Stock market sees huge drop ahead of U.S. inflation update

The stock market dropped sharply on Wednesday ahead of the publication of a U.S. inflation update.

The Dow Jones closed at 32,513.94, falling by two percent or 646.89 points, while the S&P 500 concluded the trading day at 3,748.57, dropping by 2.1 percent or 79.54 points. The Nasdaq Composite ended the day at 10,353.17, tumbling 2.5 percent or 263.02 points.

Disney’s shares went down by 13.2 percent, the most significant loss within the S&P 500 index, following lower-than-projected revenue in the third quarter. Meta Platforms, on the other hand, rose by 5.2 percent after announcing plans to lay off 13 percent of its employees to prepare for future economic pressures. Despite that, the parent company of Facebook was still down by almost 70 percent compared to 2021.

Treasury yields also dropped on Wednesday. The 10-year Treasury yield, which determines mortgage and loan rates, fell to 4.08 percent. Meanwhile, the two-year Treasury yield dropped to 4.60 percent.

On Thursday, the U.S. government will publish the October consumer price index (CPI), an indicator of inflation within the country. The Federal Reserve refers to the CPI to decide on the upcoming interest rate hike, a strategy implemented by the central bank to tame inflation.

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Although inflation has shown signs of slowing down, product prices will likely rise by 0.6 percent compared with August. The core inflation will also increase by 0.2 percent, suggesting that non-food and energy prices are still rising.

The Fed started increasing interest rates in March this year, and the current rates range from 3.75 to 4.0 percent. Economists predicted that the rate would exceed five percent by next year and stay at that level until inflation goes down. Investors are worried, however, because the Fed might not be able to bring down inflation without triggering a recession.

Mid-term elections also contributed to the volatility in the stock market as investors were still waiting for whether Democrats or Republicans would take control of Congress. Earlier predictions said that the Republicans might take over the reign from the Democrats.

Stocks also plunged in other parts of the world. Hong Kong’s Hang Seng index reached 15,980.61 on Thursday, falling by 2.3 percent. Tokyo’s Nikkei 225 hit 27,391.00, slipping by 1.2. Seoul’s Kospi also recorded 2,412.93, declining 0.5 percent. The stock market in Singapore and Malaysia also reported a decline following Wall Street’s Wednesday closing.

Crypto plunges

The two biggest crypto tokens, Bitcoin and Ether, also reported declines. Bitcoin lost more than 14 percent of its value on Wednesday, reaching below $15,900 per unit. Meanwhile, Ether’s price was down 17 percent in a day.

The decline in the crypto market came amid the financial problems plaguing FTX, one of the industry’s largest exchange platforms. Earlier in the week, Binance announced that it would acquire the non-U.S. side of FTX, but the company eventually pulled out of the deal.

Binance explained that the decision came after analyzing FTX’s accounts. Binance chief Changpeng Zhao said the development was not a “win” for the company.

“User confidence is severely shaken,” Zhao warned. “Regulators will scrutinize exchanges even more.”