A sell-off on Wall Street gained momentum Wednesday, with the Dow falling below 13,000 for the first time in two months, as investors focused on how President Obama plans to avoid the fiscal cliff after he won re-election Tuesday night.
The Dow Jones industrial average fell more than 300 points, or 2.3%.
JPMorgan Chase and Bank of America were the biggest drags on the blue chip index. And other banks followed suit, with shares of Morgan Stanley, Goldman Sachs and Wells Fargo all sharply lower.
The Nasdaq and S&P 500 both also sank more than 2%, with coal and for-profit education stocks leading the decline.
"This is purely a reaction to the political landscape and an investor response to the policies on the table -- all the new regulation that will add to the costs of doing business for certain industries and sectors" said Jack Ablin, chief investment office at Harris Private Bank. "Financials are getting hit the hardest, and energy isn't far behind."
Coal producer Alpha Natural Resources sank 13%, making it the biggest loser in the S&P 500 while Peabody Energy, James River Coal Co, CONSOL Energy and Walter Energy were also down. Oil companies Exxon Mobil Chevron and Halliburton also fell.
Oil prices tumbled 4% to $85.12 a barrel.
For-profit education stocks, which have also faced tougher regulation under the Obama administration, were also lower. Apollo Group was the biggest decliner on the Nasdaq. Devry, Corinthian College and ITT Corp. also plunged.
Telecom companies, which have a long history of paying out healthy dividends, were also under pressure as Obama has proposed raising the tax rate on qualified dividend and long-term capital gains. Both AT&T and Verizon were down sharply.
Though the sell-off was broad and deep, Ablin said it's likely a one-day reaction, and not harbinger of a bear market.
Hospital stocks HCA, Community Health Systems and Tenet Healthcare were big gainers, as Obama's win means the president's health care reform legislation is here to stay.
Wall Street had been overwhelmingly in favor of Mitt Romney, and considered him to the more business-friendly candidate, especially when it came to the regulatory environment.
But with the election behind them, investors are quickly moving on and turning to what Tuesday's results mean for the looming fiscal cliff, the market's biggest headwind, according to market strategists and money managers recently surveyed by CNNMoney.
"We have only have 10 legislative days to make something happen," said Ablin. "Obama has said he will reject any proposal that doesn't include tax hikes on the wealthy, so we see the same kind of contention that we saw during the debt ceiling battle that eventually led to a downgrade by Standard and Poor's."
If lawmakers fail to address the simultaneous onset of tax hikes and spending cuts that will be triggered on Jan. 1, they risk throwing the U.S. economy back into a recession and drive unemployment up even higher.
Fitch Rating said Wednesday that Obama needs to "quickly secure agreement on avoiding the fiscal cliff and raising the debt ceiling," and cautioned that failure to do so "would likely result in a rating downgrade in 2013." Fitch has so far maintained its AAA rating for the United States.
Meanwhile, dour forecasts about Europe's economic growth and a slowdown in Germany added more pressure on the market.
In Europe, European Central Bank president Mario Draghi warned that the region's debt problems are starting to take their toll on the economy in Germany, which has so far been relatively insulated.
The European Commission issued a report forecasting a 0.3% decline in economic activity in the European Union this year, and subdued growth in 2013.
Following a morning rally, European stocks sold off sharply. Britain's FTSE 100 dropped 1.6% while the DAX in Germany and France's CAC 40 declined 2%.
As investors bailed out of stocks, they shifted into safer havens, like U.S. Treasuries, pushing the yield on the 10-year note down to 1.64% from 1.74% late Tuesday. Gold, which is also considered a safe haven, was flat around $1,715 an ounce.
Asian markets also shaved morning losses after Obama's win was declared, as investors bet that the Federal Reserve is likely to stick with its current monetary policy in the near term. The Shanghai Composite and Japan's Nikkei finished little changed, while the Hang Seng in Hong Kong rose 0.7%.
A victory by Romney, who had been highly critical of Fed chairman Ben Bernanke, could have resulted in more uncertainty about the future leadership of the Fed and whether the central bank would be tougher on inflation. The Fed's low interest rates and bond buying programs have largely been credited for boosting the market during the past three years.
The dollar initially eased against the major world currencies but reversed course. The dollar rose 0.4% against the euro and 0.2% versus the British pound. The dollar declined against the Japanese yen.
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Investors also continued to eye corporate news. CNNMoney parent Time Warner shares rose after the media company posted a higher-than-expected profit for the third quarter thanks to strength in its cable networks.
On Wednesday afternoon, the Federal Reserve will release data on consumer credit for September, which is expected to have expanded by $10.6 billion, according to a survey of analysts by Briefing.com.