Dow loses 313 in post-election sell-off
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 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 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 21⁄2 years.
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 Commis-sion, the executive arm of the EU, said 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.
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.