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Wall Street turns to hard days ahead

NEW YORK, November 5 – Largely anticipated and already celebrated, Barack Obama’s presidential election win seemed set to get a sober reception Wednesday on Wall Street, which turned toward new difficulties to come.

Dow Jones futures slipped nine points, or 0.09 percent, around 0500 GMT, following a surge on the media’s announcement of the Democrat’s triumph at the polls.

The Nasdaq gained 39 points, or 2.2 percent, while the S&P 500 Index lost 1.10 points, or 0.1 percent, offering a glimpse of a mixed opening at 1430 GMT.

"The stock market is a great machine to anticipate," said Gregori Volokhine, head of the stocks department at Meeschaert New York. "The market leans to the right, but it really prepared for a democratic victory."

The world’s leading financial center, which broadly bet on a victory by the Illinois senator, who had been leading in the opinion polls, clearly showed the way on Tuesday.

While Americans went to the polling booths, the Dow Jones Industrial Average surged 305.45 points (3.28 percent) to 9,625.28 and the tech-heavy Nasdaq added 53.79 points (3.12 percent) to 1,780.12.

The Standard & Poor’s 500 index gained a whopping 39.45 points (4.08 percent) to finish at 1,005.75, breaking above 1,000 for the first time since October 13.

"Since Obama has based this campaign on the word change and hope to change, it’s going to bring a certain amount of optimism going forward, and would really get people feeling: ‘hey maybe we’ve turned the corner," said Marc Pado of Cantor Fitzgerald.

Sherrill Shaffer, a professor of finance at the University of Wyoming and former chief economist at the Federal Reserve Bank of New York, expected some settling down.

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"Because uncertainty is the main problem facing the financial market I expect that there will be some stabilization on the financial market," Shaffer said.

Several analysts feared how the market would react to the election of a candidate who proposed a 20 percent capital gains tax, compared to the current rate of 15 percent.

"It is true that historically what we call big money favors Republicans," Shaffer said.

But the acceleration of the financial crisis at the start of the autumn changed the dynamic.

Even though it has climbed back from its mid-October lows, the Dow Jones was still nearly 30 percent lower than at the start of the year.

According to an exit poll carried out by the CNN television network, the economy was the biggest concern for 62 percent of the electorate.

"There might be tax increases, but it is not the main problem," Volokhine said. "The market is confident that even a Democrat will not be an anti-business president but a president who will be there to try to revive the economy."

For Cormac Weldon, who is in charge of US stocks for the international asset management firm Threaneedle, Obama’s election "comes at a time when, after the credit crisis and the Treasury’s taking control of big banks, we are seeing the biggest extension of government power over the financial system since the Great Depression."

Investors seem even to have got used to the idea of tighter regulations on the financial markets, which both candidates promised.

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"In a short term, it’s going to restrain the market, in the long term it’s about rebuilding confidence of the individual investors," Pado said. "That’s who we need to bring back to the market."

But with the political uncertainty now gone, Wall Street "will quickly unhitch itself from politics to come back to economics," Volokhine said.

On the subject, investors are anxiously awaiting the monthly US unemployment figures due Friday.

Since Wednesday morning, before Wall Street opened, a monthly report by the private ADP human resources firm could bring the market back to economic reality by giving a foretaste of these statistics.

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