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Post-election slide

Stocks' 486-point drop is biggest after presidential vote, as economic forecasts send investors fleeing

COMBINED NEWS SERVICES

November 6, 2008

U.S. stocks plummeted yesterday, a day after Sen. Barack Obama's historic victory in the U.S. presidential election, as a fresh batch of dismal economic data underscored the massive challenges awaiting his administration.

The drop marked Wall Street's biggest loss ever on the day after a presidential election, coming immediately on the heels of its biggest Election Day rally on record in the previous session.

Selling hit across the board, with shares of big manufacturers, including Boeing, as well as banks, technology companies, home builders, retailers and energy companies, among the biggest casualties.

And today could be even uglier after Cisco Systems Inc., a technology bellwether, said after the close of regular trading yesterday that fallout from the United States had now spread to key markets abroad and its revenue could fall as much as 10 percent in the current quarter.

Investors worry that the new administration won't be in a position to act fast enough to avert a deep economic downturn.

"Even though there's a lot of enthusiasm and a lot of excitement around the new president, I think it's going to be very difficult for anything quick to happen," said Dean Barber, president of investment firm Barber Financial Group in Kansas City. "Today we just had reality set in that ... we're still losing jobs and we still have consumer spending at very low levels and we are heading into a holiday season that looks like it could be one of the worst."

The Dow Jones industrial average slid 486.01 points, or 5.05 percent, to 9,139.27. The Standard & Poor's 500 Index plunged 52.98 points, or 5.27 percent, to close at 952.77. The Nasdaq Composite Index lost 98.48 points, or 5.53 percent, to 1,681.64.

Grim economic news included a report that showed deep cuts in employment by private employers in October and data that showed the vast service sector contracted sharply last month as the worst financial crisis in 80 years roiled the world's largest economy.

Investors were also nervous ahead of tomorrow's government data on October nonfarm payrolls. Economists polled by Reuters have forecast a loss of 200,000 jobs in October.

Beyond broad economic concerns, worries about the financial sector intensified after Goldman Sachs Group Inc. began to notify about 3,200 employees globally that they have lost their jobs as part of a broader plan to slash 10 percent of the investment bank's workforce, a person familiar with the situation said.

Also, late-day selling by hedge funds helped deepen the market's losses during the last hour. More selling by the funds is expected to weigh on the market ahead of a Nov. 15 cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end.

"The market has really gotten ahead of itself, and falsely priced in that this recession wasn't going to be as prolonged as thought," said Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. "We're in a really bad recession, period. Wall Street can spin it anyway they want to, but this is likely going to be more prolonged than people anticipated."

Why markets tumbled

Some experts say factors dragging the markets yesterday were:

TRANSITION. Worries that the new administration won't be in a position to act fast enough to avert a deep economic downturn.

GRIM NEWS. A report showed deep job cuts by private employers and data that showed the service sector contracted sharply last month.

PAYROLL REPORT. Nervousness ahead of tomorrow's report on October nonfarm payrolls.

FINANCIAL SECTOR. Concerns after Goldman Sachs Group Inc. began to notify 3,200 employees they have lost their jobs.

HEDGING BETS. Late-day selling by hedge funds ahead of a Nov. 15 cutoff for shareholders to notify fund managers of their intent to sell investments before the year is out.

Combined news services

DOW JONES

486.01

5.05%

S&P

52.98

5.27%

NASDAQ

98.48

5.53%