Investors reconsider election optimism

NEW YORK » Wall Street's three-day winning streak came to an end yesterday as investors, taking a second look at election results, questioned whether a Democratic Congress would be friendly to business.

The losing session, which was also influenced by rising oil prices and a drop in consumer confidence, was to be expected after the rally that lifted the Dow Jones industrials to a new closing high Wednesday. Investors had driven stocks broadly higher this week on optimism that Democrats taking control of Congress would cause political gridlock that would be favorable to businesses.

But after more time to mull over the election, investors are starting to become concerned about an "anti-business stance" among Democrats in Washington, said John O'Donoghue, co-head of equities at Cowen & Co.

"The market's been looking for a reason to go to the downside, and a change in Washington is as good an excuse as any," O'Donoghue said.

Meanwhile, U.S. consumers' confidence weakened slightly in early November but stayed near a 15-month high, according to the University of Michigan. That data overshadowed good news from the Commerce Department that America's trade deficit showed a sharp improvement in September, and a report from the Labor Department that said the number of newly laid off workers had a bigger than expected drop last week.

The Dow fell 73.24, or 0.60 percent, to 12,103.30. The Dow reached a new closing high of 12,176.54 on Wednesday.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.39, or 0.53 percent, to 1,378.33, while the Nasdaq composite index fell 8.93, or 0.37 percent, to 2,376.01. The technology-laden Nasdaq was higher earlier in the day on strong earnings results from Cisco Systems Inc.

Bonds edged higher, with the yield on the benchmark 10-year Treasury note at 4.63 percent, down from 4.64 percent Wednesday.

Crude prices extended their gains after the U.S. government reported gasoline inventories fell last week. A barrel of light sweet crude soared $1.33 to $61.16.

Going forward, investors will be relying on developments in Washington and clues to the country's economic health now that third-quarter earnings reports are largely in.

"The market's going to be on guard for any signs that the (economic) soft landing is going to be harder than people are anticipating," said John Caldwell, chief investment strategist for McDonald Financial Group.