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The “fiscal cliff” now looms, with the pathway for Obama and Congress to reach agreement to avert steep tax hikes and spending cuts Jan. 1 looking tenuous and uncertain. And the Greek parliament was debating a new set of controversial austerity measures Wednesday, with a failed vote risking a new wave of crisis across Europe.

Those concerns drove the U.S. stock market down more than 2 percent in morning trading Wednesday, as measured by the Standard & Poors’ 500-stock index. The Dow Jones industrial average was off 305 points, or 2.3 percent, at about 12:30 p.m. That followed a similar overnight trend in European markets, where the French, German and British stock markets were all down; they each closed down around 2 percent as well.

Even more dramatic was the swing in the bond market. Money flooded into U.S. Treasurys overnight, driving the yield on 10-year securities down 12-hundredths of a percentage point, to 1.63 percent. That is frequently a measure of fear; when investors are antsy about the global economic situation, they tend to plow money into Treasurys as a safe harbor.

In other words, on Wednesday morning, every major market indicator was pointing toward more angst about the economic future. The trading floors of Wall Street and London and beyond are jittery. A measure of expected future market volatility known as the Vix index was up 7 percent at midday.

Some of the slide could be seen as simply nervousness about the perception that Obama’s tax and regulatory agenda could damage corporate profits. That anxiety wasn’t supported by the stock market’s movements during the race itself, however, when there was little correlation between movement in the polls and the market.

The unease over a tumultuous situation in Greece explains a drop in the euro against the dollar and a spike in Spanish and Italian borrowing costs.

But there is a strong case that a major reason for the drop in the markets Wednesday morning is that global investors are starting to look ahead at what will happen to U.S. economic policy in the very near term — over the next two months — and see more reason for fear than rejoicing.

The good news for investors was that the election was reasonably crisp: Markets had feared a confidence-rattling series of recounts and legal battles over the outcome, and seeing that Obama’s victory was decisive enough to prevent that possibility initially drove Asian markets up overnight after networks began calling the race for the president.

But as investors have started to digest the morning after, they are looking at a broader set of risks presented by the election returns. The high-stakes brinksmanship that characterized the debt-ceiling standoff last summer is looking like a mere preview of an even greater, more intense series of negotiations set to begin almost immediately.

http://www.washingtonpost.com/business/economy/markets-sell-off-in-wake-of-obama-win/2012/11/07/23871148-28ea-11e2-b4e0-346287b7e56c_story.html