Stock futures drop after Obama reelection, Draghi gloom on economy
By Chuck Mikolajczak | November 8, 2012 12:56 AM EST
Stock index futures were set for a lower open on Wednesday in the wake of Barack Obama's reelection as U.S. president as comments by European Central Bank President Mario Draghi underscored the weakness in Europe's economy.
With political uncertainty removed, investors will turn their focus back to the looming "fiscal cliff" of some $600 billion in spending cuts and tax increases that are due to kick in next year and could derail the U.S. economic recovery.
Europe will also garner attention as Greece's ruling coalition hopes to overcome its own divisions and defy protesters Wednesday to push through an austerity package needed to secure aid and avert bankruptcy.
ECB President Draghi said the bank expects the euro zone economy to remain weak "in the near term" and euro zone governments must press ahead with efforts to forge closer financial, fiscal, economic and political union.
"Unfortunately, the honeymoon doesn't last very long in real time and we knew that regardless of the outcome of the election, our focus would immediately be shifted to the fiscal cliff, which is going to be difficult in and of itself," said Art Hogan, managing director of Lazard Capital Markets in New York.
"Away from that, we had moved European concerns to the backburner in the near term, and we are going to get back to focusing on them as well - we haven't changed the makeup of a global economy with an election in the United States, and like it or not, we have to shift our focus back to that."
Energy shares may come under pressure, as companies in the sector will likely see more regulation in Obama's second term, with less access to federal lands and water, even as the administration promotes energy independence.
Healthcare stocks may also see some volatility, as President Obama's reelection rules out the possibility of a wholesale repeal of his healthcare reform law, but questions remain as to what parts of the domestic policy will be implemented.
S&P 500 futures fell 12.2 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 113 points, and Nasdaq 100 futures declined 16.75 points.
Other S&P 500 companies scheduled to post earnings include Mondelez International Inc
European stocks pared early gains and briefly turned flat around midday on Wednesday, as nagging worries over the euro zone crisis eclipsed an initial relief over U.S. President Barack Obama's reelection. <.EU>
Asian shares rose amid relief that the U.S. election result was clear cut. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> gained 0.9 percent to an eight-month high, after spending much of the session in and out of negative territory.
(Editing by Bernadette Baum)