Henny Ray Abrams/Associated Press
A trader on the floor of the New York Stock Exchange on Wednesday. A day after the election, the outlook of continued divided government in Washington and little prospect for compromise unnerved traders.
A one-two punch of worries about the post-election picture in the United States and economic weakness in Europe sent stocks reeling Wednesday, with major indices falling more than 2 percent. Some industry sectors, like finance and managed care, fell substantially more than that over fears they would be hurt by tougher regulations and other adverse policies in President Obama’s second term.
The Standard & Poor’s 500-stock index recorded its worst performance since June, falling 33.86 to 1,394.53, while the Dow Jones industrial average fell 312.95 to 12,932.73. It was the Dow’s first close below the psychologically important 13,000 level since August.
Shares also came under pressure after Barclays sharply reduced its year-end target for the S.&P. 500 to 1,325 from 1,395 — 5 percent below where the broad-based index closed Wednesday.
“Within the equity market in the near term, we believe there will be nowhere to hide,” said Barry Knapp, chief United States equity strategist at Barclays. “In the near term, we generally suggest cutting risk.”
Many market strategists expect that the market will remain volatile between now and mid-January. If Congress and the president cannot come up with a plan to cut the deficit, hundreds of billions in Bush-era tax cuts are set to expire at the beginning of 2013 while automatic spending cuts will sharply cut the defense budget and other programs.
Known as the fiscal cliff, this simultaneous combination of sweeping reductions in government spending and tax increases could push the economy into recession in 2013, economists fear.
In the wake of President Obama’s re-election, companies in some sectors, like hospitals and technology, will see a short-term pop, said Tobias Levkovich, chief United States equity strategist with Citi. Other areas, like financial services as well as coal and mining, are likely to be hurt, Mr. Levkovich said.
Indeed, coal companies were among the worst hit Wednesday. The coal industry is particularly sensitive to new environmental regulations, while Mr. Obama has pushed in the past for more investments in renewables and alternative energy sources that could reduce coal demand in the long-term.
Shares of Alpha Natural Resources, a coal giant, were down 12.2 percent to $8.45, while Arch Coal was off 12.5 percent to $7.58.
But HCA Holdings, a hospital operator, jumped 9.4 percent, to $33.85 a share. As a result of Mr. Obama’s victory, Goldman Sachs said it upgraded its rating on HCA to buy from neutral, and raised its price target to $39 from $31. It also raised price targets for Tenet Healthcare and Community Health Systems, although both are still rated neutral.
Goldman downgraded shares of Humana, a leading managed care company, to sell, and its shares fell 7.9 percent to $70.16. Goldman warned that Humana and other managed care providers could be hurt as health care reform moves forward, especially new rules for health insurers that become effective in 2014.
Shares of Wall Street firms and big banks were also hard hit. While Mitt Romney favored substantially altering the Dodd-Frank financial regulations passed in the summer of 2010 and easing many regulations, President Obama has supported stricter rules for the financial services industry. In addition, one of the industry’s fiercest critics, Elizabeth Warren, was elected to the Senate from Massachusetts, unseating her Republican opponent, Scott Brown.
Bank of America fell 7.1 percent to $9.23 while Goldman Sachs dropped 6.6 percent to $117.98 and JPMorgan Chase sank 5.6 percent to $40.48.
Investors on Wall St. React Nervously
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Investors on Wall St. React Nervously
