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The reelection of President Obama freed Wall Street to worry in earnest about the looming fiscal cliff as well as the euro zone crisis and the general global economic malaise.
The Dow Jones Industrial Average on Wednesday sank back below 13,000, falling 2.4 percent, or 312.95 points, to 12,932.73 as the S&P 500 Retailing Industry Group fared somewhat better, declining 1.5 percent, or 9.82 points, to 649.15.
Among the fashion and related companies getting hit the hardest were Tumi Holdings Inc., down 5.1 percent to $21.75; The Bon-Ton Stores Inc., 5 percent to $11.97; Elizabeth Arden Inc., 4.7 percent to $46.61; Tiffany & Co., 3.7 percent to $62.92, and Abercrombie & Fitch Co., 3.5 percent to $32.84.
Obama logged a decisive win in the electoral college, but still faces a divided legislative branch. Together the two sides will face automatic tax increases and spending cuts at the end of this year — what Federal Reserve chairman Ben S. Bernanke dubbed the “fiscal cliff.” Should the taxes kick in without modification, many see dire consequences for the U.S. economy, which is already limping along and being propped up by Fed debt purchases and ultralow interest rates.
“The political landscape has changed little after the elections,” said Nigel Gault, IHS Global Insight’s chief U.S. economist. “Some uncertainties, over health care reform and the Federal Reserve, have been cleared up by President Obama’s reelection. But crucial uncertainties over fiscal policy remain just as severe as before.”
Gault noted the Obama victory means his health care program will stay in place and that there won’t be big changes at the Fed.
“But the key uncertainties over the future of fiscal policy remain in place,” he said. “Divided government, as before, could be a recipe for complete gridlock.”
Markets were also down in Europe, where investors were closely watching the U.S. election.
Milan’s FTSE MIB fell 2.5 percent to 15,291.78, as Frankfurt’s DAX declined 2 percent to 7,232.83, Paris’ CAC 40 dropped 2 percent to 3,409.59, and London’s FTSE 100 retreated 1.6 percent to 5,791.63.
The decliners included Burberry Group, down 2.8 percent to 12.17 pounds, or $19.45 at current exchange; LVMH Moët Hennessy Louis Vuitton, 2.4 percent to 125.90 euros, or $160.73; Marks and Spencer Group plc, down 2 percent to 3.91 pounds, or $6.25, and PPR, 1.8 percent to 134.20 euros, or $171.33.