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Investors' initial reaction to Obama reelection: Sell

November 07, 2012|By Andrew Tangel
  • Traders work on the floor of the New York Stock Exchange on election day.
Traders work on the floor of the New York Stock Exchange on election day. (Jin Lee / Bloomberg )

Investors don't seem too happy with President Obama's reelection, at least initially, as stocks dropped sharply in early trading on Wall Street.

The Dow Jones industrial average fell 197 points, or 1.5%, to 13,048 shortly after the opening bell.

The broader Standard & Poor's 500 index lost 21 points, or 1.5%, to 1,407. The Nasdaq was down 41 points, or 1.4%, to 2,971.

With Obama's reelection and Congress remaining divided, governmental gridlock may persist, meaning that the same partisan dynamic will be in play as the federal government tries to deal with the looming "fiscal cliff," the automatic spending cuts and tax increases at the end of the year that threaten to push the U.S. back into recession.

Also, healthcare companies have less of a chance of avoiding full implementation of Obama's signature overhaul of the healthcare system.

And Obama's new lease at the White House dashes the financial sector's hopes of dodging the brunt of the Dodd-Frank overhaul of the financial system. Many Dodd-Frank rules have yet to go into effect, and GOP presidential candidate Mitt Romney had promised to repeal the law, though he favored some of its provisions.

Still, it may that the broader global economy's problems were weighing on investors' minds Wednesday.

The Eurozone's debt crisis remains unresolved, and the continent's economies remain weak.

European Central Bank President Mario Draghi said in a speech Wednesday that unemployment remained "deplorably high" and that economic activity is weak and would remain so in the near term.

Draghi also expressed worries over Europe's strongest economy.

"Germany has so far been largely insulated from some of the difficulties elsewhere in the euro area," he said. "But the latest data suggest that these developments are now starting to affect the German economy."

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