Stocks Slammed by Fiscal Cliff Fears
NEW YORK ( TheStreet) -- The major U.S. equity averages plunged Wednesday as worries about the fiscal cliff rattled investors in the wake of Tuesday's status quo election results.
The bears were out in force after President Barack Obama won a second term in The White House, the Republicans maintained control of the House of Representatives and the Democrats kept the upper hand in the Senate.
The lack of a shift in the political landscape racheted up fears that getting Democrats and Republicans will be able to cooperate and act decisively to address the looming expiration of certain tax cuts and other legislative measures.
Violent protests in Greece as the country's parliament votes on austerity measures also added to the dour mood. Bonds made a huge move higher with the 10-year Treasury jumping 1 1/32, pushing the yield down to 1.642%.The Dow Jones Industrial Average lost 313 points, or 2.36%, to close at 12,933. It was the blue-chip index's first close below 13,000 since Aug. 2. All 30 Dow components finished in the red. The biggest laggards in the index were Bank of America (BAC), JPMorgan Chase (JPM), UnitedHealth (UNH), Hewlett-Packard (HPQ) and Intel (INTC). The S&P 500 fell nearly 34 points, or 2.37%, to settle at 1395, while the Nasdaq Composite plummeted close to 75 points, or 2.48%, to close at 2937. The weakest sectors in the broad market were capital goods, energy, financials and technology; all of which were down more than 2%. Every industry group was under significant selling pressure though, losing more than 1%. Apple (AAPL), whose shares tumbled 3.8% was among the hardest-hit names in technology. The iPad maker was told by a Texas federal jury Tuesday to pay patent holding firm VirnetX (VHC) $368 million to help settle a patent dispute. VirnetX soared 28.4%. Decliners were ahead of advancers by a 4.3-to-1 ratio on the Big Board and 5.7-to-1 on the Nasdaq. Volume totaled 4.30 billion on the New York Stock Exchange and 2.03 billion on the Nasdaq. "The House, Senate, and Presidency are all basically in the same partisan position they were prior to the election, which means a lot more of the same policies," said Steve Ayer, managing director and partner at HighTower Strata Wealth Management. "The markets will like the fact that we will have a loose monetary policy, but that will be offset by concerns about higher taxes, worries over the Fiscal Cliff (FC) ramifications, growth concerns, and the other myriad of problems throughout the world." "In terms of the FC, perhaps the biggest concern right now is the fear of a more deeply divided Congress, with the Republicans in the House feeling emboldened as well as the Democrats in the Senate. Given the track record of our lawmakers in raising the debt ceiling last year, there will be tremendous difficulty in getting a compromise on the FC, particularly in light of the fact that we are at the beginning the lame-duck session," continued Ayer, who expects volatility to spike higher in the near-term. "The 2012 U.S. elections are over, and there has been no change to the balance of power. So, the best forecast of the future is that if nothing changes, we can expect more of the same, which has been gridlock on policy," said Douglas Cote, chief market strategist, ING Investment Management. Economic data took a backseat to the election results. The Federal Reserve said consumer credit came in at $11.4 billion, higher than anticipated. Overseas markets mostly declined. The FTSE 100 in London was down 0.45%, while the DAX in Germany was slumping by 1.2%. Japan's Nikkei average closed down 0.03% on Wednesday and Hong Kong's Hang Seng finished up 0.71%.
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