Why the Dow's Plunging After the Election

Yesterday the stock market rallied, with many investors believing it simply represented relief that the end of the long campaign was at hand. But judging from today's market action, it seems investors were ignoring the pre-election polling data and hoping for a Romney victory, because now that those hopes have faded, stocks are plunging, giving up all of yesterday's gains and much more. European Central Bank President Mario Draghi didn't help matters, again noting that the weakness in Europe's economy isn't likely to go away anytime soon. As of 11 a.m. EST, the Dow Jones Industrials (INDEX: ^DJI  ) are down 299 points, with the broader markets down around 2% as well. All 30 Dow stocks fell.

Big banks were hit hardest among Dow components, with Bank of America (NYSE: BAC  ) falling more than 5% and JPMorgan Chase (NYSE: JPM  ) down about 4.5%. Fears that a Democratic administration will continue along the lines of more stringent regulation weighed on bank stocks across the industry. Yet given the recovery that most banks have seen, due in large part to signs of life in the beaten-down housing market, the knee-jerk election reaction could well prove to be a buying opportunity.

UnitedHealth (NYSE: UNH  ) also fell sharply, sinking 4.3% as the future of the Affordable Care Act now appears to be assured. With some states having waited to see whether the health care law would survive a potential change in the Oval Office, UnitedHealth and its health insurance peers will need to move forward with steps to comply with the new law as more of its provisions take effect.

Finally, ExxonMobil (NYSE: XOM  ) lost 3.2% on a generally bad day for energy stocks. An Iraqi oil ministry official acknowledged reports that the oil giant is trying to get out of its West Qurna oil field development project in southern Iraq. The company created some controversy when it sought to conduct energy exploration in the Kurdish region of the country in late 2011, and Exxon's move may be in response to that controversy.

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does that make Bank of America a sell today? Find out in our in-depth research report on B of A, which details the bank's prospects and provides 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 11:29 AM, nongolfer wrote:

    welcome to the beginning of the next recession!

  • Report this Comment On November 07, 2012, at 11:45 AM, devoish wrote:

    Maybe people are selling today because the bills for Sandy are starting to roll in and they did not buy a log splitter two years ago.

    Maybe people are selling today because rather than investing in companies, they have been investing in political news stories.

    Maybe people are selling today because their charts are telling them the people who sold them the charts have sold.

    Maybe people are selling today because a $30,000 investment in solar panels on their own roof is better than a $30,000 investment in XOM.

    Maybe I don't know either.

    Best wishes,

    Steven

  • Report this Comment On November 07, 2012, at 11:54 AM, mdk0611 wrote:

    Didn't Fitch also threaten to downgrade US governments debt rating?

  • Report this Comment On November 07, 2012, at 12:49 PM, TehJay wrote:

    The fiscal cliff wasn't just going to disappear if Romney had won. The street knows that the president doesn't actually change until January, right?

  • Report this Comment On November 07, 2012, at 2:21 PM, chris293 wrote:

    Don't panic, of course when I say that a lot of people will panic, but that the nature of the game. Nature (Sandy) and political results no matter who won cause the markets to have vibrations that can be positive or negative. Don't let some take advantage of your emotions.

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