The Real Reason Stocks Crashed Today

Article after article is talking about how disappointed investors are at the thought of another four years of an Obama administration and a stalemate with Congress. But that's not the real reason markets are down today. In fact, markets were up during premarket trading, when everyone knew the election results. But they went into free fall after market killer Mario Draghi said Europe was in even worse shape than anticipated, and the Dow Jones Industrial Average (INDEX: ^DJI  ) and the S&P 500 (INDEX: ^GSPC  ) are both down 2.1% as of 3:15 p.m. EST.

For years, Germany has been the one bright spot in Europe, but today Draghi said that Europe's crisis is hurting the euro block's largest economy. As a result, the European Commission cut the eurozone's growth forecast for 2013 from 1% to 0.1%.

The news from Europe and an additional four years of Obama have been a double-whammy to banking stocks today. JPMorgan (NYSE: JPM  ) is down 5.1%, and Bank of America (NYSE: BAC  ) has been pummeled 6.3% lower on the developments. More regulation is bad for banks, but they've been preparing for it for years. What would be even worse for banks would be a collapse of the euro -- which seems more and more likely all the time as the European economy deteriorates.

Oil futures and energy stocks also took it on the chin today. Oil is down 4.8% to $84.43, giving up gains from recent days. As a result, oil producers ExxonMobil (NYSE: XOM  ) has fallen 3%, and Chevron (NYSE: CVX  ) is down 2.5%. The big move in oil is in part a reaction to Obama's election, because he has put a big focus on reducing oil consumption through more fuel-efficient vehicles.

Markets weren't really surprised by the election, because Obama was predicted to win by most nonpartisan analysts, so it's silly to think that today's declines owe solely to the election. Europe has had far more impact on the markets today, and the uncertainty there will be just as important as the possible ramifications of the fiscal cliff.

One company that will be heavily affected by Europe is Bank of America, which has exposure around the world. To learn more about the most talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, as well as three reasons to buy and three reasons to sell. Just click here to get access.


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  • Report this Comment On November 07, 2012, at 4:33 PM, rickease wrote:

    I'm glad to see someone is willing to tell the truth about the real reason for the market decline today. Another reason being the losers have to through their little temper tantrum because they didn't get everything their way. We all know that the market had a tremendous climb during the last four years and the market always does better with a Democrat President. So let them get their little rants out of their system and get on with it.

  • Report this Comment On November 07, 2012, at 4:43 PM, NewYork57 wrote:

    Ah, yea, right.... The market tanking the day after the election is a coincidence.

  • Report this Comment On November 07, 2012, at 11:34 PM, Jurkekr wrote:

    Right! Another great apology for an abject failure and non performer. Go ahead and convince us that little Mario waited till midnight on the night of our election to access his financial acumen...

    Some of us have outgrown fairy tales and meritless rationalizations the market for which has already been cornered by other media. The market tanked due to predictable expectations of what the future has in store for us.

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