The outcome of the US midterm elections is still uncertain, the Republican Party has failed to take a wide lead, and the market has turned its focus back to tomorrow's release of October US CPI inflation data on the Fed's rate hike path, and US stocks fell about 2% on Wednesday.
The three major U.S. stock indexes collectively closed lower, with the Dow down 646.89 points, or 1.95%, at 32,513.94, the NASDAQ down 263 points, or 2.48%, at 10,353.18 and the S&P 500 down 79.54 points, or 2.08%, at 3,748.57.
FTX "financial black hole" scares off Binance
Bitcoin fell below $16,000
On Wednesday, October 9, Eastern time, Coindesk, a cryptocurrency industry information website, quoted people familiar with the matter as saying that Binance will probably not advance its plans to acquire FTX. Because Binance's non-binding letter of intent was subject to due diligence done by Binance, Binance was strongly inclined to oppose closing the acquisition after about half a day of the process of evaluating FTX's internal data and loan commitments.
Coindesk later said that Changpeng Zhao had to reconsider within hours of the proposed acquisition. Binance executives quickly discovered themselves in a financial black hole, with FTX's debt and assets potentially in the billions of dollars and possibly more than $6 billion.
At the end of the US stock session, Binance officially released news that as a result of due diligence, as well as the news that FTX was suspected of mishandling customer funds and subject to US regulatory investigations, Binance decided not to advance the acquisition of FTX. Binance specifically emphasized that it initially wanted to be able to support FTX's customers and provide liquidity, but these issues have become beyond the company's control or ability to help.
(Source: Social Media)
After the close of the market, the media said that FTX faced a liquidity gap of up to $8 billion. FTX investors were told that without more capital backing, the company could go bankrupt.
According to media analysis, for Binance, the acquisition is a "bitter deal": if it is performed, it is likely to aggravate the company's shortage of funds; If not fulfilled, the impact on the crypto market of the bankruptcy of an exchange of the size of FTX is self-evident.
After news broke that Binance might abandon the acquisition, cryptocurrencies generally plummeted. Cryptocurrencies have fallen sharply by double-digit percentages for two consecutive days: Bitcoin, the largest leader by market capitalization, fell more than 13%, lost $16,000 to a two-year low, and fell more than 20% in two days, and Ethereum, the second largest, fell 17.47% to $1,100.
Following Tuesday, the FTX token FTT fell again by nearly 80% in the last 24 hours.
By the close of the US stock market, the decline of cryptocurrencies had narrowed, with only Polygon (MATIC) falling more than 20% in the last 24 hours of the top 10 cryptocurrencies, bitcoin, ETH and BNB falling by more than 10%, and FTT falling more than 40% in 24 hours.
Binance's abandonment means that FTX, which has just experienced a dark and bright future, will experience shocks again, and the plot reversal of the Binance acquisition case that shocked the cryptocurrency circle.
Binance CEO Changpeng Zhao said on Tuesday that FTX has a large liquidity run, and after FTX asked for help on the same day, in order to protect users, Binance signed a non-binding letter of intent to fully acquire FTX, and will do due diligence in the next few days.
Changpeng Zhao did not say that he would complete the transaction at the time, but said that it would take some time to deal with the run, and now the situation is changing rapidly, and Binance is assessing the situation in real time. At the same time, he said that Binance has the right to withdraw from trading at any time, and it is expected that the price of FTT will fluctuate sharply in the next few days as things change.
On Wednesday, before the media reported that Binance had announced that it had abandoned the acquisition, media said that two major U.S. financial regulators, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), the top regulator for U.S. commodities, were investigating whether the troubled FTX had properly handled customer funds and its relationship with other cryptocurrency industry institutions owned by FTX founder and CEO Sam Bankman-Fried (SBF).
According to public information, FTX and Alameda Research are cryptocurrency exchanges and corresponding trading companies founded by Bankman Fried, respectively. The FTX exchange was valued at $32 billion at the start of this year, sending 1992-born Bankman Fried's book wealth soaring to $24 billion, and he has also been dubbed "Musk in the currency circle" after generous investments by world-renowned investment institutions such as SoftBank, Tiger Global, BlackRock and Ontario's Teachers' Pension Plan. If FTX eventually goes bankrupt, Banksman Fried's $24 billion personal fortune will be a dream.
Bankman Freed Image source: Wikipedia
The United States fell sharply across the board, and Tesla fell back to 2 years ago
Apple fell more than 3%, Disney fell 13%
With the news of "Binance's exit from the FTX acquisition" before the closing bell rang, the three major U.S. stock indexes were hammered to near the lowest point of the day, and the overall decline during the day was close to 2%.
(Bitcoin, three major indices minute chart, source: TradingView)
Although the trend of US stocks in the tick chart is highly correlated with Bitcoin, the reason for the sharp decline in US stocks is obviously not only from the currency circle. Including Disney, Roblox and other individual stocks handed over disappointing financial reports that disappointed the market, coupled with the mid-term elections exceeding expectations, all put pressure on market sentiment.
For the U.S. stock market, there is also a test of CPI data before Thursday's opening. Inflation is still expected to remain on the rise, but the annual rate will fall slightly to 8%.
Keith Lerner, co-chief investment officer of Truist Wealth, explained that while elections are important, other factors are more important for markets and economies — inflation trends, interest rates and monetary policy, the economy and corporate earnings will continue to have the biggest impact on markets over the next year.
Eleven sectors of the S&P 500 were wiped out the day after the U.S. midterm elections. Among them, the energy sector closed down 4.88% and performed the worst - the constituent Occidental Petroleum fell more than 9.2% to lead the decline, the optional consumer sector fell more than 3.1% - the constituent Norwegian Cruise Line fell more than 8.6%, personal care Bath & Body Works fell 7.9%, Tesla also fell about 7.2%, the information technology/technology sector fell more than 2.6%, the telecommunications, finance, raw materials, industrial, consumer goods, real estate, health care sector fell as much as 1.9%, and the utilities sector fell more than 0.8%. The decline is minimal.
Technology stocks generally fell, with Tesla down more than 7%, Nvidia down more than 5%, Chevron, Amazon, ExxonMobil down more than 4%, and Apple down more than 3%.
It is worth noting that Tesla (TSLA) reported $177.59, down 7.17%, with the latest market value of $560.79 billion, and the stock price has fallen to 2 years ago. Tesla's market value lost $43.3 billion (about 313.6 billion yuan) overnight. According to surging news, documents released by the US Securities and Exchange Commission on November 8 local time show that Tesla CEO Musk sold 19.5 million Tesla shares worth $3.95 billion (about 28.6 billion yuan) last week. The BBC reported on November 9 that the reason for the sale had not been disclosed.
According to the US Consumer News and Business Channel (CNBC), in 2021, Musk sold nearly $22 billion in Tesla shares. In April, he sold more than $8 billion worth of Tesla shares; In August, it sold another $7 billion Tesla shares. The total value of Tesla shares sold by Musk this year has reached nearly $20 billion. Since the beginning of this year, Tesla's stock price has also fallen by 46%.
According to the Forbes billionaire list, Tesla CEO Musk's net worth has fallen below $200 billion to $197.4 billion, still the richest man in the world. Since Musk bid to buy Twitter in April, Tesla's market value has lost nearly half, and his net worth has decreased by $70 billion.
Other stocks with large movements include:
Dow component Disney fell more than 13 percent to its lowest since March 2020, its biggest one-day drop since 2001. In the third quarter, streaming users exceeded expectations, but losses widened sharply, and EPS profits and revenue were worse than expected.
According to the financial report, Disney's total revenue in the quarter was 20.1 billion yuan, a year-on-year growth rate of 9%, significantly lower than the market expectation of 21.3 billion. In terms of operations, theme park revenue reached a record year-over-year increase of 36%, and the number of streaming users continued to grow more than expected, surpassing Netflix in total subscriptions, but at the same time losing more than twice the amount last year. Disney said that the inflection point of streaming losses has arrived and may improve next quarter.
The "first stock in the metaverse" and video game platform Roblox fell nearly 21%, the biggest drop in at least a month and the lowest since late June, with good third-quarter revenue but a larger-than-expected loss.
"Buy Now Pay Later" financial services company Affirm Holdings fell more than 22% to its lowest level since listing, lost more than expected in the third quarter, and was also dragged down by slowing sales of Peloton's exercise bikes, and connected fitness leader Peloton fell more than 10% from a seven-week high.
Upstart Holdings, an AI-powered lending platform, narrowed its decline sharply to 10.4 percent after falling more than 26 percent, still the lowest since listing, and fourth-quarter revenue guidance was much weaker than expected, citing challenging macroeconomic conditions.
Retail huddle stock AMC Cinemas closed down nearly 8 percent after falling more than 10 percent to its lowest since February, with a loss per share in the third quarter that was smaller than market expectations and revenue beat expectations, and the CEO said results were weighed down by weak box office in the late third quarter.
Lucid Group, a U.S. electric car company dubbed "Tesla's arch-rival," fell nearly 17 percent to its lowest level since January and near its lowest level since going public, saying it could raise up to $1.5 billion in working capital through stock sales.
Popular China followed the decline in the broader U.S. stock market. China ETF KWEB fell 7%, CQQQ fell 5%, and the Nasdaq Golden Dragon China Index (HXC) fell 6.79%.
Among the popular Chinese concept stocks, China Evergrande (ADR) fell 21.47%, Xpeng Motors fell more than 14%, B Station, NIO and Li Auto fell 12%, JD.com and Baidu fell 6.7%, Pinduoduo fell 6%, NetEase fell 4.7%, Alibaba fell nearly 5%, Tencent ADR fell more than 6%,
Disclaimer: The content and data of the article are for reference only and do not constitute investment advice. Investors do so at their own risk.
Editor| Cheng Peng Du Hengfeng
Proofreader| Liu Xiaoying
Cover image source: Visual China
Daily economic news is synthesized from company announcements, public information, and financial associations
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