NEW YORK It appears that Wall Street really did prefer the more business-friendly Mitt Romney to manage the economy from a desk in the White House.
An Obama stock market bounce never materialized after his re-election. Stocks, instead, fell with a thunderous thud Wednesday on news that the president, who gets low grades from investors on his business acumen, will be in charge of USA Inc. for another four years.
There was a general view in the market that a Romney win would be more favorable to stocks, said John Praveen, chief investment strategist at Prudential International Investment Advisors. Many investors apparently had held out hope for a Mitt Romney victory.
With the ink barely dry on Obamas upbeat acceptance speech, the mind-set of Wall Street investors took a quick, downbeat, bearish turn. It was as if investors all hit a button at the same time that switched the market into worry-only mode, erasing any positive market-related vibes that might have existed a day earlier.
Fear that the nations fiscal crisis would not be resolved in time to avoid falling off the edge of the so-called fiscal cliff intensified, as did fears that chronic uncertainty would infect the market through years end.
Worries that Obamas plans to increase taxes on both capital gains and dividends would reduce investor appetite for stocks and even spark selling before the tax bite kicks in also took hold.
Stocks that would be hurt by Obamas preference for stiff regulations, such as banks, sold off sharply. And to make matters worse Wednesday, worries about Europes debt crisis returned to the top of investors what-to-worry-about list.
Add it all up and what you get is a Molotov cocktail that created a pretty severe bout of selling, said Andy Busch, a public policy strategist at BMO Capital Markets.
To say the negative mood hurt stocks would be an understatement, as Wall Street was awash in red ink all day Wednesday, when about $400 billion in stock market value vanished in the trading session, according to Wilshire Associates.
The Dow Jones industrial average suffered its worst point drop since last November, plunging 313 points, or 2.4 percent, to 12,933. It was the fifth-worst drop after an Election Day since 1900, Bespoke Investment Group said. The biggest loss after a presidential election was four years ago when the Dow tumbled 5 percent after Obama won his first term in office.
Despite the down session, the Dow remains up nearly 6 percent for the year. The gains have been powered by an easy-money policy from the Federal Reserve, a housing comeback and resilient consumers who are keeping the economy growing.
There were no shortage of theories on Wall Street as to why the market reaction was so violently negative.
Garnering the most blame was the belief that the status quo election result with Obama holding on to his job and the Democrats retaining power in the Senate and the Republicans protecting their turf in the House of Representatives will translate into legislative gridlock that could jeopardize a deal getting done in Congress by years end to avert the fiscal cliff.
While both presidential candidates were silent about the fiscal cliff during the debates and the election season, it is now the No. 1 issue facing investors, said Barbara Novick, head of government relations for money management firm BlackRock.
The fiscal cliff is the term to describe the growth-killing impact of more than $600 billion in coming tax increases and government spending cuts on Jan. 1 unless Congress acts to avert it.
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