Stocks dip on post-election woes

NEW YORK (CNNMoney.com) -- A three-session advance hit a roadblock Thursday, with investors bailing out of drug, telecom and financial stocks following confirmation that the Democratic Party will control all of Congress for the first time since 1994.

The Dow Jones industrial average (down 73.24 to 12,103.30, Charts) lost 0.6 percent after ending the previous session at an all-time high.

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The broader S&P 500 (down 7.39 to 1,378.33, Charts) index lost 0.5 percent, after ending near 6-year highs on Wednesday.

The tech-fueled Nasdaq composite (down 8.93 to 2,376.01, Charts) lost nearly 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.

Stocks started off the day in positive territory, as investors reacted to Cisco's strong earnings. But the tone turned negative in the afternoon.

After hitting multi-year highs at Wednesday's close, the major gauges were vulnerable to a pullback Thursday, said Chris Johnson, market strategist at Schaeffer's Investment Research.

"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."

It was projected Wednesday that the Democratic Party would likely control both chambers. However, it wasn't confirmed until Thursday afternoon, when Virginia Republican Sen. George Allen conceded defeat to Democrat James Webb.

That seemed to coincide with the market selloff Thursday.

However, stocks were vulnerable to a pullback anyway after several weeks of gains, analysts cautioned.

"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.

After the close of trade, Dow stock Walt Disney (Charts) reported quarterly earnings and revenue that topped forecasts. Shares inched lower in extended-hours trading as investors took a 'sell the news' approach.

Also after the close, fellow Dow stock AIG (Charts) reported higher quarterly earnings and revenue that topped forecasts. Shares inched higher in extended-hours trading.

There are no market-moving quarterly earnings or economic reports expected Friday.

As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a mostly flat open Friday, when fair value was taken into account.

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 $1.46 to $42.88, Charts), Johnson & Johnson (down $1.84 to $66.15, Charts) and Pfizer (down $0.78 to $25.84, Charts) all declined.

Dow stocks Verizon Communications (down $0.75 to $36.11, Charts) and AT&T (down $0.95 to $33.42, 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 2.3 percent.

After rallying in the morning, technology stocks trimmed gains, although Cisco Systems (up $1.61 to $26.71, 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 $13.55 to $341.05, Charts) index added 4.1 percent, while the iShares Silver Trust (up $6.11 to $130.28, Charts) index added 4.9 percent.

Urban Outfitters (up $2.53 to $21.53, Charts) rallied 13.3 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 1.86 billion shares. On the Nasdaq, decliners topped advancers by almost two to one on volume of 2.43 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 settle at $61.16 a barrel on the New York Mercantile Exchange.

Treasury prices inched higher, lowering the yield on the 10-year note to 4.62 percent from 4.63 percent late Wednesday. Bond prices and yields move in opposite directions.

COMEX gold rose $18.50 to settle at $636.80 an ounce.

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