NEW YORK - A CASE of post-election nerves sent Wall Street plunging on Wednesday as investors, looking past Mr Barack Obama's presidential victory, returned to their fears of a deep and protracted recession.

Volatility swept over the market again, with the Dow Jones industrials falling nearly 500 points and all the major indexes tumbling more than 5 per cent.

The market was widely expected to give back some gains after a runup that lifted the Standard & Poor's 500 index more than 18 per cent and that gave the Dow its best weekly advance in 34 years; moreover, many analysts had warned that Wall Street faced more turbulence after two months of devastating losses.

But investors lost their recent confidence about the economy and began dumping stocks again.

'The market has really gotten ahead of itself, and falsely priced in that this recession wasn?t going to be as prolonged as thought', said Mr Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.

'Regardless of who won the White House, these problems are not going away.'

'We're in a really bad recession, period,' he said. 'People are locking in profits and realizing we?re not out of the woods.'

Beyond broad economic concerns, worries about the financial sector intensified after Goldman Sachs Group began to notify about 3,200 employees globally that they have been lost their jobs as part of a broader plan to slash 10 per cent of the investment bank's work force, a person familiar with the situation said.

The cuts were first reported last month. Goldman fell 8 per cent, while other financial names also fell; Citigroup dropped 14 per cent.

Commodities stocks also fell after steelmaker ArcelorMittal said it would slash production because of weakening demand. Its stock plunged 21.5 per cent.

Although the market expected Mr Obama to win the election, as the session wore on investors were clearly worrying about the weakness of the economy and pondered what the Obama administration might do.

Analysts said the market is already anxious about who Mr Obama selects as the next Treasury Secretary, as well as who he picks for other Cabinet positions.

'The celebration is over. Today we saw a bit of reality', said Mr Al Goldman, chief market strategist at Wachovia Securities in St Louis.

'President-elect Obama is coming into a situation with limited experience, having to handle an economy in serious trouble, a couple of wars and terrorism. It's an extremely tough job.'

Analysts said investors were also uneasy in advance of the Labour Department's October employment report, to be issued on Friday.

Economists, on average, expect a 200,000 drop in payrolls, according to Thomson/IFR.

Late-day selling by hedge funds helped deepen the market's losses during the last hour. More selling by the funds is expected to weigh on the market ahead of a Nov 15 cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end.

The Dow fell 486.01, or 5.05 per cent, to 9,139.27. The blue chips had risen more than 300 on Tuesday, and last week rose 11.3 per cent, their biggest weekly gain since 1974.

The S&P 500 index fell 52.98, or 5.27 per cent, to 952.77. Through the six sessions that ended Tuesday, the index, the one most closely watched by market professionals, rose 18.3 per cent.

The Nasdaq composite index fell 98.48, or 5.53 per cent, to 1,681.64, while the Russell 2000 index of smaller companies fell 31.33, or 5.74 per cent, to 514.64.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a light 5.29 billion shares compared with 5.45 billion shares traded on Tuesday.

'We're seeing people come into the market at the last minute and the low volume exaggerates moves to the downside and the upside. That really scares the heck out people,' Mr Goldman said.

Wednesday's trading showed that the market is living up to expectations of continued volatility as it tries to recover from the devastating losses of the last two months.

Mr Bill Stone, chief investment strategist at PNC Wealth Management, said the uncertainty over the direction the government's financial bailout plan will take under the next administration likely weighed on financial stocks on Wednesday.

Analysts agree that Mr Obama's most immediate priority will be dealing with the nation's financial crisis and deciding how to further implement the US$700 billion (S$1.04 trillion) rescue package passed by Congress last month.

Mr Goldman said trading could remain turbulent as investors begin assessing the shape and direction of Mr Obama's forthcoming economic policies.

'The market has to go through a period of figuring out if they are going to gain confidence in Obama and the Congress or lose it', he said.

Mr Obama's victory means that industries such as oil and gas producers, utilities and pharmaceuticals may face greater regulation and even taxes, while labor unions and automakers are expected to benefit.

In addition, banks, insurance companies, hedge funds and the rest of the financial sector will almost certainly face attempts at a regulatory overhaul by the Democratic Congress next year.

Among financials, Goldman Sachs fell US$7.57, or 8 per cent, to US$87.43. Citigroup fell US$2.05, or 14 per cent, to US$12.63, while Bank of America dropped US$2.78, or 11.3 per cent, to US$21.75.

Other sectors that are being closely watched in light of the election results are pharmaceuticals and alternative energy, analysts said.

Merck fell US$2.41, or 7.7 per cent, to US$28.72. Pfizer, meanwhile, dipped US$1.09, or 6 per cent, to US$17. SunTech Power Holdings was among the alternative energy stocks that declined, falling US$6.82, or 21.5 per cent, to US$24.88.

In addition to monitoring the direction the next administration will take, investors continue to heed the state of the credit markets.

The paralysis in the credit markets that began after the bankruptcy of Lehman Brothers Holdings in mid-September has been alleviated somewhat by a series of government interventions, but they still show some signs of strain.

Banks continued to ratchet down the rates they charge one another for borrowing on Wednesday, but the key interbank lending rate - the London Interbank Offered Rate, or Libor ? remains well above the Federal Reserve's target interest rate of 1 per cent.

Libor for three-month US dollar loans fell to 2.51 per cent from 2.71 per cent on Tuesday.

And the bid for Treasury bills remains high. The three-month bill, considered one of the safest assets around, fell to 0.42 per cent from 0.48 per cent late on Tuesday.

A low yield indicates high demand. The yield on the benchmark 10-year Treasury note was unchanged at 3.73 per cent.

The US dollar was mostly lower against other major currencies, while gold prices fell.

Light, sweet crude dropped US$5.23 to settle at US$65.30 a barrel on the New York Mercantile Exchange. -- AP