US equities sell off after Obama victory US equities opened lower on Wednesday after President Barack Obama won a second term and left investors focused on gridlock in Washington that could impair a quick resolution of the fiscal cliff. Sentiment was also rattled after Mario Draghi, president of the European Central Bank said the eurozone crisis was weighing on Germany's economy. Less than an hour after the opening bell, the S&P 500 was trading 1.5 per cent lower at 1,406.40. In turn yields on US Treasury were lower and gold prices were firmer as markets priced in the risk that Washington will find it hard to prevent the economy from facing the $600bn fiscal cliff of automatic tax hikes and spending cuts that kicks in at the start of 2013. "The real mess for the markets will be what happens during the "Lame Duck" session of Congress," said Steven Ricchiuto, economist at Mizuho Securities. Important tax, government spending, and Treasury debt limit legislation have to be passed against a backdrop of a power struggle within each party on which way the country should be heading. Tobias Levkovich, chief US equity strategist at Citi said: "The status quo result suggests "going over the cliff." A compromise is likely mid-to-late January but stocks should stay volatile in the interim. James Paulsen, chief investment strategist at Wells Capital said investors were being too alarmist and they that should focus "on the broadening and accelerating economic momentum in the US economy." He added: "As government stays hopelessly ineffective, the private sector can accelerate the drive forward and investors can participate at the remarkable sales price of only about 14 times earnings." At mid-morning the Dow Jones Industrial Average was down 1.6 per cent at 13,030.23, while the Nasdaq Composite was 1.4 per cent lower at 2,970.60. All the major S&P sectors were in the red, with energy, telecoms and financials down at least 2 per cent. Shares in banks were sharply lower on Wednesday as a second term for President Obama is seen retaining the current tough regulatory framework for financials. Jack Ablin, chief investment officer at Harris Private Bank said financials were set to underperform due to no alleviation in regulatory scrutiny. Shares in Morgan Stanley were down 4.2 per cent to $17.42, JPMorgan was off 3.1 per cent to $41.57, Goldman Sachs was 3.6 per cent lower at $121.65, Citigroup was down 2.7 per cent at $37.42 and Bank of America was 3.9 per cent weaker at $9.56. Wells Fargo was down 2 per cent to $33.42. Among high profile companies, shares in Apple remained under pressure with the S&P's most valuable member down 2.2 per cent at $569.96. Analysts said that tax reform during the fiscal cliff may involve an effort to tax foreign earnings of large US multinationals. Also under pressure were high dividend paying stocks as taxes may be raised sharply on this type of income stream for investors, which has been appealing in the recent climate of low interest rates. "Elections do have consequences and if we see taxes on dividends rise well above that of capital gains, it's a significant threat to high dividend paying sectors including telecoms, utilities, pharmaceuticals, which are richly valued," said David Bianco, chief US equity strategist at Deutsche Bank. In earnings news, Kraft reported better-than-expected third-quarter earnings and affirmed its outlook for 2013. Shares were up 1.3 per cent to $45.26. Results from Time Warner also beat forecasts and the media group also affirmed its full-year business outlook with the stock rising 4.2 per cent to $44.91. Wellpoint's earnings missed estimates, leaving its shares down 4 per cent to $58.76. Elsewhere, News Corp shares were 2 per cent higher at $25.09 after its earnings were boosted by an asset sale and higher cable-network revenue. Shares in EZCorp dropped 13.6 per cent to $17.93 after the pawn broker reported a 6.1 per cent rise in fiscal fourth-quarter profit and warned that weakness in the gold market and regulatory pressures would hit earnings. Sprint Nextel fell 0.9 per cent to $5.68 after the telecom company agreed to buy some $480m in assets from US Cellular.