US futures wobble as midterm elections return mixed verdict

US equity-index futures fluctuated between gains and losses as corporate performance showed signs of stress and midterm elections failed to yield a Republican sweep that investors had anticipated.

December contracts on the Nasdaq 100 and S&P 500 indexes were little changed, a day after US stocks capped a three-day rally. News Corp. and Walt Disney Co. tumbled at least 8% each in premarket New York trading after posting disappointing results. A selloff in cryptocurrencies deepened, sending Bitcoin towards the biggest four-day slump since June. Oil slid on sluggish demand outlook from China.

Equity and bond investors had hoped for a Republican comeback in Congress, with the best outcome seen as GOP control of both the House of Representatives and Senate. But US voters delivered a mixed verdict, with Republicans heading for control of the House by smaller margins than forecast and the race for Senate still wide open. That left Thursday’s inflation report the next catalyst for markets.

“The Republican aim of controlling both houses hangs by a thread,” Chris Beauchamp, the chief markets analyst at IG Group in London, wrote in a note. “A divided House might mean the partisan battles over spending and the debt ceiling are not quite as dramatic or vitriolic, but this is unlikely to brighten the policy outlook markedly. Instead, the focus will likely return to the Federal Reserve and the US economy.”

Republicans made gains in their drive to take control of Congress but many of the closest races had yet to be called. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results.

Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies.

News Corp. plunged 9.3% in premarket trading after posting first-quarter adjusted earnings that missed the average analyst estimate. Walt Disney lost 8% as quarterly results missed across the board.

Of the 452 S&P 500 companies that have reported earnings so far this season, 110 have failed to meet analyst forecasts. Meanwhile, 12-month blended forward estimates for profit at the gauge’s companies have fallen 2.7% since mid-September.

—Bloomberg