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.
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.”
While Obama’s victory in 2008 spurred the biggest plunge ever for the Dow on the day after an election, gains for American assets over the past four years are among the best in the developed world. Fed Chairman Ben S. Bernanke’s actions to revive the economy helped send the Dow up 67 percent. The Dow has gained 3.9 percentage points more than the MSCI All-Country World Index since Obama’s inauguration, beating 16 of 24 developed countries.
Investors also watched the latest developments in Europe’s attempt to tame its debt crisis. Greek lawmakers vote today on a bill that contains austerity measures demanded by the so-called troika that oversees euro-area bailouts insists. European Central Bank President Mario Draghi said inflation risks are “very low” and the debt crisis is starting to hurt Germany, Europe’s largest economy.
“Germany has so far been largely insulated from some of the difficulties elsewhere in the euro area,” Draghi said at a conference today. “But the latest data suggest that these developments are now starting to affect the German economy.”
Some of the biggest companies declined today. Bank of America retreated 4.7 percent to $9.47. Apple fell 2.2 percent to $567.30. Freeport dropped 2.8 percent to $39.23.
Fertilizer producers slumped. Agrium tumbled 8.8 percent to $97.75. The fertilizer maker and the largest U.S. farm-products retailer reported third-quarter profit and revenue that trailed analysts’ estimates after Asian sales talks stalled and a plant restart took longer than expected. Potash Corp. of Saskatchewan Inc. retreated 1.2 percent to $39.95. CF Industries Holdings Inc. decreased 1.9 percent to $202.33.
NII Holdings Inc. slumped 13 percent to $6.15. The Latin America mobile-phone carrier that offers service under the Nextel brand posted a wider loss than analysts had estimated.
Shares of defense contractors such as Lockheed Martin Corp. and Raytheon Co. fell after Obama defeated Romney, who had proposed boosting military spending. Lockheed, the world’s biggest defense company, fell 4.3 percent to $90.78. Huntington Ingalls Industries Inc., the maker of aircraft carriers, fell 3.3 percent to $43.50.
Time Warner Inc. added 2.5 percent to $44.17. The media company that owns HBO and the Batman film franchise reported third-quarter profit that topped analysts’ estimates after making gains in cable-network revenue.
Macy’s Inc. rose 0.7 percent to $41.68. The second-largest U.S. department-store chain posted third-quarter profit that topped analysts’ estimates while its forecast for the end of the year signaled it may use heavy discounts to draw holiday shoppers.