|DANIEL WAGNER, AP Business Writer|
Investors dumped stocks Wednesday in one of the sharpest sell-offs of the year. With the election only hours behind them, they focused on big problems ahead in
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
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 remained down 279 points with a half-hour of trading to go.
"It does look ugly," said
"It's a combination of all that, quite honestly," Pavlik said.
It was the worst day for the market in a year, but not the worst day after an election. That distinction belongs to 2008, when
This time, energy companies and bank stocks took some of the biggest losses. Both industries would have faced lighter and less costly regulation if
Stocks seen as benefiting from Obama's decisive re-election rose. They included hospitals, free of the threat that a Romney administration would have sought to roll back Obama's health care law.
The frantic selling recalled the days after Obama's first victory, as the crisis raged and stocks spiraled downward. The Dow plunged more than 400 points on each of the two trading days after Obama's election on
The average hit bottom at 6,547 in
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.
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
The best day-after performance was in 1900, another re-election. The Dow jumped more than 3 percent on the day after
With the 2012 election over, traders turned to an increasingly sickly European economy, dragged down by a debt crisis for more than three years. The 27-country
<p> 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 more than
U.S. stock futures were higher overnight after Obama cruised to victory. They turned sharply lower after the European forecasts and discouraging comments from
Now that the U.S. election has been resolved, it's natural for traders to focus on
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
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
That's no easy task for a deadlocked government whose overall composition has barely changed — a Democratic president and
"Obama's re-election does not change the bigger economic or fiscal picture,"
Fitch Ratings offered a warning about the fiscal perils facing the U.S. If Obama does not quickly forge agreement with
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.
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
As traders streamed into lower-risk investments, the yield on the 10-year Treasury note plunged to 1.63 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.
Not all hospital companies are expected to benefit. Many serve patients who will be covered by
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.
With Obama seeking to restrain the growth of military spending, defense companies could struggle to win government contracts. Their stocks fell sharply:
Among the 10 industry groups in the
Banks figure to face tougher regulation in a second Obama term than they would have under Romney.
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.
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,
Other notable moves included Apple, the world's most valuable company. It fell 4 percent to
AP Business Writers
|Copyright:||Copyright 2012 The Associated Press. All rights reserved.|