Stocks fell 2 percent on Wednesday, putting the S&P 500 on track for its biggest drop since June, as investors' focus shifted from President Barack Obama's re-election to the looming fiscal showdown and whether it could create another U.S. recession.

Energy, healthcare and the banking sectors ranked among the hardest hit after Obama defeated Republican Mitt Romney, whose policy positions favored those industries. Defense shares also plunged.

Investors worry that Washington is headed for a long and bitter debate over some $600 billion in spending cuts and tax increases due to kick in next year. Many fear certain changes could derail the economic recovery, with that perception behind the "fiscal cliff" nickname.

"Traders on the floor are thinking: 'Before the election, President Obama wasn't able to resolve the fiscal cliff, so what makes you think he's going to be able to do it after the election?' That's the big issue right now," said Todd Schoenberger, managing principal at the BlackBay Group in New York.

The sell-off in the United States was compounded by concerns in Europe, a key market for many U.S. companies. The euro-zone economy will barely grow next year, but pick up in 2014, the European Commission said. The region's economy would grow only 0.1 percent in 2013 after a bigger than previously forecast contraction this year.

The Dow Jones industrial average was down 305.88 points, or 2.31 percent, at 12,939.80. The Standard & Poor's 500 Index was down 31.49 points, or 2.20 percent, at 1,396.90. The Nasdaq Composite Index was down 69.66 points, or 2.31 percent, at 2,942.27. The S&P 500 also below the key 1,400 level for the first time since September 4.

Wednesday's drop is a reversal from the previous session's gains when voting was under way. Defense and energy shares were among the market leaders that day, causing speculation that some investors were betting on a Romney win.

"The market is telling us that it was pricing in the potential for a Romney victory, based upon the rally over the past few days," said Phil Orlando, chief market strategist for equities at Federated Investors Inc of Pittsburgh.

On Wednesday, an index of defense shares was down 3.8 percent, its biggest one-day drop in a year. Shares of United Technologies were down 3.5 percent at $77.14.

Among sectors, the S&P energy index lost more than 3 percent on investors' fears that companies in the sector will likely see more regulation in Obama's second term, with less access to federal lands and water.

Other decliners in the energy area included Arch Coal , down 13.3 percent at $7.50, and Alpha Natural Resources , off 12.8 percent at $8.39.

Healthcare stocks also fell, as President Obama's re-election rules out the possibility of a wholesale repeal of his healthcare reform law, but questions remain as to what parts of the domestic policy will be implemented. The S&P health care index lost 2.5 percent.

The S&P financial index fell 3.1 percent and shares of Bank of America slid 5.5 percent to $9.39.

In 2008, stocks also rallied on election day, but then fell by the largest margin on record for a day following the vote, with each of the three major U.S. stock indexes posting losses ranging from 5 percent to 5.5 percent.

Among individual stocks, Apple was the biggest drag on the S&P 500, falling 3.2 percent to $561.40. The shares fell as low as $556.04, their lowest in five months.

(Additional reporting by Ross Kerber in Boston; Editing by Kenneth Barry and Jan Paschal)