U.S. stocks declined, snapping a two- day advance in the Standard & Poor’s 500 Index, 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 S&P 500 retreated today as phone, financial and energy companies had the biggest losses. Bank of America Corp., Apple Inc. and Freeport-McMoRan Copper & Gold Inc. fell at least 1.4 percent to pace losses among the largest companies. Fertilizer producers dropped as Agrium Inc. tumbled 7.6 percent amid disappointing earnings and revenue.
The S&P 500 declined 1.4 percent to 1,408.83 at 9:41 a.m. in New York. The Dow Jones Industrial Average futures slid 175.87 points, or 1.3 percent, to 13,069.81. Trading in S&P 500 companies was 56 percent above the 30-day average at this time of day, according to data compiled by Bloomberg.
“Here we go again in Washington,” Ed Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York, wrote in a note today. “President Barack Obama has won a second term. While he promised last night that ‘the best is yet to come,’ more political storms are likely.”
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.
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 after the worst recession in seven decades 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.
Stocks have on average rallied 3 percent in the two months following Election Day after a tight race, according to Thomas J. Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., who cited historical data from the last five elections with close contests.
Yet since 1984, the S&P 500 has declined an average 0.9 percent on the day which followed presidential elections, according to data compiled by Bespoke Investment Group. The benchmark measure for American equities has risen only two of seven times on the day after the polls, the data showed.
Some of the biggest companies declined today. Bank of America retreated 3.9 percent to $9.56. Apple fell 1.4 percent to $571.87. Freeport dropped 1.6 percent to $39.69.
Fertilizer producers slumped. Agrium tumbled 7.6 percent to $98.96. 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 1.1 percent to $39.98. CF Industries Holdings Inc. decreased 2 percent to $202.17.
Investors also watched the latest developments in Europe’s attempt to tame its debt crisis. Greek lawmakers vote today on an austerity bill that contains austerity measures demanded by the so-called troika that oversees euro-area bailouts insists.
A 31.5 billion-euro ($40 billion) aid payment has been frozen since June as Prime Minister Antonis Samaras’s coalition government haggled over the measures and a two-year extension to meet the fiscal targets in the accord.
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 in Frankfurt today. “But the latest data suggest that these developments are now starting to affect the German economy.”