robinhood, Coinbase et al. help drive Cathie Wood's ARK and other ETFs to multi-year lows Cathie Wood's Ark Innovation ETF (ARKK) fell as much as 6.4% Wednesday to its lowest since those pandemic days of yesteryear, March 2020, crushed by Roblox (-19%), Robinhood (-13%), Coinbase (-10%), Zoom Video (-8%), Block (-8%) and DraftKings (-7%).

The Renaissance IPO ETF (IPO) dropped as much as 5.4% to its lowest since April 2020, hurt by Affirm (-22%) and Applovin (-9%), as well as Roblox, Robinhood and Coinbase.

Meanwhile, ProShares Online Retail ETF (ONLN) touched an all-time low, dating back to its inception in July 2018. Qurate Retail (-12%), Dada Nexus (-11%), Sea (-13%), Globe-e Online (-8%) and Wayfair (-9%) led the way lower.

Oil prices dropped on Wednesday following data showing a greater-than-expected rise in U.S. crude stockpiles, as well as concerns that a jump in COVID-19 cases in China would weigh on demand.

Brent crude futures were down $2.51, or 2.6%, to $92.86 a barrel by 2:26 p.m. ET. The U.S. West Texas Intermediate (WTI) crude futures had fallen $2.82, or 3.2%, to $86.08.