Investors flee financial stocks as Obama’s reelection raises fears that financial industry might actually be regulated.
The action began at 7:00 EST on Wednesday morning. The major European stock indices and the American stock futures indices sank faster than stones after publication of a remark by European Central Bank President Mario Draghi during a speech at the Business Forum in Frankfurt. Draghi warned that although Germany has been insulated from difficulties elsewhere in the Eurozone, “the latest data suggest that these developments are starting to affect the German economy”. At 7:00, the December 12 Dow Jones Industrials future had been at 13,180. Immediately after that point, it went into an abrupt nosedive along with the other American index futures and the European stock indices (NYSEARCA:FEZ). Chart courtesy of Stockcharts.com
By the time the opening bell rang, many investors had already bailed out of their financial stocks, out of fear that the bank-friendly financial team from the first Obama administration (including Timothy Geithner) could be replaced by new sheriffs with more serious attitudes about financial reform. Carbon-based energy stocks were also hard-hit. Arch Coal (NYSEARCA:ACI) was down by nearly 14 percent. The United States Oil ETF (NYSEARCA:USO) sank 4.51 percent. Trading the Presidential Election Results
As of 2:37 EST, the Dow Jones Industrial Average took a 282-point nosedive (2.13 percent) to 12,962. The S&P 500 Index sank 2.15 percent to 1,397 – staying below its 50-day moving average of 1,434.82 (NYSEARCA:SPY). The Nasdaq Composite swooned 2.45 percent to 2,938 (NASDAQ:QQQ). The Russell 2000 Index sank 2.30 percent to 806 (NYSEARCA:IWM).
The “Dollar Bull” Index ETF (NYSEARCA:UUP) declined by 4 cents (0.18 percent) to 22.13 as of2:09 EST.
As of 1:55 EST, the S&P 500 Volatility Index – or VIX – advanced 5.92 percent to 18.62, and the VIX Short-Term Futures ETN made a 5.91 percent advance to 36.36 (NYSEARCA:VXX).
The major European stock indices were crushed on Wednesday, after the statement by Mario Draghi. The Euro STOXX 50 Index finished Wednesday’s trading session with a 2.24 percent swoon to 2,479 (NYSEARCA:FEZ). The FTSE 100 Index fell 1.58 percent to 5,791 (NYSEARCA:EWU). The German DAX Index dropped 1.96 percent to 7,232 (NYSEARCA:EWG). France’s CAC 40 Index fell 1.99 percent to 3,409 (NYSEARCA:EWQ). Spain’s IBEX 35 Index sank 2.26 percent to 7,660 (NYSEARCA:EWP). Italy’s FTSE MIB Index took a 2.50 percent nosedive to 15,291 (NYSEARCA:EWI).
As of 2:23 EDT, the euro declined 0.36 percent against the dollar, trading at $1.2768 (NYSEARCA:FXE).
On London’s ICE Futures Europe Exchange, December futures for Brent crude oil declined by $3.49 (3.17 percent) to $106.65/bbl. (NYSEARCA:USO).
SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) -1.73% as financial stocks and carbon-based energy stocks led the Wednesday selloff.
SPDR EURO STOXX 50 ETF (NYSEARCA:FEZ) -2.25% as a result of the warning from ECB President Mario Draghi that the German economy is being affected by “difficulties elsewhere” in the Eurozone.
Financial Select Sector SPDR ETF (NYSEARCA:XLF) -2.60% as investors dumped financial stocks out of fear that the financial reform bill might actually be enforced after Obama’s reelection.
iShares Barclays 20+ Year Treasury Bond Fund (NYSEARCA:TLT) +1.99% as sinking stock prices killed investors’ appetite for risk, making the safe haven of government bonds especially attractive.
Bottom line: The major stock indices backpedaled from Tuesday’s advance as the financial and carbon-based energy sectors led the major stock indices into the red.