Tags: obama | stock | market

Obama Win Met with Stock Market Mayhem

Wednesday, 05 Nov 2008 10:12 PM

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NEW YORK — Vanishing jobs and slumping markets confronted Barack Obama on the first day after his historic election as U.S. president, escalating pressure for urgent action to curb the world's relentless financial crisis.

A day after being elected America's first black president, Obama heard a chorus of congratulations from around the world but also warnings about the creeping global recession that will crowd the top of his agenda along with the wars in Iraq and Afghanistan.

Investors and world leaders expressed hope Obama could guide the international community while investors eagerly awaited an announcement on who would be selected as Treasury Secretary to oversee the $700 billion program to buy distressed assets and recapitalize wobbly financial institutions.

"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 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," he said.

The market euphoria of Election Day dissipated with all the major U.S. stock indexes plummeting more than 5 percent, the largest decline on record for a day following a U.S. presidential contest.

European stocks earlier lost 2.2 percent on a day in which Germany approved a 50 billion euro ($64.22 billion) stimulus package, Italy pledged to support its banks and service sector activity in the euro zone hit a decade low.

Other European banks reported weak earnings and gloomy data from Britain and the 15-nation euro zone added to expectations of hefty interest rate cuts on Thursday.

"We need a new deal for a new world," said European Commission President Jose Manuel Barroso. "I sincerely hope that with the leadership of President Obama, the United States of America will join forces with Europe to drive this new deal."

Oil sank nearly 8 percent to around $65 a barrel and the VIX, a volatility index seen as a measure of investor fear, soared 14 percent.

Traders cited fears over the economy on a day when ADP Employer Services said U.S. private employers cut a larger-than-expected 157,000 jobs in October, presaging another whopping job-loss figure on Friday when the Labor Department issues the more market-sensitive nonfarm payrolls data.

In addition, the Institute for Supply Management reported the U.S. service sector shrank unexpectedly sharply in October, sources said investment bank Goldman Sachs planned to lay off another 3,200 employees, and bellwether finance company GMAC reported a $2.52 billion loss for the third quarter.

Rupert Murdoch's News Corp -- which owns a TV network, movie studios and The Wall Street Journal -- said it would take cost-cutting measures across all its businesses.

All the bad news raised the stakes for Obama, who could inherit global and national recessions when he is inaugurated on January 20.

"The president-elect will have to move quickly to ensure a smooth and quick transition. His first appointments must focus on his economic team," said Mohamed El-Erian, chief executive of top bond fund Pimco, with $830 billion in assets under management.

The short list for Treasury Secretary likely includes former Treasury Secretary Lawrence Summers, former Federal Reserve Chairman Paul Volcker and Timothy Geithner, president of the Federal Reserve Bank of New York.

Obama has proposed a new economic stimulus package to help revive the economy, which is still staggering from a mortgage crisis that left financial institutions overleveraged, undermined confidence, froze credit markets and transformed Wall Street.

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