Stocks fall after election day
Traders work at the New York Stock Exchange the day after election day. U.S. stocks slid as investor focus returned to the budget debate and Europe’s debt crisis after Obama’s reelection. (Peter Foley, Bloomberg / November 8, 2012)
WASHINGTON — Financial markets plunged as concerns about Europe's economy combined with the morning-after reality that the U.S. elections left the same gridlocked politicians to deal with the fast-approaching fiscal cliff.
The Dow Jones industrial average fell 313 points, or 2.4%, on Wednesday to its lowest level in three months. The broader Standard & Poor's 500 index also ended the day down 2.4%, and the Nasdaq was off 2.5%.
Investors worried that another recession loomed next year unless newly reelected President Obama and still-strong congressional Republicans could stop the large tax hikes and government spending cuts that kick in Jan. 1.
"We've gotten certainty on the presidency and now we move into the uncertainty of where we were before — the fiscal cliff," said Quincy Krosby, market strategist at Prudential Financial. "The market's not going to have much patience to wait to see when the negotiations begin in earnest and how they evolve."
Sectors in Washington's fiscal or regulatory cross-hairs — defense, healthcare, energy and financial — took drubbings. Big banks, which are subject to many new financial rules championed by Obama, got hammered.
Goldman Sachs Group Inc. lost $8.27, or 6.6%, to $117.98. JPMorgan Chase & Co. lost $2.40, or 5.6%, to $40.48. Morgan Stanley plunged $1.56, or 8.6%, to $16.63. And UnitedHealth Group Inc., the health insurance giant, lost $2.13, or 3.8%, to $54.26, as hopes for a repeal of Obama'shealthcare reform law faded with his reelection.
More signs of trouble regarding the European debt crisis also pushed markets lower. European Central Bank President Mario Draghi said new data indicated that the fiscal problems were starting to affect Germany, the Eurozone's strongest economy. Growth forecasts for the region were downgraded.
And riots broke out in Greece ahead of the Greek parliament's narrow approval of a tough new round of spending cuts.
But most of the attention was on Washington. Fitch Ratings, one of the three leading credit rating companies, highlighted the stakes facing politicians in the coming weeks.
The firm declared there would be "no fiscal honeymoon" for Obama, warning that the U.S. probably would face a ratings downgrade if a deal could not be brokered to stave off the fiscal cliff and to increase the nation's debt ceiling again.
Business leaders said that with the bitter presidential and congressional elections over, it was time for Democrats and Republicans to join together and prevent another fiscal crisis.
"The most important mandate coming out of this election is fixing the problems we knew we had to fix," said Jay Timmons, president of the National Assn. of Manufacturers.
The challenge is huge.