Today: Wall Street suffers through a major sell-off a day after the election, but fears focus more on Europe and Congress than the White House. Also: Apple (AAPL) continues to dive, reaching "bear market" terrain, while other Silicon Valley stocks follow suit.
Stocks plunge on fears of European weakness, 'fiscal cliff'
Wall Street suffered through one of its worst days of the year Wednesday, one day after President Barack Obama was handily re-elected for a second term, but experts say the massive stock sell-off had less to do with the man in charge of the United States than the economic health of other countries.
All three major U.S. stock indexes declined more than 2.1 percent Wednesday, the biggest one-day loss this year for the Dow, to bring the indexes down to some of the lowest levels seen since August. Losses were widespread, with all sectors of the broad-based Standard & Poor's 500 declining and more than 80 percent of stocks losing value on the day on both the New York Stock Exchange and Nasdaq.
While investors had supported Obama's challenger, former Massachusetts Gov. Mitt Romney, both vocally and with their wallets, the president's victory in itself seemed to have little to do with Wednesday's tanking market -- futures did not drop dramatically when the election was decided Tuesday night.
However, when bad news about the European economy began to flow in Wednesday morning, the effect on stocks was nearly immediate. The struggling continent's main ballast through its economic problems has been Germany, but that country is now being dragged into the same mire as its neighbors, and announced drastically lowered forecasts for gross domestic product and economic growth across the eurozone for this year and next.
"Financial developments in Germany are the mirror-image of financial developments in the rest of the euro area," European Central Bank President Mario Draghi said in a speech.
On the other side of the coin, the continent's most troubled country, Greece, experienced violent protests as its government debated austerity measures. The measures passed by a majority vote, a relief for observers concerned about Greece's ability to remain in the eurozone.
Domestic issues are not completely blameless in Wall Street's worries, however, with the No. 1 concern being the "fiscal cliff," spending cuts and tax increases scheduled to take effect at the beginning of 2013 if Congress fails to negotiate a new plan. After Tuesday night's election results showed that the two houses of Congress will again be split, with Democrats controlling the Senate and Republicans maintaining the House, hopes for an easy solution to the problem vanished.
"With a polarized federal government we see little reason to increase the probability of avoiding the tax cliff, avoid brinksmanship over the debt ceiling or to expect pro-growth tax and entitlement reform in 2013," Barry Knapp, head of U.S. equity strategy at Barclays's securities unit, wrote in a note Wednesday, in which he slashed his forecast for the S&P 500.
With domestic and foreign issues causing major concerns, the big question is when stocks will find a floor, especially with the debate on the fiscal cliff expected to drag.
"There's no question that Europe is lagging the rest of the developed and emerging world, but stocks will find a base soon, when investors start seeing through some of the smoke over the region and cliff," Mountain View senior money manager Richard Weiss, of American Century Investments, told Reuters.
Apple falls to 20 percent below highs, officially in 'bear market'
One of the most important stocks on both the S&P and Nasdaq indexes continued to fall Wednesday, as Apple's latest healthy decline pushed it into "bear market" territory.
The Cupertino tech giant has struggled on Wall Street since the launch of the iPhone 5, amid analyst and consumer disappointment with the company's iPad Mini launch and iPad refresh, an executive shake-up that axed a respected software executive, and production problems causing delays in iPhone 5 shipments. The production delays have not abated, as Apple manufacturing partner Foxconn admitted Wednesday that it is still struggling to meet demand.
On Wednesday, the stock fell as far as $555.75, the lowest price since June 4 and 21.2 percent lower than the all-time high set less than two months ago on Sept. 21, the launch day for the iPhone 5. A stock is said to be in a bear market when it falls at least 20 percent in a two-month span.
With Apple's stock price falling, critics are piling on. Former Apple software engineer and manager Dan Crow wrote a highly cited piece for The Guardian in which he said, "We will see that Apple's peak of creativity, innovation and leadership was early 2012." Doubleline Capital CEO Jeff Gundlach echoed those thoughts in a CNBC interview, saying of the iPad Mini, "You know, once you start just changing the size of your products, I really think you're not exactly innovating." Gundlach said Apple stock could fall as far as $425.
"What's the future creativity from Apple? They've always been able to create new markets none of us realized we needed. It's to be determined if they can continue to do that," David Readerman, portfolio manager at Forward Management, told Reuters in summing up Wall Street's current view of Apple.
Apple shares closed Wednesday at $558, a daily decline of 3.8 percent.
Silicon Valley tech stocks slip, solar stocks fail to gain
Silicon Valley did not escape Wednesday's stock doldrums, as the SV150 index of Silicon Valley's largest tech companies plunged even more than the major U.S. indexes, 3.1 percent.
Palo Alto electric car company Tesla received a 1.3 percent bump after the loss by Romney, who constantly portrayed the firm as a loser in the clean-energy sector that Obama champions. Other green energy stocks were not as fortunate, however, with solar power companies such as San Jose's SunPower (SPWRA) (down 2.4 percent) and FirstSolar (down 4.5 percent) failing to gain despite the U.S. International Trade Commission approving U.S. tariffs against Chinese competitors.
Hewlett-Packard (HPQ), which hit a decade-low price of $13.68 last week but rebounded Monday and Tuesday, plunged 4.9 percent back to its previous depths, closing just a penny higher than last week's low. Other companies heavily invested in the personal computer industry also lost recent gains, with Santa Clara chipmaker Intel (INTC) dropping 3.8 percent and Microsoft declining 2.6 percent.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 74.64, or 2.48 percent, to 2,937.29
The blue chip Dow Jones industrial average: Down 278.46, or 2.10 percent, to 12,967.22
And the widely watched Standard & Poor's 500 index: Down 33.86, or 2.37 percent, to 1,394.53
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.