U.S. stocks plunged on Wednesday, with the Dow Jones Industrial Average registering its biggest decline in a year, as investors' focus shifted to the looming "fiscal cliff" debate and Europe's economic troubles after the U.S. presidential elections.
The Dow Jones lost 313 points, or 2.36%, to close at 12,933. The Standard & Poor's 500 Index fell 34 points, or 2.37%, to 1,395. Both the Dow and the S&P 500 closed at their lowest levels since early August. The Nasdaq Composite Index lost 75 points, or 2.48%, to close at 2,937.
The U.S. presidential election was considered a major source of uncertainty for the market, but now investors have turned their focus to the fiscal cliff. There are concerns that if no deal is reached over some $600 billion in spending cuts and tax increases due to kick in early next year, it could derail the economic recovery.
Adding to the negative sentiment, the European Commission said the region would barely grow next year, dashing hopes for improvement in the short term.
Financial stocks and energy shares, the two sectors that could face increased regulation after President Barack Obama's re-election, suffered the most. Coal firms Peabody Energy lost 9.6% and Arch Coal sank 12.5%.
Among financials, JP Morgan Chase & Co declined 5.6% and Goldman Sachs dropped 6.6%. Morgan Stanley was down 8.6%.
Technology shares declined as Apple Inc entered bear market territory with a 3.8% plunge, weighing on the Nasdaq.
Defense shares, which gained on Tuesday when the U.S. presidential election was under way, also declined. United Technologies dropped 2.9%, while Lockheed Martin sank 3.9%.
Healthcare stocks were mixed as President Obama's re-election rules out the possibility of a wholesale repeal of his healthcare reform law. Tenet Healthcare was the S&P 500's biggest percentage gainer, up 9.6%.
In Asia, share fell on Thursday as investors looked towards the U.S. budget debate and as China’s Communist Party began meeting to decide its fifth generation of leaders since taking power in 1949.
The MSCI Asia Pacific Index lost 1% to 122 as of 11:30 a.m. in Tokyo. Japan’s Nikkei 225 Stock Average fell 1.3%. South Korea’s Kospi lost 1.3%, Singapore’s Strait Times dropped 0.9%. Hong Kong’s Hang Seng Index slid 1.1% and China’s Shanghai’s Composite slid 0.7%.