US stock markets dived two percent Wednesday after President Barack Obama's re-election victory set up a tough battle with Republicans over the looming "fiscal cliff".
After opening sharply lower, losses on the stock indices accelerated in a tsunami of red ink.
The Dow Jones Industrial Average was down 291.49 points (2.20 percent) at 12,954.19 at 1600 GMT.
The broad-based S&P 500 fell 31.64 (2.22 percent) to 1,396.75, while the Nasdaq Composite shed 68.17 (2.26 percent) at 2,943.76.
Obama won a resounding victory over Republican challenger Mitt Romney for another four-year term in a closely fought race late Tuesday.
But voters left Congress divided, with Democrats maintaining the Senate and Republicans holding the House of Representatives.
"Focus now shifts to the upcoming fiscal cliff of tax increases and spending cuts that go into effect in 2013 unless a budget compromise is met by Congress," said Wells Fargo Advisors analysts.
"By returning a divided government to Washington, the electorate has given neither party a clear mandate to address the lackluster recovery, the fiscal cliff, and the looming debt crisis," said Brian Kessler at Moody's Analytics.
The broad market sell-off was led by telecommunications and financial stocks. On the blue-chip Dow, Bank of America dived 5.4 percent, JPMorgan Chase shed 4.7 percent and AT&T lost 3.4 percent.
The government announced late Tuesday that AT&T agreed to pay a $700,000 fine and refund customers overcharged in a smartphone payment plan.
Alcoa dropped 2.4 percent, Caterpillar fell 2.6 percent and United Technologies was down 2.9 percent.
On the Nasdaq, heavyweight Apple dropped 3.2 percent.
Market sentiment was also pressured after European Central Bank chief Mario Draghi warned that the eurozone's woes were beginning to hurt Germany, Charles Schwab & Co. analysts said.
The market downturn snapped two days of gains, with stocks putting in a strong election day rally Tuesday. The Dow added 1.02 percent, the S&P 500 rose 0.79 percent and the Nasdaq climbed 0.41 percent,
Bond prices jumped as investors fled equities. The 10-year US Treasury yield fell to 1.63 percent from 1.74 percent late Tuesday, and the 30-year tumbled to 2.83 percent from 2.92 percent. Prices and yields move inversely.