Stocks turn weaker

NEW YORK (CNNMoney.com) -- Stocks slumped Thursday afternoon, giving up morning gains, as investors bailed out of drug, telecom and financial stocks one session after the Dow hit a record high and the Democratic Party took full control of Congress for the first time since 1994.

The Dow Jones industrial average (down 74.04 to 12,102.50, Charts) lost almost 0.6 percent, with roughly 30 minutes left in the session. The blue-chip barometer ended the previous session at an all-time high, but failed to hang on to that Thursday.

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The broader S&P 500 (down 6.91 to 1,378.81, Charts) index lost 0.5 percent, after ending near 6-year highs on Wednesday.

The tech-fueled Nasdaq composite (down 9.89 to 2,375.05, Charts) lost 0.4 percent, after having risen through the early afternoon in response to Cisco's strong earnings. On Wednesday, the Nasdaq closed at its highest level since February 2001.

After hitting those multi-year highs at Wednesday's close, the major gauges were vulnerable to a pullback, said Chris Johnson, market strategist at Schaeffer's Investment Research, particularly as stocks had rallied in the weeks leading up to the election.

Additionally, "The market was a little caught off guard by the Democrats not only winning the House, but winning it by such a large margin, let alone winning the Senate," he said. "You're seeing in particular the drug stocks getting punished today on worries about legislation."

The Democratic takeover of the Senate was completed when Sen. George Allen, the Republican, conceded defeat to Democrat James Webb.

Investors attempted to come to terms with the Democratic Party's sweep Wednesday, and stocks managed to close the day higher. But the market was choppy all day Thursday, as investors focused on the election, but also corporate and economic news. By the afternoon, stocks were firmly in the red.

"Stocks had a big run-up leading into the election and now there's almost a little fatigue, with investors wondering what the next leg up will be," said Peter Dunay, investment strategist at Leeb Capital Management.

Drug, defense and healthcare stocks continued to slip for a second session, reflecting Wall Street's concerns about how new Democratic Party legislation might impact those sectors.

Dow 30 components Merck (down $1.48 to $42.86, Charts), Johnson & Johnson (down $1.82 to $66.17, Charts) and Pfizer (down $0.83 to $25.79, Charts) all declined.

Dow stocks Verizon Communications (down $0.78 to $36.08, Charts) and AT&T (down $0.86 to $33.51, Charts) also slipped on concerns that a bill related to telecom-reform legislation won't go through with a Democratic Party-controlled Congress.

Financial stocks slumped, dragging down the Amex Broker/Dealer (Charts) index by 2 percent.

After rallying in the morning, technology stocks trimmed gains, although Cisco Systems (up $1.70 to $26.80, Charts) remained higher. After the close Wednesday, Cisco reported higher fiscal first-quarter earnings and sales that topped estimates. The company also issued a bullish fiscal second-quarter revenue outlook.

A variety of gold and silver industry stocks rallied, jumping in tune with the price of the raw commodity.

The Amex Gold Bugs (up $12.70 to $340.20, Charts) index added 3.8 percent, while the iShares Silver Trust (up $5.69 to $129.86, Charts) index added 4.6 percent.

Urban Outfitters (up $2.67 to $21.67, Charts) rallied almost 15 percent in active Nasdaq trade after the clothing retailer issued third-quarter earnings that topped forecasts and said current-quarter results would beat expectations as well.

Market breadth was negative. On the New York Stock Exchange, losers beat winners nine to seven on volume of 1.55 billion shares. On the Nasdaq, decliners topped advancers two to one on volume of 2.14 billion shares.

In economic news, the U.S. trade deficit narrowed more than what analysts were expecting in September, due to lower oil prices and record exports.

Weekly jobless claims fell a greater-than-expected 20,000 to 308,000, reflecting strength in the labor market.

U.S. light crude oil for December delivery rose $1.33 to $61.16 a barrel on the New York Mercantile Exchange.

Treasury prices were little changed from late Wednesday, with the yield on the 10-year note holding at 4.63 percent. Bond prices and yields move in opposite directions.

COMEX gold rose $18.50 to $636.80 an ounce.

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