MarketView for November 7

Summary

The Dow Jones Industrial Average lost more than 300 points on Wednesday with all major stock indexes down over 2 percent in the wake of the presidential election as investors' focus shifted to the looming "fiscal cliff" debate and Europe's economic troubles.

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 Big Board and the Nasdaq ending in negative territory. Both the Dow and the S&P 500 closed at their lowest levels since early August. The S&P 500 closed below the key 1,400 level for the first time since August 30, while the Dow ended the day under 13,000 for the first time since August 2.

Financial stocks and energy shares, two sectors that could face increased regulation after President Barack Obama's re-election, were the weakest on the day, while Apple entered bear market territory. Apple ended the day down 3.8 percent to close at $558, off 20.8 percent from an all-time intraday high of $705.07 set on September 21. That decline had the shares of the world's most valuable publicly traded company in 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 House of Representatives, while the Senate remained under Democratic control.

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, the other side of the coin is that the day's slide was a buying opportunity.

Despite Wednesday's sell-off, all three major U.S. stock indexes were still up for the year. At Wednesday's close, the Dow was up 5.9 percent, while the S&P 500 was up 10.9 percent and the Nasdaq 12.8 percent.

Wednesday's drop was a reversal from Tuesday's rally when voting was under way. Defense and energy shares were among the market leaders that day, causing speculation that some investors were betting on a Romney win.

Shares of United Technologies fell 2.9 percent to $77.68, while Lockheed Martin was down 3.9 percent to end the day at $91.15.

Energy shares fell as investors bet that the industry may see increased regulation in Obama's second term, with less access to federal lands and water. Crude oil shed more than 4 percent while an index of coal companies fell 8.8 percent. Coal firms Peabody Energy lost 9.6 percent to $26.24 and Arch ended the day down 12.5 percent to close at $7.58.

Among financials, JPMorgan Chase closed down 5.6 percent at $40.46 and Goldman Sachs ended the day down 6.6 percent at $117.98.

Healthcare stocks were mixed as President Obama's re-election rules out the possibility of a wholesale repeal of his healthcare reform law; although questions remain as to what parts of the domestic policy will be implemented. Tenet Healthcare was the S&P 500's largest percentage gainer, up 9.6 percent at $27.34.

In 2008, stocks also rallied on Election Day, but then fell by the largest margin on record for a day following the vote, with each of the three major U.S. stock indexes posting losses ranging from 5 percent to 5.5 percent.

After the bell, both Qualcomm and Whole Foods reported results. Qualcomm's revenue exceeded expectations, sending its shares up 8 percent to $62.75 in extended trading, while Whole Foods fell 3.3 percent to $92.75 after the bell. In the regular session, Qualcomm closed down 3.7 percent at $58.12, while Whole Foods ended the day down 2.1 percent at $95.93.

About 7.81 billion changed hands on the major equity exchanges, a number that was slightly below last year's daily average of 7.84 billion shares, although Wednesday's volume did surpass that of many recent sessions.