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NEW YORK -- U.S. stocks opened sharply lower Wednesday following the
re-election of President Obama. Within minutes of the opening bell, the
Dow Jones industrial average was down nearly 200 points.
initial reaction is decidedly negative over the defeat of the more
business-friendly Mitt Romney and the continued gridlock in Congress
that will make it tough for lawmakers to avert a fiscal policy crisis by
Key stock indexes were down more than 1.3 % as the market opened in the U.S.
yesterday's 133-point Dow rally, it is not surprising that we are
giving some back because the general perception on Wall Street was that a
Romney victory would have been better for markets," says Dan McMahon,
director of equity trading at Raymond James. "People will have a lot of
concerns about the fiscal cliff (getting resolved) and will again
question the economic policies and fiscal prudence of the Obama
In foreign markets, investors seemed not yet
ready to overwhelmingly endorse Obama's win. In Europe, key indexes
opened higher but reversed course and were all trading lower Wednesday.
FTSE 100 was down 0.3% to 5,867.70, France's CAC 40 index was 0.7%
lower at 3,455.07, and Germany's DAX 30 index fell 0.8% to 2,286.02. In
Asia, markets ended the day mixed.
Some analysts blamed the
dropoff in Europe and the pessimistic mood in New York on remarks made
by European Central Bank president Mario Draghi about the negative
economic outlook for the eurozone, especially the economy of Germany.
in the U.S., investors are already looking past the hard-fought Obama
win and focusing on the virtual status quo that remains in Congress,
where Republicans retain control, and the Senate, in which the Democrats
still have a slim majority, altered little by picking up two seats.
That means averting the so-called "fiscal cliff" looming in December,
when a host of mandated budget cuts and tax cut expirations seem more
worrisome than what investors had feared before they knew the outcome of
the presidential election. The biggest fear is Washington's potential
inability to compromise in a lame-duck session, resulting in a host of
tax hikes and spending cuts set to kick in Jan. 1.
One major source of disagreement in the fiscal debate is that Obama wants to boost revenues by taxing the rich. But
vehemently oppose that approach. Some Wall Street pros, including Ed
Yardeni, chief investment strategist at Yardeni Research, believe that
Obama's win will result in more turbulent negotiations.
"The chances of going off the cliff probably just increased," Yardeni says.
when a deal is forged on tax reform, entitlements and deficit
reduction, will investors gain the level of clarity needed to deliver a
jolt of confidence to markets, says David Joy, chief market strategist
at Ameriprise Financial.
"Investors and companies need to know
the rules of the game, whether those rules are to their liking or not,"
says Joy. "A (fiscal cliff) deal is more important than the fact that
the election is over."
The dollar is trading stronger against the
euro, which dipped 0.4% to $1.2754, probably more a reflection of
ongoing worries about the debt crisis in Europe. Greece faces its toughest vote yet Wednesday
on passing $17.3 billion more in austerity measures to qualify for more
bailout funding or default on millions of dollars in loans. The dollar
did strengthen slightly, 0.3%, against the yen.
Gold prices had
been up as much as 2% overnight but the gains were trimmed to 0.4% by
early Wednesday, to $1,725.20, as global investors puzzled over how the
election might affect inflation. Crude oil prices were down 1.3% to
"The re-elected president must immediately act to avoid the fiscal cliff," says David Kotok, chief investment officer at
Cumberland Advisors. "Massive negotiations lie ahead."
that the same political players remain to negotiate a deal, President
Obama, in his acceptance speech last night, stressed that the need for
Investors will be closely watching statements
from top leaders of both political parties related to fiscal cliff
negotiations, notes Tina Fordham, a global strategist at Citigroup.
"Their signals matter most," she says.
Before Tuesday's vote,
markets overseas had already been pricing in and anticipating a win by
President Obama as investors hoped for the continuity, said Jim Welsh,
portfolio manager of the Forward Tactical Enhanced Fund. Foreign
investors appreciate the "stability that a reelection of Obama would
provide," he says.
"An Obama victory will leave less uncertainty
for the markets and probably help what's been better sentiment in Asia
recently," said Mark Headley of Matthews Asia Pacific fund. Had Romney
won, it would have meant "more uncertainty for a world already with lots