Dow down 312.95 points day after election
The Standard & Poor's 500 Index posted its biggest daily percentage drop since June, with all 10 S&P sectors solidly lower and about 80 percent of stocks on both the New York Stock Exchange and the Nasdaq ending in negative territory. Both the Dow and the S&P 500 closed at their lowest levels since early August.
Financial stocks and energy shares, two sectors that could face increased regulation after President Barack Obama's reelection, were the weakest on the day. The S&P financial index lost 3.5 percent, while the S&P energy index fell 3.1 percent. An S&P index of technology shares slid 2.8 percent as the stock of Apple Inc entered bear market territory.
Obama's victory had been anticipated, though many polls indicated a close race between the President and Mitt Romney, his Republican challenger, going into election day.
The election was considered a major source of uncertainty for the market, but now the focus turns to the fiscal cliff, with investors worrying that if no deal is reached over some $600 billion in spending cuts and tax increases due to kick in early next year, it could derail the economic recovery.
The Republican Party retained control of the U.S. House of Representatives, while the Senate remained under Democratic control.
David Joy, chief market strategist at Ameriprise Financial in Boston, said this kind of divided government was disappointing "since that configuration has resulted in gridlock and there's no clear path towards unlocking that.
"It holds implications for how quickly we resolve the fiscal cliff issue, or whether it gets resolved at all," said Joy, who helps oversee $571 billion in assets.
The market's losses were broad, with pessimism exacerbated by overseas concerns after the European Commission said the region would barely grow next year, dashing hopes for improvement in the short term.
Still, some viewed the day's slide as a buying opportunity, saying it was unlikely that no deal would be reached on the fiscal cliff and arguing that Europe's troubles were already priced into markets.
"There's no question that Europe is lagging the rest of the developed and emerging world, but stocks will find a base soon, when investors start seeing through some of the smoke over the region and cliff," said Richard Weiss, who helps oversee about $120 billion in assets as a senior money manager at American Century Investments in Mountain View, California.
The Dow Jones industrial average slid 312.95 points, or 2.36 percent, to 12,932.73 at the close. The Standard & Poor's 500 Index fell 33.86 points, or 2.37 percent, to 1,394.53. The Nasdaq Composite Index lost 74.64 points, or 2.48 percent, to close at 2,937.29.