So much for a post-election afterglow in the stock market.
A day after racking up their largest-ever election-day gains, stock prices crumpled Wednesday as investors turned their gaze from the election back to the realities of a still-sliding economy.
The Dow Jones industrial average skidded almost 500 points — more than washing out Tuesday’s 305-point advance — as investors faced the likelihood that economic numbers could remain gruesome for months to come.
“People have been kind of pie-eyed because the election took the market’s attention off earnings and the employment situation,” said Chris Johnson, chief executive of Johnson Research Group in Cincinnati. “Now we’re coming out the other side of the election, we know who’s in office and we’re getting smacked in the side of the head. It’s back to reality.”
The Dow slumped 486.01 points, or 5.1 percent, to 9139.27. It was the Dow’s 12th-biggest point loss ever; seven of the top 12 have come this year.
The Standard & Poor’s 500 index fell 52.98 points, or 5.3 percent, to 952.77, and the Nasdaq composite index tumbled 98.48 points, or 5.5 percent, to 1681.64.
Sectors that could be hit the hardest in a protracted recession — including financial, consumer discretionary and materials — led the decline.
The sell-off was driven partially by fears about the effect of mounting layoffs.
Investors are bracing for the government’s monthly unemployment report Friday to show that as many as 200,000 jobs were eliminated in October, the worst loss in the 10 months that joblessness has been rising.
Analysts said Barack Obama’s decisive victory didn’t play a part in the market’s slide because his election had been expected. But the sell-off underscored the scramble that’s taking place across Wall Street as investors attempt to figure out how his presidency would affect business and the economy.
Although Obama outlined the broad contours of his planned economic policies during the campaign — including increases in income and capital-gains taxes for wealthier Americans — investors are debating how much he can pursue in the face of the financial crisis.