Stocks added to sharp declines across the board Wednesday in the wake of President Barack Obama’s re-election, triggered by worries over the looming “fiscal cliff” and as fears over Europe’s economy reemerged.
The Dow broke below 13,000 for the first time since early August, while the S&P 500 traded near 1,400, both significant psychological levels.
“I don’t think there’s a long-term market reaction to the presidential election itself—it’s now how quickly we can focus on the ‘fiscal cliff’ and coming up with a resolution,” said Art Hogan, managing director of Lazard Capital Markets.
The Dow Jones Industrial Average plunged nearly 250 points, dragged by Bank of America [BAC 9.46 
-0.48 (-4.83%) 
] and AT&T [T 33.76 -1.04 (-2.99%) ], wiping out its 1 percent rally from the previous session.
The S&P 500 and the Nasdaq were also sharply lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, gained above 18.
All key S&P sectors were firmly in the red, led by energy and financials.
Obama was re-elected president Tuesday night, put over the top by the crucial battleground state of Ohio following the most expensive election in U.S. history.
Meanwhile, ratings agency Fitch said Obama needs to move quickly to avoid the “fiscal cliff” that is threatening the country’s economic recovery, adding that failure to address the issue would likely result in a downgrade in 2013.
Wall Street had favored Romney and the Republican ticket in part because it preferred their approach of retaining tax cuts, and making spending cuts. The Obama Administration favors raising taxes on the richest Americans, and also increasing capital gains and dividend taxes. (Read More: Fixing ‘Fiscal Cliff’ Will Mean ‘High, Higher’ Taxes)
Meanwhile, European shares reversed their gains following ECB President Mario Draghi’s negative comments on the region’s economy. Draghi said economic activity in the euro zone area is expected to remain weak and the slowdown may have reached Germany.
And the members of Greece’s parliament are expected to vote on a new package of austerity measureswith the government’s majority under threat. If the bill doesn’t pass, Greece will not receive its next financial aid installment of 31.5 billion euros ($40.2 billion) on Monday.
“The U.S. election temporarily flipped worries over Europe, but Europe still has an important role in global markets,” said Quincy Korsby, market strategist at Prudential Financial. “They’ve obviously been a chronic condition, but it’s flare ups like today that grab attention.”
On the economic front, weekly mortgage applications declined last week as Hurricane Sandy battered the East Coast and disrupted normal business activity, according to the Mortgage Bankers Association.
Apple [AAPL 565.55 -14.6495 (-2.52%) ] fell more than 2 percent. The tech giant is close to being down a jaw-dropping 20 percent from its all-time high of $705.07.
Among earnings, Macy’s [M 41.24 -0.14 (-0.34%) ]reported a higher profit, thanks to sales gains, and boosted its full-year.
Time Warner [TWX 44.345 
1.235 (+2.86%) ] edged higher after the media company posted higher earnings.
And Kraft Foods [KRFT 44.49 -0.21 (-0.47%) ] struggled to hold gains after the newly independent food manufacturer reported a higher profit.
Qualcomm [QCOM 59.14 -1.23 (-2.04%) ], CBS [CBS 33.81 -0.62 (-1.8%) ] and Activision Blizzard [ATVI 11.22 -0.12 (-1.06%) ] are among companies slated to post earnings after the closing bell.
The Treasury is set to auction $24 billion in 10-year notes on Wednesday, with the results available shortly after 1pm ET.
The Federal Reserve will release its consumer credit report for September at 3 p.m. New York time. Economists polled by Thomson Reuters forecast a $10.1 billion gain, after a $18.1 billion increase in August.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
WEDNESDAY: 10-yr note auction, consumer credit, Coach shareholders mtg, Oracle shareholders mtg; Earnings from Qualcomm, Activision Blizzard, CBS, Monster Beverage, Whole Foods
THURSDAY: International trade, jobless claims, 30-yr bond auction, Kellogg analyst day, 3M investor mtg, OPEC press conference; Earnings from Dean Foods, Wendy’s, Disney, Groupon, Nordstrom, Nvidia, Kayak, Zipcar
FRIDAY: Import/export prices, consumer sentiment, wholesale trade; Earnings from JCPenney
