Dow tanks again, biggest two-day drop since 1987

I know what you’re thinking. But is it true?

“We’re a long way from the end of the economic challenges,” said Mike Morcos, who helps manage $1 billion at Old Second Wealth Management in Aurora, Illinois. “Earnings next year are going to be significantly lower and estimates are going to continue to come down.”

The Standard & Poor’s 500 Index fell 5 percent to 904.88, extending its two-day loss to 10 percent. The Dow Jones Industrial Average retreated 443.48 points, or 4.9 percent, to 8,695.79. The Russell 2000 Index of small U.S. companies declined 3.7 percent to 495.84. The MSCI World Index of 23 developed markets lost 5.9 percent to 925.09…

About 481,000 workers filed initial jobless claims last week, the Labor Department said today in Washington, exceeding the 477,000 projected by economists surveyed by Bloomberg News. The number of people staying on benefit rolls was the most since February 1983…

Earnings at companies in the S&P 500 that have reported third-quarter results fell 9.2 percent on average, Bloomberg data show. Analysts expect full-year profits to drop 7.7 percent, according to a compilation of analysts’ estimates.

Consumer spending was way down in October too, which means holiday sales should be in the toilet. A few of our diehard Obama-haters were asking in another thread why this very important news confirming that The One is economic poison hadn’t been posted at HA yet. Answer: Because my ignorance of finance is so total that I can’t give you an intelligent estimate of how much blame he bears. Those whose ignorance isn’t as total can do me a solid, though, by explaining something to me. Given that these massive fluctuations have been par for the course for the past two months; given that, per the CNBC article I linked, some analysts think the economic forecasts are dire enough to drive the Dow below 7,000; and given that Obama’s likelihood of winning the election on Monday and Tuesday, when we saw big gains, was upwards of 95 percent and had therefore already been priced in (mostly), what reason is there to believe that his victory played some huge role here? And what conclusion do we draw if it swings back 300 points tomorrow or next week?

The fact that the market’s been rocked harder than it has in 20 years in the two days after his election does seem a tad too nuanced to be coincidence, but we were already off 40 percent from last year’s high a few weeks ago and the long-term economic forecasts remain roundly dire. It’s not like there isn’t another trend that can explain this result. Exit quotation via Megan McArdle, a woman after my own pessimistic heart: “If the crisis is as bad as some people fear, Obama will have no magic bullet to fire at it. The very best he can hope for is a fairly successful process of trial and error. To the electorate, that will look like bumbling as Rome burns.”

Update: Pethokoukis calls it “an Obama correction.”