Dow lowest since August on fiscal cliff concern

U.S. stocks fell, sending the Dow Jones Industrial Average to the lowest level since August, as investors’ focus returned to the U.S. tax debate and Europe’s debt crisis following the re-election of President Barack Obama.

All 10 groups in the Standard & Poor’s 500 Index retreated as energy, financial and industrial companies had the biggest losses. Bank of America Corp., Apple Inc. and Freeport-McMoRan Copper & Gold Inc. fell at least 2.2 percent to pace losses among the largest companies. Fertilizer producers dropped as Agrium Inc. tumbled 8.8 percent amid disappointing earnings.

The S&P 500 declined 1.8 percent to 1,403.31 at 10:35 a.m. in New York, also poised for the lowest level since August. The Dow slid 240.76 points, or 1.8 percent, to 13,004.92. Trading in S&P 500 companies was 35 percent above the 30-day average at this time of day, according to data compiled by Bloomberg.

“It’s a rush to safe haven,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management. His firm oversees about $325 billion. “We’re selling off further on rising fears about what a fiscal cliff negotiation is going to mean here. People bring all their worst fears in. At the end of the day, you have the fiscal cliff, Europe and you see a risk-off trade.”

Obama defeated Republican Mitt Romney, boosting speculation policy makers will add to stimulus in the world’s largest economy. While Obama received at least 303 electoral votes to Romney’s 206, Republicans kept a majority in the House of Representatives. Democrats retained control of the Senate.

Fiscal Cliff

Now that the election has been decided, investors will turn their focus to the $607 billion of tax increases and federal spending cuts set to kick in automatically in January, the so- called fiscal cliff. The Congressional Budget Office has said the U.S. economy would slow by as much as 0.5 percent next year if Congress fails to keep the increases from taking effect.

Former Federal Reserve Chairman Alan Greenspan said the U.S. election yesterday perpetuated the political status quo and hasn’t increased the probability of resolving the nation’s fiscal challenges.

“I’m concerned that the election per se has really not changed the balance very much of what’s going on” in the debate over how to reduce the U.S. deficit, Greenspan said today in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We’ve got to resolve this issue. Unless and until we come to grips with this issue, we are not going to be able to look to the future with a considerable state of equilibrium and hope.”

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