Stocks Plunge After Election; Europe Woes Deepen

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New York stock exchangeBy DANIEL WAGNER, AP Business Writer

Wall Street greeted a second Obama term the way it greeted the first.

Investors dumped stocks Wednesday in the sharpest sell-off of the year. With the election only hours behind them, they focused on big problems ahead in Washington and across the Atlantic Ocean.

Frantic selling recalled the days after Obama's first victory, as the financial crisis raged and stocks spiraled downward.

Four years later, American voters returned a divided government to power and left investors fretting about a package of tax increases and government spending cuts that could stall the economic recovery unless Congress acts to stop it by Jan. 1.

In Europe, leaders warned that unemployment could remain high for years, and cut their forecasts for economic growth for this year and 2013. The head of the European Central Bank said not even powerhouse Germany is immune.

The Dow Jones industrial average plummeted as much as 369 points, or 2.8 percent, in the first two hours of trading. It recovered steadily in the afternoon, but slid into the close and ended down 313, its biggest point drop since this time last year.

"It does look ugly," said Robert Pavlik, chief market strategist at Banyan Partners LLC. He said it was hard to untangle the impact of Europe-related selling from nerves about the nation's fiscal uncertainty.

"It's a combination of all that, quite honestly," Pavlik said.

It was the worst day for stocks this year, but not the worst after an election. That distinction belongs to 2008, when Barack Obama was elected at the depths of the financial crisis. The Dow fell 486 points the next day.

This time, energy companies and bank stocks took some of the biggest losses. Both industries would have faced lighter, less costly regulation if Mitt Romney had won the election.

Stocks seen as benefiting from Obama's decisive re-election rose. They included hospitals, suddenly free of the threat that Romney would roll back Obama's health care law.

Obama was elected Nov. 4, 2008.

The Dow plunged more than 400 points on each of the next two trading days.

The blue-chip average hit bottom at 6,547 in March 2009, less than two months after Obama took office.

Then it doubled over the next three-plus years as the crisis eased and a fragile economic recovery took root.

Things were looking so good that until recently, some analysts were betting on when the market might hit an all-time high.

Of course, the market today is far less precarious than it was in 2008. The financial system has stabilized. Europe appears to be serious about tackling its debt crisis, despite frequent setbacks.

The housing market appears to be coming back, and the economy has added jobs for more than two and a half years.

On the day after the 28 other presidential elections since 1900, the stock market has gone up 13 times and down 15 times, according to research by Bespoke Investment Group, a market research company.

The best day-after performance was in 1900, another re-election. The Dow jumped more than 3 percent on the day after William McKinley won a second term, according to Bespoke.

With the 2012 election over, traders turned to Europe's increasingly sickly economy, dragged down by a debt crisis for more than three years. The 27-country European Union said unemployment there could remain high for years.

The European Commission, the executive arm of the EU, said that it expects the region's economic output to shrink 0.3 percent this year. In the spring, the group predicted no change.

For next year, the commission predicted 0.4 percent growth, barely above recession territory. It predicted 1.3 percent last spring.

Renewed focus on European economic problems also pushed the price of oil down $4.27 per barrel, its biggest decline of the year, to finish at $84.44, the lowest since July 10.

The Dow closed down 312.95 points, or 2.4 percent, at 12,932.73 - its first close below 13,000 since Aug. 2.

The Standard & Poor's 500 index fell 33.86 points, or 2.4 percent, to 1,394. That was the broader index's first close below 1,400 since Aug. 30.

The Nasdaq composite index lost 74.64 points, or 2.5 percent, to 2.937.29.

U.S. stock futures had risen overnight after Obama cruised to victory. They turned sharply lower after the European forecasts and discouraging comments from Mario Draghi, president of the European Central Bank.

Now that the U.S. election has been resolved, it's natural for traders to focus on Europe's problems, said Peter Tchir, who manages the hedge fund TF Market Advisors.

What they're tuning in to, he said, is the failure of a major European summit last week and minimal progress on the issues that are holding the region back.

"People can only digest one or two stories at a time, and people had put Europe on the back burner" before the election, he said.

Obama's win followed a costly campaign that blanketed markets with uncertainty about possible changes to tax rates, government spending and other issues seen as crucial to the prospects of some industries and the broader economy.

As jitters about the election subsided, traders confronted an ugly reality: The so-called fiscal cliff, which will impose automatic tax increases and deep cuts to government spending at the end of the year unless the president and Congress reach a deal.

That's no easy task for a deadlocked government whose overall composition has barely changed - a Democratic president and Senate and a Republican House.

If Congress and the White House don't reach a deal, the spending cuts and tax increases could total $800 billion next year. Some economists say that could push the economy back into recession.

"Obama's re-election does not change the bigger economic or fiscal picture," Paul Ashworth of Capital Economics, an economic research company, said in a note to clients.

Fitch Ratings offered a warning Wednesday about the perils facing the U.S. If Obama does not quickly forge agreement with Congress to avert the fiscal cliff, the credit rating agency said, it may strip the U.S. of its sterling AAA credit rating.

The government's failure to come up with a plan to reduce the deficit led Standard & Poor's to cut its rating of long-term U.S. Treasury securities last year from a sterling AAA to AA+. It was the first-ever downgrade of U.S. government debt.

Tobias Levkovich, a financial analyst at Citi Research, told clients Wednesday that a compromise on taxes and spending was likely in mid- to late January, but that stocks will probably fall in the meantime.

A deal early next year is much more likely "once the political class begins to negotiate realistically and as the consequences ... are too costly for either party to ignore," he wrote.

European markets closed sharply lower, with benchmark indexes in France and Germany losing 2 percent. Italy lost 2.5 percent; Spain lost 2.3 percent.

As traders streamed into lower-risk investments, the yield on the 10-year Treasury note plunged to 1.64 percent from 1.75 percent late Tuesday. A bond's yield declines as demand for it increases.

Most industries reacted to the election much as analysts had expected.

Big, publicly traded hospital companies soared because of expectations that they will gain business under the health care law, known as ObamaCare. HCA Holdings leapt 9.4 percent, Tenet Healthcare 9.6 percent, Community Health Systems 6 percent and Universal Health Services 4.3 percent.

Not all hospital companies are expected to benefit. Many serve patients who will be covered by Medicaid plans that generally do not cover the full cost of care provided by hospitals.

Health insurance stocks sank, defying many analysts' expectations. ObamaCare will expand coverage of the uninsured in 2014, giving insurers millions of new customers. But the overhaul also imposes fees and restrictions on the companies, potentially threatening their profitability. Humana slid 7.9 percent, UnitedHealth Group 3.8 percent, Aetna 4.2 percent and Wellpoint 5.5 percent.

With Obama seeking to restrain the growth of military spending, defense companies could struggle to win government contracts. Their stocks fell sharply: Lockheed Martin lost 3.9 percent, Northrop Grumman 4.6 percent and General Dynamics 3.9 percent.

Among the 10 industry groups in the S&P 500 index, financial stocks and energy companies fell the most.

Banks figure to face tougher regulation in a second Obama term than they would have under Romney. JPMorgan Chase fell 5.6 percent, Citigroup 6.3 percent, Bank of America 7.1 percent, Goldman Sachs 6.6 percent and Morgan Stanley 8.6 percent.

The biggest losers were coal companies, which had hoped that a Romney administration would loosen mine safety and pollution rules that make it more costly for them to operate. Peabody Energy dived 9.6 percent, Consol Energy 6.1 percent, Alpha Natural Resources 12.2 percent and Arch Coal 12.5 percent.

Oil companies fell less steeply.

Trading also reflected the outcome of ballot measures decided in Tuesday's election. After two states approved the recreational use of marijuana for the first time, Medical Marijuana Inc., a company too small to be listed on major exchanges, surged 22 percent.

Other notable moves included Apple, the world's most valuable company. It fell 3.8 percent to $558.00 and has dropped 20 percent from its all-time high of $705.07, reached Sept. 21.

___

AP Business Writers Christina Rexrode and Steve Rothwell in New York, Tom Murphy in Indianapolis, Linda Johnson in Trenton, N.J. and Marcy Gordon in Washington contributed to this report.

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Mark

Here is the only solution to fix our depressed economy:The "One - Year Mortgage Holiday" 9 Point Economic Recovery & Jobs Plan, as fully detailed at www.saveoureconomy.com is the only legitimate economic stimulus plan designed to actually solve the current housing, credit, banking, financial crises, that will jump start our economy, create millions of new jobs, stimulate growth and generate long term economic prosperity.

The #1 key element of the plan, the "silver bullet", is an ingenious "One - Year Mortgage Holiday" for every home owner & business in America, so that for 12 months, you do not have to make a monthly mortgage payment. All Renters of apartments, retail & office space will also get a 38% rebate on their rent. Consequently Main Street, that has already spent & wasted Trillions bailing out Wall Street and received nothing in return, since credit markets are still frozen, foreclosures, unemployment and bankruptcies are still rising, would then be able to have a well deserved one year "Time Out", from having to make a mortgage payment. So a 25 year mortgage simply becomes a 26 year mortgage. All mortgage bank lenders, would still be paid a monthly average interest rate of 6% on all mortgage debt in the country. This would allow consumers, all home owners, renters and businesses to decide for themselves how best to spend, save & invest their own money each month, that would inject approximately $80 billion monthly back into the economy.

November 09 2012 at 8:40 AM Report abuse +1 rate up rate down Reply
jelloquest

I guess Obama will now have to say he inherited a real mess from himself.

November 08 2012 at 6:37 PM Report abuse +1 rate up rate down Reply
mcclure511

Does anyone doubt that having millions of Hispanic voters had an affect on the election? With the Mexican and other South American drug dealers sending their drugs by the boat load to this country, why do we need to reward their country of origin by giving their people the priveledge of becoming American citizens? We should stop all immigation like Canada did and find out who is not supposed to be here. Why should Hispanics and particularly Mexicans be allowed to come here in the first place when over 10 milllion are here breaking our laws?Tell me again that Mexicans are not taking jobs,using our taxpayer paid hospitals, and schools . And whose brilliant idea is it to let Muslims of any kind come here when the world is at war with Muslim terrorists? DId we not round up the Japenese in WW2? Our country is run by a bunch of IDIOTS.

November 08 2012 at 4:30 PM Report abuse +2 rate up rate down Reply
LA is Best

It shows to go ya that everybody that understands how the financial system works is scared because of 0bamas reelection and rightly so! The only people that are NOT worried are the idiots that voted for him and the takers that are looking for the bread lines and free 0bama phones, in other words..... the TAKERS!

November 08 2012 at 1:41 PM Report abuse +3 rate up rate down Reply
1 reply to LA is Best's comment
jelloquest

Very sad but very true!!!!!!!!!

November 08 2012 at 6:38 PM Report abuse +2 rate up rate down Reply
jtran8424

I don't understand why these purportedly intelligent market investors who watched our economy decline after Clinton left Bush with a surplus and put us in a hole halfway to China both literally and figuratively, and are "scared" with a second term of Obama and some decent regulations, UNLESS they are planning on a tidy profit by scaring the small investors silly so they will sell their really not unstable stocks which will be even more stable under Obama.

I worked in the Investment Industry and I was "excited" to learn how the REALLY BIG BOYS moved the market down when they wanted stocks to purchase but wanted the lowest prices possible and would dump all their stocks in that market to scare the little boys silly and they would dump all their stocks in that same market, too while it was at a bottom price, and after a month or so, put in small orders all over the country so as not to make much of a notice until they had at least 51% of that stock, and suddenly they owned that business, and THEN THEY COULD MANIPULATE THE PRICE, NICE, HUH. YOU PLAY, YOU PAY...LITTLE BOYS SHOULD PLAY LITTLE BOY GAMES, AND DON'T YOU THINK THAT ROMNEY HASN'T MADE HIS PROFIT OFF OF YOU LITTLE BOYS...YOU JUST DON'T GET IT, WAKE UP, BOYS, YOU ARE JUST LUCKY YOUR MAN DIDN'T WIN OR YOU WOULD BE PAYING EVEN BIGGER THAN NOW...

November 08 2012 at 1:32 PM Report abuse -2 rate up rate down Reply
mompkp7

Please don't tell me this is Bush's fault already..............Obama needs a new speech writer.........the other half of America is tired of same ole lies

November 08 2012 at 11:43 AM Report abuse +3 rate up rate down Reply
swtdreamluvr

poeple on welfare gave obama 4 more .why would anyone vote for someone who is gonna take your free stuff away from you.

November 08 2012 at 11:15 AM Report abuse +2 rate up rate down Reply
Joe

It is not at all amazing to see every blog this morning is anti Obama / Democratic Party. Those who took the sugarcoated pill for the second time aren't interested in fiscal responsibility or foreign policy, they are only concerned with gay rights, government paid abortions and contraceptives, continued welfare instead of jobs, etc. The important issues that will have severe consequences in the near future were swept aside by lies and deceit from the rock star who mesmerizes the ignorant and naive electorate he panders to.

November 08 2012 at 10:55 AM Report abuse rate up rate down Reply
1 reply to Joe's comment
jay917

If jobs were readily available their would be less needing assisstance. People lost Billions in retirement benefits, IRA's, and 401K's when things went bellyup. It will take much time for "job creators" to hire more , especially when they can force their present staff into doing more. As goods and services are increasingly in demand eventually they will have to hire more..But they won't until absolutely necessary

November 08 2012 at 12:01 PM Report abuse -2 rate up rate down Reply
sajai

Did ALL of you negative idiotic know-it-alls SKIP this line in the article? "U.S. stock futures had risen overnight after Obama cruised to victory. They turned sharply lower after the European forecasts and discouraging comments from Mario Draghi, president of the European Central Bank."

You dumb dumbs are WRONG again! Wrong on Romney, AND wrong on the market. GROW UP and quit being so hateful of President Obama! You are SO un-American! GO LIVE SOMEPLACE ELSE!

November 08 2012 at 10:39 AM Report abuse -1 rate up rate down Reply
Dan Watson

It's amazing to see the media, and especially the Huffington Post, try to spin the Wall Street Sell Off as the result of any/everything but the election of Obama. The truth is most investors fear what will happen with a second term of Obama. They have heard him say he wants to tax the Rich although even Obama knows that doing so will hurt the economy and won't alleviate his massive spending appetite and increasing national debt. Obama fully intends to raise taxes on investments so what did anyone expect investors to do, buy more stock? Those who are getting "FREE STUFF" from the Obama administration are now in sufficient number to sway elections and they did. America will have a very shaky and perilous next four years under Obama.

November 08 2012 at 10:36 AM Report abuse +1 rate up rate down Reply
1 reply to Dan Watson's comment
horsecreek35

Very true , It amazes me that the have nots seem to think that they know what is best for our country... It does not matter that the minorities combined with the female vote can elect a president due to the electoral vote, what matters is that they are too dumb to be voting at all.... Did you hear them interview the young college ladies coming out of the polls..? One was ask why she voted for Obama with the economy in the shape it was in... her reply , " the economy does not affect me , I live with my parents ! Another when ask how she felt about the Benghazi incident replied ," uhhh who is Benghazi ? Our country is headed in a bad direction ...

November 11 2012 at 3:41 PM Report abuse rate up rate down Reply