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U.S. Stocks Post Biggest Post-Election Drop on Economic Concern

The stock market posted its biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.Citigroup Inc. tumbled 14 percent and Bank of America Corp. lost 11 percent as the Standard & Poor's 500 Index and Dow Jones Industrial Average sank more than 5 percent. Nucor Corp., the largest U.S.-based steel producer, slid 10 percent after bigger rival ArcelorMittal doubled production cuts amid slowing demand. Boeing Co., the world's second-largest commercial planemaker, lost 6.9 percent after UBS AG forecast a 3 percent drop in global air traffic next year."We had an election yesterday; that doesn't mean the problems go away,'' said Kevin Rendino, a Plainsboro, New Jersey- based money manager at BlackRock Inc. who oversees $10 billion."We still have an economic slowdown.''The S&P 500 tumbled 52.98 points, or 5.3 percent, to 952.77, erasing yesterday's 4.1 percent rally. The Dow retreated 486.01, or 5.1 percent, to 9,139.27. The Russell 2000 Index of small U.S. companies fell 5.7 percent to 514.64. The MSCI World Index of 23 developed markets decreased 2.5 percent to 982.98.The slide halted an 18 percent rebound from the S&P 500's five-year low on Oct. 27. The benchmark for U.S. equities has lost more than 35 percent this year, the steepest annual plunge since 1937, and Obama will have to contend with an economy pummeled by the fastest contraction in manufacturing in 26 years and the lowest consumer confidence.
Biggest Rally Erased
The market's decline came a day after the biggest presidential Election Day gain since the New York Stock Exchange first opened for trading on a voting day in 1984.The report by ADP Employer Services showed companies cut 157,000 jobs in October, the most since November 2002 when the U.S. was emerging from a recession. The Institute for Supply Management said service industries in the U.S., which make up 90 percent of the economy, contracted by the most on record.About 1.3 billion shares changed hands on the NYSE, 11 percent less than the three-month daily average.Citigroup lost $2.05 to $12.63 and Bank of America plunged $2.78 to $21.75. The S&P 500 Financials Index sank 8.8 percent after extending declines late in the day following Oppenheimer & Co. analyst Meredith Whitney's prediction on CNBC that the mortgage market will contract and more than $2 trillion in available credit-card lines will be pulled from the system.Whitney also said potential loan modifications under an Obama administration will hurt banks and diminish their appetite for risk.
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By Elizabeth Stanton
http://www.bloomberg.com/apps/news?pid=20601087&sid=aj_ayFUP0riQ&refer=worldwide
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