ASX set to slip as election results send Wall Street lower

Stocks fell in afternoon trading on Wall Street on Wednesday as results continued to come in for midterm elections and it was still too early to tell whether Republicans will win control of one or both houses of Congress.

The S&P 500 has slipped 0.9 per cent in early afternoon trade, while the Dow Jones has shed 1.1 per cent and the Nasdaq retreated by 1.4 per cent. The ASX is set to start the day in the red, with futures at 5.04am AEDT pointing to a fall of 14 points, or 0.2 per cent, at the open.

Disney slumped 12.1 per cent and led the broader communications sector lower after it reported financial results that fell well short of analysts’ expectations and issued a weak earnings forecast.

Facebook parent Meta Platforms was a bright spot. It surged 7.6 per cent after saying it will lay off 11,000 employees, or about 13 per cent of its workforce, as it contends with faltering revenue and broader tech industry woes. The move comes just a week after widespread layoffs at Twitter under its new owner, billionaire Elon Musk.

Votes from the US midterms are still being counted across the country and Wall Street is waiting to see if the balance of power in Washington shifts. The elections could determine how much is done in the next several years in Washington, and possibly beyond. If Republicans gain control of at least one house of Congress, standoffs with the Democratic White House could stymie progress on legislation.

Wall Street’s main concern remains stubbornly hot inflation and the Federal Reserve’s fight against high prices that have been squeezing businesses and consumers. The central bank has been aggressively raising interest rates throughout the year to slow the economy and tame inflation, but the strategy risks going too far and bringing on a recession. Investors have been closely watching economic data for any hints that inflation could be cooling enough for the Fed to consider easing up on its rate increases.v

The central bank has said that it might soon pare back the size of its increases, but warned that it may ultimately hike rates higher than expected because of just how stubborn high inflation has been. The Fed has already raised its key overnight rate to a range of 3.75 per cent to 4 per cent, up from virtually zero in March, and more investors are expecting it to top 5 per cent next year.

“This is like a marathon and we’re in the early part of it,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.