November 5, 2008 / 1:51 AM / 11 years ago

Market sinks on economic gloom as Cisco warns late

NEW YORK (Reuters) -Stocks plummeted on Wednesday, a day after Barack Obama’s historic victory in the U.S. presidential election, as a fresh batch of dismal economic data underscored the massive challenges awaiting his administration.

A trader reacts after the closing bell of the New York Stock Exchange on November 5, 2008. REUTERS/Lucas Jackson

The drop marked Wall Street’s biggest loss ever on the day after a presidential election, coming immediately on the heels of its biggest Election Day rally on record in the previous session.

Selling hit across the board, with shares of big manufacturers, including Boeing, as well as banks, technology companies, home builders, retailers and energy companies among the biggest casualties.

And Thursday could be even uglier after Cisco Systems Inc , a technology bellwether, said after the close of regular trading that fallout from the United States had now spread to key markets abroad and its revenue could fall as much as 10 percent in the current quarter. It shares slid more than 6 percent after the bell to $16.25, down $1.14 from their Nasdaq close at $17.39.

Investors worry that the new administration won’t be in a position to act fast enough to avert a deep economic downturn.

“Even though there’s a lot of enthusiasm and a lot of excitement around the new president, I think it’s going to be very difficult for anything quick to happen,” said Dean Barber, president of investment firm Barber Financial Group in Kansas City.

“Today we just had reality set in that ... we’re still losing jobs and we still have consumer spending at very low levels and we are heading into a holiday season that looks like it could be one of the worst.”

The Dow Jones industrial average slid 486.01 points, or 5.05 percent, to 9,139.27. The Standard & Poor’s 500 Index plunged 52.98 points, or 5.27 percent, to close at 952.77. The Nasdaq Composite Index lost 98.48 points, or 5.53 percent, to 1,681.64.

Grim economic news included a report that showed deep cuts in employment by private employers in October and data that showed the vast service sector contracted sharply last month as the worst financial crisis in 80 years roiled the world’s largest economy.

Jet aircraft manufacturer Boeing sank 6.9 percent to close at $49.55 on the New York Stock Exchange, making it the second-heaviest drag on the Dow and ranking only behind Exxon Mobil Corp, whose shares tumbled 4.9 percent to $73.69, while rival Chevron lost 4.2 percent to $74.88.

The slide in energy shares was also precipitated by a sharp drop in oil prices on fears that an economic downturn will hurt energy demand. December crude fell $5.23, or 7.42 percent, to settle at $65.30 a barrel on the New York Mercantile Exchange.

On Nasdaq, the stock of iPhone and iPod maker Apple was the top drag, down almost 7 percent at $103.30.

Shares of Cisco, a maker of equipment that forms the backbone of corporate technology networks, dropped 5.1 percent to $17.39 on Nasdaq. After the bell, the stock slid to $16.25.

Financials weighed on the S&P 500, with shares of Morgan Stanley ending down almost 10 percent at $17.06, and those of Bank of America down more than 11 percent at $21.75. The S&P financial index fell 8.8 percent.

Steelmakers Nucor Corp and U.S. Steel Corp tumbled after Arcelor-Mittal, the world’s largest steelmaker, forecast a weaker fourth quarter, slashed output and froze growth plans.

Nucor plunged 10.5 percent to $35.50, while U.S. Steel tumbled 8.3 percent to $37.75, both in NYSE trading.

Among home builders, luxury home builder Toll Brothers plunged nearly 10 percent to $20.73, while among retailers, Wal-Mart Stores , a Dow component, fell 3.6 percent to $54.13.

All 30 Dow components ended in the red.

A report from ADP Employer Services showed private employers made their deepest job cuts in six years last month and companies’ planned layoffs surged to their highest in nearly five years.

The Institute for Supply Management said the U.S. service sector contracted sharply in October.

Slideshow (4 Images)

Investors were also nervous ahead of Friday’s government data on October non-farm payrolls. Economists polled by Reuters have forecast a loss of 200,000 jobs in October.

Trading was muted on the New York Stock Exchange, with about 1.31 billion shares changing hands, below last year’s estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.21 billion shares traded, slightly above last year’s daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by a ratio of about 4 to 1 on both the NYSE and the Nasdaq.

Additional reporting by Leah Schnurr; Editing by Jan Paschal

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