While Washington ushered in change Tuesday with the inauguration of Barack Obama as the nation’s 44th president, Wall Street saw more of the same as the Dow plummeted more than 300 points on free-falling banking stocks. 

Today’s Markets

The Dow Jones Industrial Average lost 332.13 points, or 4.01%, to 7949.09, the S&P 500 sank 44.90 points, or 5.28%, to 805.22 and the Nasdaq Composite fell 88.47 points, or 5.78%, to 1440.86. The consumer-friendly FOX 50 dropped 29.30 points, or 4.60%, to 608.32.

Underscoring the economic chaos facing the new White House, Tuesday's selloff sent the Dow to its worst Inauguration Day performance on record and below the pivotal 8000 level for the first time in two months. 

The latest carnage in the financial sector was staggering: State Street (STT) lost more than half of its value on fears it may need to raise more cash, Citigroup (C) plunged to the lowest level since its November rescue and Royal Bank of Scotland (RBS) saw more than two-thirds of its market cap disappear after saying it likely lost $41 billion in 2008, the biggest loss in British corporate history.

"As Barack Obama prepares to assume the presidency...an event that will surely change everything about the remainder of his life, for the stock market, not much is different,” Dan Greenhaus, equity analyst at Miller Tabak, wrote in a research note. “Credit concerns continue to weigh on the market and apparently no quantity of money can satiate those concerns.”

All 30 components of the Dow ended in the red, led by enormous losses for Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM). On the other hand, defensive stocks like Merck (MRK) and Proctor & Gamble (PG) posted more modest losses.

The Nasdaq Composite saw the heaviest selling as tech stocks fell 4%. Logitech (LOGI) and Expedia (EXPE) posted some of the steepest losses on the Nasdaq 100. Tech giants like Amazon.com (AMZN) and Microsoft (MSFT) also fell sharply.

Tuesday's losses were easily the worst in inaugural history, exceeding the 2.89% decline on the Dow when Lyndon B. Johnson assumed the presidency in 1963. Market observers said the selloff had less to do with Obama's policies and comments than the enormity of the task ahead of him. 

"The financials are still an issue no matter what Obama says," said Paul Nolte, director of investments at Hinsdale Associates, who predicted the markets will retest their recent lows. 

In his inaugural address, Obama emphasized the financial turmoil facing the U.S. during the nation's most serious economic crisis in nearly a century. 

"Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met," Obama said. 

Obama has proposed an economic stimulus package that may top $850 billion to battle the year-long recession. Last week, Congress authorized Obama to tap the remaining $350 billion from the Treasury Department's controversial Troubled Asset Relief Program, funds that are expected to be used to shore up the shaky financial system and housing market. 

Banks Sink to New Depths

The financial sector was paralyzed by a series of new developments and predictions which all underscore fears that banks will need more cash, possibly through new government intervention. 

Just days after BofA received a new government bailout and Citi unveiled plans to dismantle itself, the British government over the weekend announced a new bank bailout package for their troubled financial system. In addition to insuring banks against future losses, the U.K. also upped its stake in embattled RBS to 70% from 58%, raising the specter of nationalization.

U.S. financial stocks were also slammed by bearish analyst notes as Friedman, Billings, Ramsey Group slashed its 2009 outlook on BofA and said the lender is "undercapitalized." Friedman also said Wells Fargo (WFC), which acquired Wachovia last year, may need to cut its dividend in half in 2009.

The markets also hammered shares of PNC Financial (PNC) on fears about its ability to absorb bad loans at National City, which it bought last year. Regions Financial (RF), a large regional bank, spooked the market on Tuesday with $6 billion in writedowns and State Street, the world's largest institutional asset manager, warned its 2009 results will miss growth targets. 

In the commodities markets, crude oil futures enjoyed their largest one-day gains since New Years Eve. The price of a barrel of crude settled at $38.74, up $2.23, or 6.11%. Earlier, crude oil prices slumped as low as $32.70 per barrel. 

Corporate Movers

Chrysler LLC and Fiat unveiled a strategic alliance that could eventually give the Italian auto maker control of struggling Chrysler. Fiat, which is not committing to funding Chrysler in the future, is taking an “initial” 35% stake in the auto maker and said it will share technologies and vehicle platforms.

Johnson & Johnson (JNJ) beat the Street with fourth-quarter earnings of 94 cents a share but issued a weaker-than-expected outlook for 2009. 

The New York Times Co. (NYT) inked a deal to receive $250 million from Mexican billionaire Carlos Slim at an eyebrow-raising interest rate of 14%. As part of the deal, Slim could become the publisher's third-largest shareholder with an 18% stake.

Bank of America (BAC) is preparing to cut 4,000 jobs, or 40% of its newly-merged capital markets unit, the Financial Times reported.

Toyota Motor (TM) officially named Akio Toyoda, the grandson of the company’s founder, to replace Katsuaki Watanabe as its next leader.

TD Ameritrade (AMTD), the second-largest U.S. online broker, matched estimates with earnings of 31 cents per share but cut its 2009 earnings forecast. 

Global Markets

European markets suffered a late-day slide to end in the red as the Dow Jones Euro Stoxx 50 plunged 2.29% to 2200.80 while London's FTSE 100 fell 0.42% to 4091.40. 

Asian markets fared much worse overnight as Japan's Nikkei 225 sank 2.31% to 8065.79 and Hong Kong's Hang Seng plunged 2.85% to 12959.77.