Dow Jones drops more than 300 points day after election
NEW YORK (AP) - Financial stocks are less than enthusiastic about an Obama second term.
U.S. stocks plunged across the board on Wednesday, the day after President Barack Obama was decisively re-elected. But no segment of the market was hit harder than the financial industry.
Financial stocks in the Standard & Poor's 500 were down more than 3 percent around midday, worse than any of the other nine stock categories in the S&P.
The concerns that plagued stocks broadly - looming government spending cuts and tax increases, a deepening recession gripping Europe - are especially hard on banks and other financial firms.
Obama's re-election also has a direct impact on banks:
- It gives Federal Reserve Chairman Ben Bernanke an implicit OK to hold interest rates at record lows. Mitt Romney, the Republican challenger, had suggested replacing Bernanke.
Low interest rates are supposed to spur borrowing, which helps banks by creating more lending business, but they cut into what banks make on loans. Banks have complained for months that their interest margins are getting squeezed.
- It means the thick roster of banking rules passed in 2010, the Dodd-Frank Act, is all but certain to stay in place. Those rules have crimped some revenue sources that banks used to rely on, like fees charged to stores when customers use debit cards, or on credit cards marketed to college students. Romney had promised to repeal Dodd-Frank.
- It means the candidate who has had few nice things to say about the banking industry is back in power. In 2008, the financial sector threw its money and its weight behind Obama. But this time, many veered toward Romney instead. Some switched because they doubted Obama could fix the economy. Others were disturbed by his proposals to tax capital gains and dividends at a higher rate. Others simply didn't like what they perceived as an anti-banking tone from Obama, who scourged "fat cat bankers" and "millionaires and billionaires."
On Wednesday at midday, Bank of America and Goldman Sachs were down more than 5 percent. Wells Fargo was down about 3 percent. Morgan Stanley was down nearly 7 percent, and Citigroup and JPMorgan Chase were down more than 4 percent.