New president. Same old stock market. Inauguration Day came and went Tuesday without the so-called Obama bounce that Wall Street was hoping for.
The historic swearing in of President Obama — and his promise to boost the ailing economy with "bold and swift" action — did little to spur investor optimism.
Stocks suffered their biggest drop since Dec. 1 as fresh anxieties about the health of the teetering banking system, coupled with the recognition that bleak business conditions may take longer than expected to improve, overshadowed the ebullience from Obama's first day in power.
The Standard & Poor's 500-stock index fell 5.3% to 805.22, its worst Inauguration Day performance in the post-World War II era, S&P says. The index is now down 10.9% in the first 12 trading days of 2009, its worst start to a year ever.
"The central story line has not changed," says Alec Young, equity strategist at S&P. "There is only so much one man can do." The sell-off sends the message that the economy remains distressed, he adds.
Most of the distress was centered in the battered banking system, where reports of more big losses at U.S. banks, such as State Street stt and Regions Financial rf, fanned fears that the crisis is getting worse.
The slide continues a trend that began the day after Election Day. Since Nov. 4, the Dow Jones industrials are down 1,676 points, or 17.4%. Tuesday, the Dow fell 332 points, or 4.0%, to 7949, its lowest close since its 7552.49 Nov. 20 bear market low.
Investors will be closely watching what Obama does to boost economic growth. They will be waiting to see how quickly he gets his stimulus package passed and how he will spend the remaining $350 billion of TARP funds.
One perceived plus is the size of the stimulus package, estimated as high as $825 billion.
"That is a fiscal sledgehammer," says David Kelly, chief market strategist at JPMorgan Funds. "One of the lessons from past economic crises, like Japan in the 1990s and the U.S. in the 1930s, is that it is much better to overdo it than to underdo it."
The next 100 days will likely see a flurry of legislation that will affect markets, notes Jeffrey Kleintop, market strategist at LPL Financial. "Uncertainty over the policy actions could weigh on markets," he says. Kleintop says stocks rose almost 80% in 1933 in the first 100 days after Franklin Roosevelt was sworn in and pushed through a big stimulus plan.