New York A case of postelection nerves sent Wall Street plunging Wednesday as investors looked past Barack Obama's presidential election and returned to fears of a deep and protracted recession.
The Dow Jones industrials fell nearly 500 points, and all the major indexes tumbled more than 5 percent.
The slide ended the best stretch since the financial meltdown began in mid-September, following a run-up last week that lifted the Standard & Poor's 500 index more than 18 percent and gave the Dow its best weekly advance in 34 years. The market had been expected to give back some gains, however, and analysts had warned that Wall Street faced more turbulence.
"The market has really gotten ahead of itself and falsely priced in that this recession wasn't going to be as prolonged as thought," said Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. "Regardless of who won the White House, these problems are not going away.
"We're in a really bad recession, period," he said. "People are locking in profits and realizing we're not out of the woods."
Worries about the financial sector intensified after Goldman Sachs Group Inc. began notifying about 3,200 employees globally that they had lost their jobs as part of a plan to slash 10 percent of its work force.
The cuts were first reported last month. Goldman fell 8 percent, while other financial names also fell. Citigroup Inc. dropped 14 percent.
Commodities stocks also fell after steelmaker ArcelorMittal said it would slash production because of weakening demand. Its stock plunged 21.5 percent.
The market expected Obama to win the election, but as the session wore on, investors clearly worried about the weakness of the economy and pondered what the new administration might do.
Analysts said the market is already anxious about Obama's upcoming selections for Treasury secretary and other Cabinet positions.
"The celebration is over. Today we saw a bit of reality," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. "President-elect Obama is coming into a situation with limited experience, having to handle an economy in serious trouble, a couple of wars and terrorism. It's an extremely tough job."
Late-day selling by hedge funds helped deepen the market's losses during the last hour. More selling by the funds is expected to weigh on the market ahead of a Nov. 15 cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end.
The Dow fell 486.01, or 5.05 percent, to 9,139.27. The blue chips had risen more than 300 on Tuesday, and last week rose 11.3 percent, their biggest weekly gain since 1974.
The S&P 500 index fell 52.98, or 5.27 percent, to 952.77. Through the six sessions that ended Tuesday, the index, the one most closely watched by market professionals, rose 18.3 percent.
Goldman said trading could remain turbulent as investors assess the shape and direction of Obama's forthcoming economic policies.
Obama's victory means that industries such as oil and gas producers, utilities and pharmaceuticals may face greater regulation and even taxes, while labor unions and automakers are expected to benefit.
Meanwhile, banks, insurance companies, hedge funds and the rest of the financial sector will almost certainly face attempts at a regulatory overhaul by the more heavily Democratic Congress.