NEW YORK (AP) — Wall Street closed sharply lower, giving back a big chunk of the gains built in a three-day rally running up to Election Day. The S&P 500 lost 2.1% Wednesday. Several sources of disappointment were behind the drop. There's still uncertainty about whether Tuesday's elections will result in a divided Congress that would prevent the kinds of economic policies that make Wall Street nervous. A batch of sour profit reports also hurt, while crypto plunged again amid the industry's latest crisis of confidence. Looming over all of it is a report scheduled for Thursday, when the U.S. government gives the latest update on inflation.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

NEW YORK (AP) — Wall Street is slumping Wednesday and giving back a big chunk of the gains built in a rally running up to Election Day

The S&P 500 was down 1.7% in afternoon trading, erasing more than half its gain from what had been a three-day winning streak. The Dow Jones Industrial Average was 551 points lower, or 1.7%, at 32,609, as of 2:38 p.m. Eastern time, and the Nasdaq composite was 2.2% lower.

Several sources of disappointment were behind the drops, including uncertainty about whether Tuesday's elections will result in a Congress that would prevent the kinds of sweeping economic changes that make Wall Street nervous. A batch of sour profit reports from big-name companies like The Walt Disney Co. also hurt the market, while crypto prices plunged again amid the industry's latest crisis of confidence.

Looming over all of it is a report scheduled for Thursday, when the U.S. government will show just how bad inflation was across the country. That reading will likely have a big effect on how much further the Federal Reserve hikes interest rates to get inflation under control. Those rate hikes have been by far the dominant force shaking Wall Street this 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.

The Federal Reserve has already hiked its key overnight interest rate up to a range of 3.75% to 4%, up from virtually zero in March, and a growing number of investors expect it to top 5% next year.

By making it more expensive for people and companies to borrow money, the Fed is intentionally slowing the economy and jobs market in hopes that will stamp down inflation that's near its highest level in four decades. But the Fed threatens to create a recession if it goes too far, and high rates in the meantime drag down on prices for stocks and all kinds of investments.

Cryptocurrencies have felt some of the worst pain from the Fed's whiplash move away from the record-low interest rates it instituted during the recession caused by the pandemic. Bitcoin fell even further Wednesday, below $16,900 from its record of nearly $69,000 almost exactly a year ago. It's down more than 8% over the last day.

This latest plunge for crypto, including an 11% drop for ethereum, comes amid worries about the financial strength of one of the industry's biggest trading exchanges, FTX. A mega player in the industry, Binance, said on Tuesday that it planned to buy its troubled rival to help it manage a crunch where users had been scrambling to pull their money out. But a report on Wednesday from industry website CoinDesk suggested Binance may walk away from the deal, which sent crypto prices reeling further.

Underscoring the effects of the latest collapse in the crypto world, the CEO of Binance said that "FTX going down is not good for anyone in the industry."

"Do not view it as a 'win for us,'" Changpeng Zhao, who goes by his initials CZ, said in a letter to Binance employees that he posted on Twitter. "User confidence is severely shaken. Regulators will scrutinize exchanges even more."

Stocks of companies embedded in the crypto economy also continued to sink. Robinhood Markets lost another 13.6% and is down 31.5% so far this week. Coinbase Global fell 9.1% to bring its drop for the week to 21.4%

Elsewhere on Wall Street, Disney sank 12.5% for the largest loss in the S&P 500 after reporting results for the latest quarter that fell well short of analysts' expectations. It also gave a weak earnings forecast.

Facebook parent Meta Platforms was a bright spot. It rose 5.6% after saying it will cut costs by laying off 11,000, or about 13% of its workforce, as it contends with faltering revenue and broader tech industry woes.

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AP Business Writers Elaine Kurtenbach and Matt Ott contributed to this report.