North American stocks continued to struggle in midday trading after surrendering early gains on Thursday morning.
Shortly after noon, the Dow Jones industrial average was down 43 points or 0.3 per cent, to 12,890 – or about 65 points below its earlier high. The broader S&P 500 was down 6 points or 0.4 per cent, to 1388. In Canada, the S&P/TSX composite index was down 46 points or 0.4 per cent, to 12,185.
The reversal follows a rough day for stocks after Barack Obama was re-elected as U.S. President on Tuesday night. On Wednesday, the S&P 500 fell more than 30 points, marking its biggest one-day decline in five months.
Most of the backdrop to Thursday's action wasn't bad at all. The European Central Bank and the Bank of England maintained monetary policies, as expected.
And in the United States, initial jobless claims fell to 355,000, down 8,000 from the previous week.
However, investors could be re-awakening to the risks posed by the U.S. fiscal cliff and the sovereign-debt crisis in Europe. Any failure by U.S. politicians to come to an agreement could force tax increases and enormous spending cuts that would wreak havoc on the country's economic growth – and Tuesday's election results suggested that political gridlock will continue.
In Europe, Spain conducted a successful bond auction and Greek politicians agreed to more spending cuts as a condition for receiving the next round of financial aid for the euro zone. However, Bloomberg News reported that a euro zone official has said that financial ministers might hold off on sending aid to Greece until the end of November.
European bond yields reflected rising anxiety. The yield on Greece's 10-year government bond rose to 17.5 per cent, up 54 basis points. Spain's 10-year bond rose to 5.8 per cent, up 16 basis points. And Italy's 10-year bond rose to 5 per cent, up 10 basis points. (There are 100 basis points in a percentage point.)
Meanwhile, there are some corporate disappointments hanging over the market. McDonald's Corp. reported that sales at stores open for at least one year fell by 1.8 per cent in October. The shares fell 1.5 per cent.
Still, some of the more bloodied stocks in Wednesday's brutal selloff held onto modest gains. Bank of America Corp., which fell more than 7 per cent on Wednesday, was up 2.6 per cent.
Within the S&P 500, commodity producers were the biggest drags on performance: Materials and energy stocks fell 0.8 per cent each. Consumer discretionary stocks fell 0.7 per cent and health care stocks fell 0.6 per cent. However, utilities rose 0.9 per cent and financials rose 0.2 per cent.
Within Canada's benchmark index, energy stocks and utilities fell 0.7 per cent each and financials fell 0.5 per cent. Materials rose 0.3 per cent.
Among commodities, gold rose to $1,724 (U.S.) an ounce, up $10. Crude oil rose to $85.31 a barrel, up 87 cents.
David Berman