Stock futures fall on Obama reelection

NEW YORK -- Investors reacted to the news of President Obama's re-election by sending U.S. stock futures lower, then higher and finally lower across the board Wednesday morning.

With the market set to open at 9:30 a.m. ET, futures for key stock indexes were sending signals that stocks would fall modestly when trading begins.

In foreign markets, investors seemed not ready to overwhelmingly endorse Obama's win. In Europe, key indexes in Britain, France and Germany were modestly higher. In Asia, markets ended the day mixed.

Investors seem to be looking past the hard-fought Obama win and focusing on the virtual status quo that remains in Congress, where Republicans retain control, and the Senate, in which the Democrats have the majority, picking up two seats.

That means averting the so-called "fiscal cliff" looming in December, when a host of mandated budget cuts and tax cut expirations, could be just as troublesome as investors had feared before they knew the outcome of the presidential election. The biggest fear is that Washington's inability to compromise will amplify economic and financial woes plaguing the U.S.

The dollar was essentially unchanged in trading against the euro, probably more a reflection of ongoing worries about the debt crisis in Europe. Greece faces its toughest vote yet Wednesday on passing $17.3 billion more in austerity measures to qualify for more bailout funding or default on millions of dollars in loans. The dollar did strengthen slightly, 0.3%, against the yen.

Gold prices had been up as much as 2% overnight but the gains were trimmed to 0.5% by early Wednesday, to $1,727.80, as global investors puzzled over how the election might affect inflation.

The dollar was soft heading into the election, losing ground as investors considered how the currency would react to the upcoming so-called fiscal cliff of tax increases and budget cuts. It fell 0.2% to $1.2822 per euro in late New York trading Tuesday. Meanwhile, the dollar strengthened vs. the Yen, gaining 0.3%.

The modest change in global stock indexes didn't surprise investors, who largely anticipated no major changes in U.S. international policy with Obama returning to the White House for another four years.

"An Obama victory will leave less uncertainty for the markets and probably help what's been better sentiment in Asia recently," said Mark Headley of Matthews Asia Pacific fund. Had Romney won, it would have meant "more uncertainty for a world already with lots of uncertainty."

Markets overseas had already been pricing in and anticipating a win by President Obama as investors hoped for the continuity, said Jim Welsh, portfolio manager of the Forward Tactical Enhanced Fund. Foreign investors appreciate the "stability that a reelection of Obama would provide," he says.

USA Today