US markets were modestly down in early Wednesday trading as investors and traders began to digest Donald Trump's electoral victory. The S&P 500 dropped sharply at the beginning of trading and then recovered, before falling again about 0.5%, while the Dow Jones Industrial Average was briefly in positive territory before falling again over 0.1%. Both indices dropped more sharply right as trading opened but then recovered.
Overnight, the futures contract for the S&P 500 hit the limit for an overnight change after it fell 5% and ended up falling just over 4%. The New York Stock Exchange said on Twitter that "Pre-market trading is orderly but heavier than usual. We are prepared because our markets are designed to perform in a range of conditions."
Many analysts and investors expected a contraction following Trump's win.
"Markets could go down materially because Trump is such a wild card," Jeff Rottinghaus, a bond manager at the investment firm T.Rowe Price, said in a note.
Analysts have raised concerns about Trump's intention to restrict immigration and to renegottiate — personally — US trade relations with broad swathes of the world.
"Overall, there is a substantial amount of uncertainty over how the economy would evolve under a Trump presidency," analysts at Nomura said in a note. "Taken at his word, his unilateral actions in the early days of his presidency could be highly disruptive to the domestic economy and trade policies."
So far, the pain has mostly been felt overseas, as the Mexican peso had its biggest drop in decades against the dollar and markets for large US exporters fell.
As markets opened in Asia and Australia, the race was not quite called but was clearly trending Trump's way, leading to large drops. The Nikkei 225, the major Japanese index, closed down over 5% as the Yen surged against the dollar, which damages Japanese firms dependent on exports.
Other major exporting countries and currencies dropped, like the Australian markets and the Australian dollar, which fell 2% and over 1% respectively.
"While these first-round effects are certainly disconcerting, we expect the US equity market to recover over the medium term," Mark Haefele, the chief investment officer of UBS Wealth Management, said in a note, arguing that the "fundamentals" of US corporations will "outweigh political uncertainty."
US markets, in what a pair of economist called a "historical anomaly," had tended to trend up when Hillary appeared to be more likely to win — like during the first debate — and fall when Trump's chances went up, like when Federal Bureau of Investigation Director James Comey said that it had discovered emails of top Clinton staffer Huma Abedin on her estranged husband Anthony Weiner's computer.
It's not unusual, however, for stock markets to respond very strongly to surprising news and then rise later on. While the British pound is still well below its levels before the E.U. referendum vote, nearly all the markets that fell dramatically right afterward eventually recovered.
European markets were broadly down — although not as much as some expected. The Stoxx 600, a broad European index, fell more than 2% at the beginning of trading and is now down less than 1%. The FTSE 100, an index of large British companies, is actually slightly up so far today. Deutsche Bank projected that European stocks could fall as much as 10% in response to a Trump victory, which seems unlikely based on the first day's trading following his win.