NEW YORK – Wall Street stopped to catch its breath Wednesday, cashing in gains from a rally that lifted the Standard & Poor's 500 index more than 18 percent over six sessions. The Dow Jones industrials fell 170 points, while all the major indexes were down more than 1.5 percent.
Analysts said the market anticipated a win by Barack Obama in the presidential election, and so the voting had little if any impact on Wednesday's trading. Investors were collecting profits after the market's runup, including a rally Tuesday that sent the Dow up more than 300 on expectations that battered stocks would enjoy a traditional year-end rally.
"It's virtually all technical, psychological, and very little to do with politics," said Jack A. Ablin, chief investment officer at Harris Private Bank. "Everyone was buying the rumor yesterday and selling the news today ... The market had not only anticipated an Obama victory, but from what I'm gleaning, pretty much a Democratic sweep."
"Everything pretty much occurred as expected, so now we're kind of moving on to the next thing," he said. Most investors are probably focusing on the Labor Department's October employment report Friday, he said.
But investors returned their focus from the election to the economy on Wednesday, ahead of a report that's expected to show the service sector, like the manufacturing sector, shrank in October.
Economists on average expect a 200,000 drop in payrolls, according to Thomson/IFR. Employers have been slashing jobs after a freeze-up in the credit markets crippled many companies' ability to get financing.
In the first minutes of trading, the Dow Jones industrial average fell 170.53 points, or 1.77 percent, to 9,454.75.
The S&P 500 index fell 18.30, or 1.82 percent, to 987.45, while the Nasdaq composite index fell 26.80, or 1.51 percent, to 1,753.32.