Stocks slide on Wall Street, extending sell-off
NEW YORK — Stocks slid on Wall Street on Thursday, a day after the Dow Jones industrial average logged its biggest one-day drop of the year, as investors fretted about the potential for gridlock in Washington.
The Dow closed down 121.41 points to 12,811.32, bringing its two-day loss to 434 points. The Standard and Poor's 500 index fell 17.02 points to 1,377.51 and the Nasdaq composite slipped 41.71 to 2,895.58.
The Dow plunged 313 points Wednesday, its fifth worst one-day drop following a presidential election. The biggest, in 2008, occurred in the midst of the financial crisis on the day after President Obama won his first term.
After Obama's re-election to a second term on Tuesday, investors turned their focus back to Europe's problems and the so-called fiscal cliff, a package of tax increases and government spending cuts that will occur unless Congress acts by Jan. 1. Investors see it as a serious threat to the economic recovery.
“The thinking before the election was that it would remove some of the uncertainty, but it seems to have done the opposite,” said Tyler Vernon, chief investment officer at Biltmore Capital Advisors in Princeton, N.J.
Stocks are still up on the year, but well below the peak they reached in September. That was when the Federal Reserve announced a third round of its bond-buying program, which is intended to hold down borrowing costs and encourage lending.
The S&P 500 is 6 percent below its high close of the year, 1,465, which it reached on Sept. 14. That was its highest level in nearly five years. It's still up 10 percent for the year.
Investors may be tempted to sell appreciated stock before a possible increase in the capital gains tax at the end of the year, Vernon said.
Tax cuts enacted by President George W. Bush expire at the end of this year and the government wants to cut a $1 trillion budget deficit.
“The mood of the market has certainly switched,” said J.J. Kinahan, chief derivatives strategist at TD Ameritrade, as investors monitor developments on the fiscal cliff and wait for more clues about Obama's agenda.
Investors were encouraged by reports on unemployment and the trade deficit that came out before the market opened. The Dow climbed as much as 48 points in the morning but started to sink after the first hour of trading.
The Dow fell steadily throughout the rest of the day, and more steeply in the last hour of trading. The Dow gave up 73 points in the last 40 minutes, accounting for more than half the day's loss.
Among stocks making big moves:
— Energy drink maker Monster Beverage sank 57 cents to $44.40 after the company said its revenue growth slowed in the third quarter.
— Dean Foods rose 32 cents to $16.40 after the company reported a third quarter profit of $36 million for the third quarter, compared with a $1.5 billion loss in the same period a year earlier.
— Burger chain Wendy's rose 13 cents to $4.39 after the company said that a key sales figure rose. Revenue at restaurants open at least 15 months rose 2.7 percent, the sixth straight quarter of growth.
— CBS rose 36 cents to $34.36 after the company said that earnings rose 16 percent as falling ad revenue was offset by higher fees from pay TV distributors.