Wall Street Takes Plunge
(AP) – 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.
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 was the worst day for stocks this year, but not the worst after an election. That distinction belongs to 2008, when Barack Obama’s election victory accelerated 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 regulatory relief if Mitt Romney had won the election.
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.
Stocks seen as benefiting from Obama’s re-election rose. They included hospitals, suddenly free of the threat that Romney would roll back Obama’s highly divisive 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 tried to take root.
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.
Fitch Ratings offered a warning Wednesday about the perils facing the U.S. If Obama does not quickly forge an 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.