Election-Day euphoria vanished in a cloud of negativity on Wednesday as the Dow plummeted almost 500 points, its worst post-election plunge on record. The losses narrowly surpassed the Dow’s 4.51% decline the day after Franklin Roosevelt’s win in 1932 during the Great Depression.

Today's Market

The Dow Jones Industrial Average lost 486.01 points, or 5.05%, to 9139.27, the broader S&P 500 dropped 52.98 points, or 5.27%, to 952.77 and the Nasdaq Composite slid 98.48 points, or 5.53%, to 1681.64. The consumer-friendly FOX 50 fell 42.13 points, 5.49%, to 724.71.

“I think it’s primarily a realization that some of the bullishness we’ve seen in the last week needs to be tempered a bit. There still are potential potholes ahead and the market had gotten significantly overbought short-term," said Michael James, senior equities trader at Wedbush Morgan Securities. 

Wednesday's losses, which were led by plunging financial giants like Citigroup (C), come a day after Barack Obama and the Democrats swept the elections by promising change amid the worst financial crisis since the Great Depression.

“I think everybody was anticipating Obama was going to win. Now that he has, we have turned our views back to the economy to say, ‘Geez, look at the mess we’re still in,’” said Paul Nolte, director of investments at Hinsdale Associates. “The fact that Obama is now the president-elect doesn’t change the economy for good or bad. He won’t be able to implement anything until March or April.”

The selloff erases all of the Dow's 305-point rally from Tuesday, which was the largest on a presidential Election Day in modern history. 

"Nothing has changed from yesterday to today. Personally, I thought yesterday’s rally was ridiculous. There was very little reason for the market to be up," said James.

All 30 components of the Dow lost at least 1% on Wednesday, led by steep losses from Boeing (BA) and Citigroup. Drug maker Merck (MRK) and Bank of America (BAC) also fell sharply. 3M (MMM) was the best performing stock on the index but still lost nearly 2%. 

The Nasdaq Composite ended in the red for the first time in more than a week, ending its longest win streak since December 2007. Big-name tech stocks like Google (GOOG) and Apple (AAPL) posted steep losses.

It's worth noting the New York Stock Exchange saw slim volume of barely 1.3 billion shares. 

Economy Back in Focus

Obama’s election was widely expected on Wall Street and elsewhere, so Wednesday’s losses likely weren't a knee-jerk reaction to his victory.

"The election of Obama does not change anything from an economic, credit or housing point of view. Nothing has changed other than the fact that people will now stop focusing on the election and start to focus on the economy," said Kenneth Polcari, managing director at ICAP Equities.

There was no shortage of economic news on Wednesday for Wall Street to focus on. Unfortunately, none of it was positive. 

The ADP Employment survey released Wednesday showed the U.S. lost a higher-than-expected 157,000 private-sector jobs last month. However, the ADP report has had limited success recently in predicting the government’s more closely-watched report.

Another key economic report showed the nation's service sector contracted further in October, giving yet more evidence of a U.S. recession. The Institute for Supply Management, a private research firm, said its non-manufacturing index fell to 44.4 last month, down from 50.2 in September. 

Looming in the not-too-distant future is Friday's all-important monthly jobs report, which is expected to show the U.S. lost 175,000 jobs in October on top of the 160,000 lost the month before.

“Given everything else we’ve seen so far, it wouldn’t surprise me to see something in the 200,000 to 225,000 range. For this particular part of an economic cycle, that isn’t a surprise," said Nolte. “It reinforces the fact that we’re in a recession and numbers are going to be bad in a recession.”

Financials, Earnings Weigh on Stocks

Despite new signs of thawing credit markets, financial stocks were the biggest drags on Wall Street on Wednesday, falling more than 8% as a group. Citigroup was at the forefront of those losses, diving double-digit percentages despite a lack of major news. Citi wasn't alone as Goldman Sachs (GS), Morgan Stanley (MS) and Merrill Lynch (MER) all suffered steep losses. 

The government intervention appears to have helped unlock the lending markets as the three-month Libor rate, a closely-watched barometer of banks’ willingness to lend to each other, dropped to 2.5% -- the lowest level of the year.

There were few positive earnings reports on Wednesday as bond insurers MBIA (MBI) and Ambac Financial (ABK) posted huge quarterly losses and Time Warner (TWX) lowered its 2008 outlook. 

Crude Sinks Below $70

Meanwhile, crude oil prices gave back nearly all of Tuesday's huge gains, falling sharply after the government reported weekly gasoline inventories surprisingly jumped by 1.1 million barrels last week. Analysts had forecasted a decline of 600,000 barrels in gasoline stockpiles. 

The price of a barrel of crude closed down $5.23 to $65.30. The declines come after crude saw its biggest one-day jump in six weeks on Tuesday, soaring on the plunging dollar and news of a production cut from Saudi Arabia. 

Corporate Movers

Google (GOOG) announced it is abandoning its search advertising deal with Yahoo! (YHOO) to avoid a potential lengthy legal battle with anti-trust regulators. 

Time Warner (TWX), owner of CNN and Time, beat the Street with a third-quarter adjusted-profit of 31 cents per share on $11.71 billion in revenue. However, the media giant cut its 2008 forecast below Wall Street's view. 

MBIA (MBI) disclosed a quarterly loss of $3.48 per share, well off its profit of 30 cents per share a year ago. 

Ambac Financial (ABK) posted a much worse-than-expected quarterly adjusted-loss of $8.11 a share. The bond insurer, which took $2.71 billion in writedowns, was expected to disclose a more modest loss of 50 cents per share. 

Transocean (RIG) fell sharply after the world's largest offshore oil and gas driller said it earned $3.39 per share on an adjusted basis in the third quarter, widely missing estimates for $3.54 per share. 

Duke Energy (DUK) missed estimates with third-quarter adjusted-earnings of 33 cents per share on $3.51 billion in revenue.

Sara Lee (SLE) plunged double-digit percentages after the baking company slashed its fiscal 2009 outlook. The company earned 32 cents per share in the fiscal first-quarter, compared to 28 cents a year ago.

Global Markets

Overseas, Asian investors responded positively to Obama's victory. Japan's Nikkei 225 Index gained 406.64, or 4.46%, to 9521.24. In Hong Kong, the Hang Seng Index gained 455.82 points, or 3.17%, to 14840.16.

European reaction was more tepid as London's FTSE 100 closed down 2.4% and Germany's Dax lost 2.1%.