Post-Election Wall Street Tumbles, ‘Fiscal Cliff’ Looms

(Wednesday, November 7th, 2012)

U.S. stocks fell more than 2 percent on Wednesday, putting the S&P 500 on track for its biggest drop since June, as investors shifted their focus to a looming fiscal showdown in Congress after President Barack Obama’s re-election.

Energy, healthcare and the banking sectors were among the hardest hit after Obama defeated Republican Mitt Romney, whose policy positions favored those industries. Defense shares also plunged.

Adding to the weaker sentiment were renewed worries about economic troubles in Europe, a key market for many U.S. companies. The euro zone economy will barely grow next year but pick up in 2014, the European Commission said. The region’s economy would grow only 0.1 percent in 2013 after a bigger than previously forecast contraction this year.

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“Traders on the floor are thinking, before the election Presidential Obama wasn’t able to resolve the fiscal cliff so what makes you think he’s going to be able to do it after the election? That’s the big issue right now,” said Todd Schoenberger, managing principal at the BlackBay Group in New York.

The Dow Jones industrial average was down 329.86 points, or 2.49 percent, at 12,915.82. The Standard & Poor’s 500 Index was down 36.03 points, or 2.52 percent, at 1,392.36. The Nasdaq Composite Index was down 76.72 points, or 2.55 percent, at 2,935.21. The S&P 500 also below the key 1,400 level for the first time since Sept. 4.

Wednesday’s drop is a reversal from the prior session’s gains when voting was under way. Defense and energy shares were among the market leaders that day.

“The market is telling us that it was pricing in the potential for a Romney victory, based upon the rally over the past few days,” said Phil Orlando, chief market strategist for equities at Federated Investors Inc of Pittsburgh.

On Wednesday, an index of defense shares was down 3.8 percent, its biggest one-day drop in a year. Shares of United Technologies were down 3.5 percent at $77.14.

Washington must next focus on some $600 billion in spending cuts and tax increases due to kick in next year that could derail the economic recovery, hence the “fiscal cliff” nickname.

Among sectors, the S&P energy index dropped more than 3 percent as investors fears companies in the sector will likely see more regulation in Obama’s second term, with less access to federal lands and water.

Other decliners in the energy area included Arch Coal down 13.3 percent at $7.50 and Alpha Natural Resources off 12.8 percent at $8.39.

Healthcare stocks also fell, as President Obama’s re-election rules out the possibility of a wholesale repeal of his healthcare reform law, but questions remain as to what parts of the domestic policy will be implemented. The S&P health care index lost 2.5 percent.

The S&P financial index was down 3.1 percent.

(Reuters)

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5 Comments

  1. Gadolhadorah says:

    duhh!! the article forgot to mention that the Dow is up over 6,000 points since Obama was first elected. Today’s 250 point selloff is a blip in the trend line and to be expected after the election (its called “sell on the news”.

  2. YITZCHOKY says:

    Unfortunately for AMerica obama was re-elected. Inflation, lack of jobs, money not buying anything will be coming soon. There is no such thing as a free lunch somebody got to pay. The poor will get poorer since you can not the rich out of business. Russia tried control economy and over 40 million starve to death. If you don’t read history you will repeat it. Free phones, free education free this and free that does not work. There is over $1 trillion of college loan not paid and this decrease the valve of the dollar

  3. akuperma says:

    Four more years of Obama. A split Congress unlike to compromoise. International instability caused by American giving up its leadership role.

    Baruch ha-Shem.

    Lots of potential opportunities for Value investors to buy low. So many things to short.

  4. mark levin says:

    1. A “blip” is what I call liberal regressive thinking. Just a bunch of blips by immature gimme people who can’t think normally.

  5. ahavas_yisroel says:

    I don’t want to hear Americans whining about how bad the economy is and what condition Wall Street is in. They had a chance to change all that, and they elected the same dummies as before. They made their bed, now they can sleep in it.

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