President Obama was snapped back into the reality of dealing with a fragile economic recovery today as stocks plunged in the market’s worst day of the year in the wake of his re-election.
The Dow Jones industrial average plummeted 2.4 percent, or 313 points, capping the market’s worst performance since Nov. 9, 2011 and its second steepest post-election drop in six decades, next to the 5.1 per cent drop following the 2008 election.
Index futures also plunged after the European Union slashed its growth forecast for next year. The blue-chip index finished at its lowest level since early August and the S&P 500 lost 34 points, or 2.4 per cent.
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Meanwhile, the dollar rose and the Labor Department announced that the number of job openings waiting to be filled declined by 100,000 to 3.56 million compared to the prior month. The figures show that the October jump in private payrolls, which was the biggest in eight months, may be difficult to sustain.
The markets were reacting to the challenges ahead for Obama as he returns to a still-bitterly divided Congress in Washington to try and broker a deficit reduction deal before Jan. 1, the day that the so-called ‘fiscal cliff’ — a $607 billion package of tax increases and spending cuts — will go into effect unless Congress acts first.
Mere hours after winning a hard-fought campaign against Republican challenger Mitt Romney, Obama must now face the headaches of the ‘fiscal cliff,’ as well as persistent high unemployment and uncertain economic growth.
And in the days ahead, voters will be holding him to his acceptance speech promise that ‘the best days are yet to come.’
Democrats and Republicans must come to a deficit reduction agreement within the next 54 days to avoid the fiscal cliff’s debilitating mixture of tax increases and spending cuts.
If Congress fails to act, the U.S. economy would contract sharply, potentially sending the nation into a second recession that could spread globally.
Businesses are already slowing hiring and holding back from making new investments in preparation for the possibility that Congress fails to overcome its division.
With the weight of the nation’s economy on his shoulders, President Obama stressed the need for bipartisanship in his acceptance speech last night.
‘In the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together,’ Obama said. ‘I believe we can seize this future together because we are not as divided as our politics suggests.’
But the lawmakers who must find compromise before the fiscal cliff hits are the same ones who failed to do so 15 months ago, when the U.S. was on the brink of defaulting on its debt if Washington didn’t agree on a budget deal.
Out of that failure, the ‘fiscal cliff’ was born as a fall-back measure in case that same political gridlock again plagued budget negotiators in the future.
Investors will be closely watching statements from top leaders of both political parties related to fiscal cliff negotiations in the coming days and weeks, and the stock market will reflect their progress — or lack thereof — in coming to deal.
‘Their signals matter most,’ Tina Fordham, a global strategist at Citigroup, told USA Today.
VIDEO: NYSE shows deep decline at Wednesday’s Opening:
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