ABC's Betsy Stark reports from New York:
Analyst Hugh Johnson says traders are viewing the Massachusetts upset through a different prism today. Today the reality is setting in that loss of Democratic control in Washington could mean less federal spending, less fiscal stimulus, less government support of a weak economy. He says the change in the political landscape casts a shadow over the assumption that if the economy were to falter again, the federal government would step in with another round of stimulus. As a result, stocks, commodities, oil, even gold are all down today on fears of slower growth.
Also weighing on stocks: bank earnings. Big banks made hefty trading profits in Q4 as the financial markets rose, but today B of A, like Citi and JPMorgan Chase, said it’s still losing billions on consumer mortgage and credit card loans, as ordinary Americans -- unemployed and underemployed -- fall behind.
Analysts say China figures in today’s sell-off as well: there are reports the Chinese government has ordered Chinese banks to stop lending for the rest of the month in an effort to let some of the air out of the country’s real estate bubble. China is a vital engine of global growth and slower growth would reverberate around the world.
“Stocks have come very far very fast,” says Johnson. “And when they do, everything has to go just right.” He says it’s not surprising to see some profit-taking after the recent phenomenal gains.