Stock Futures Sink on Fiscal Cliff Worries
NEW YORK ( TheStreet) -- U.S. stock futures were sinking Wednesday as looming fiscal cliff worries came back to the forefront following news that Barack Obama was re-elected as president of the United States.
Futures for the Dow Jones Industrial Average were plunging 117 points, or 95.68 points below fair value, at 13,084. Futures for the S&P 500 were falling 12.20 points, or 10.44 points below fair value, at 1413. Futures for the Nasdaq were declining 24.50 points, or 24 points below fair value, at 2651.
"The lack of a stronger reaction amongst the different asset classes suggests that the market was largely pre-positioned for an Obama victory," said Geoffrey Yu, analyst at UBS. "Perhaps more surprisingly and worryingly for markets in the medium term, Democrats will hold the Senate, which increases the scope for political gridlock as the fiscal cliff battle looms heading into year-end."
The major U.S. equity averages soared Tuesday, going into rally mode as Americans decided between Obama and Mitt Romney for president.
Economists at Capital Economics released a note saying that "the re-election of President Obama removes one uncertainty that has been weighing on the markets over the last few months. But they are none the wiser about if, how and when Congress will deal with the colossal tightening in fiscal policy scheduled to occur early next year."
"And with Congress still split, President Obama will struggle to garner bipartisan support for a more comprehensive agreement that addresses the longer term issue of how to put the nation's finances back on a sustainable path."
The Federal Reserve is expected by economists to report that consumer credit increased by $10.05 billion in September after increasing by $18.1 billion in August. The report is due at 3 p.m. EST.
Overseas markets mostly declined. The FTSE 100 in London was down 0.29%, while the DAX in Germany was slumping by 0.56%. Japan's Nikkei average closed down 0.03% on Wednesday and Hong Kong's Hang Seng finished up 0.71%.
Investors were also awaiting a Greek parliamentary vote on the latest austerity package, scheduled for Wednesday.
"These measures must be ratified in order to ensure the next tranche of bail-out dough. Without it, the ECB, IMF, and European Commission may just pull the plug," noted Stephen Guilfoyle, economist at Meridian Equity Partners.
Gold for December delivery was rising $3.90 to $1,718.90 an ounce at the Comex division of the New York Mercantile Exchange, while December crude oil contracts were down $1.40 at $87.31 a barrel.
The benchmark 10-year Treasury was gaining 31/32, diluting the yield to 1.647%. The dollar was rising 0.33%, according to the U.S. dollar index.
In corporate news, Time Warner (TWX) posted third-quarter earnings of 86 cents a share, beating estimates by 4 cents, though revenue came in at $6.84 billion, below the average analyst estimate of $6.9 billion, as strength at the media giant's cable networks was balanced by weakness at the company's film and TV entertainment business.