US stocks tumbled to their lowest levels in three months amid concerns about the US political landscape, as well as concerns about Europe's festering debt crisis.

The Dow Jones Industrial Average dropped 311 points, or 2.35%, to 12,934 on Wednesday.

The Standard & Poor's 500-stock index gave up 33 points, or 2.37%, to 1394, with all 10 of the sectors and more than 90% of the 500 stocks losing ground. The technology-oriented Nasdaq Composite declined 74 points, or 2.48%, to 2937.

The declines followed a day of broad-based gains, which many investors and traders had attributed to hopes for more political certainty after the election. But Wednesday's selloff shattered that notion.

With the two houses of Congress split between Democrats and Republicans, investors are fearful of a contentious battle over taxes and the deficit that could take the US government to the brink of another crisis. Political brinkmanship on deficit reduction helped trigger a credit downgrade of the US by Standard & Poor's in August 2011.

This time, the concern is the "fiscal cliff," scheduled tax increases and spending cuts set to take place on Jan. 1 unless Congress reaches a compromise to avert the policy changes. The split houses of Congress, and continued partisan rancor, have fuelled worries that legislators may not reach a compromise until the last minute, if at all.

In a report Wednesday, Fitch Ratings said that failing to avoid the fiscal cliff would tip the US economy into an avoidable recession and result in an increase in the unemployment rate to above 10% in 2013.

Leading the declines were financial and energy stocks, as crude-oil prices tumbled and the outlook for coal darkened.

Exxon Mobil fell 2.8% and Chevron declined 2.4%, while coal stocks, weighed down by declines of 12% or more at Alpha Natural Resources and Arch Coal, were hit hard. Railroad shares, which rely heavily on coal shipments, were also weak.

Financial stocks were hit hard by investor concerns about the impact of electoral wins by Elizabeth Warren in Massachusetts and Alan Grayson in Florida. Both congressional Democrats have taken a strong line on banking regulation, potentially increasing scrutiny for financial companies. Bank of America and JP Morgan Chase tumbled 6.4% and 5.1%, respectively, to lead the Dow laggards. Citigroup dropped 5.7% and Morgan Stanley lost 7.8%.

Among hospital stocks, which were seen benefiting from an Obama victory, HCA Holdings and Tenet Healthcare rallied 9.9% and 9.6%, respectively. Health-care peer UnitedHealth declined 3.7%.

Adding to the US concerns were developments in Europe, where markets erased early gains to turn lower.

Concerns over the impact of the euro-zone crisis on Germany came to the fore, after German industrial production for September showed a 1.8% monthly decline. Separately, European Central Bank President Mario Draghi said in remarks prepared for delivery in Frankfurt that the euro-zone debt crisis is beginning to have an impact on the German economy.

Also weighing on investor sentiment in Europe were concerns over a parliamentary vote in Greece on new austerity measures, which are needed for Greece to receive the next dose of bailout funds from international lenders.

In corporate news, Plexus plunged 27% after the electronic-components supplier said it was informed that it would no longer be a supplier to Juniper Networks, its biggest customer. Juniper rose.

AT&T fell 2.7% after it unveiled plans to invest $14 billion over the next three years to expand its wireless and wireline broadband networks, in an effort to support increased customer demand for high-speed Internet. At the same time, the company boosted its quarterly dividend.

Sprint Nextel slipped 1.5% after it agreed to buy some wireless spectrum and customers from US Cellular for $480 million and the assumption of some debt. US Cellular, which also reported a drop-off in subscriptions, fell 11%.

Amyris substantially pared its advance, but gained 5.8% after the renewable fuels and chemicals company reported a much narrower-than-expected third-quarter loss and revenue that was nearly double what analysts had projected.

LivePerson skidded 12% after the provider of chat services reported third-quarter earnings that matched estimates but revenue that came up short, and provided a fourth-quarter earnings and revenue outlook that were below projections.

Time Warner gained 4.4% after the media company reported third-quarter earnings that exceeded estimates while affirming its full-year earnings outlook.

For Australian ADRs listed on the NYSE, BHP Billiton improved 106 cents (1.47%) to $72.99, ResMed firmed 77 cents (1.89%) to $41.55, Telstra Corporation strengthened 20 cents (0.97%) to $21.25, Telecom Corporation of NZ fell 3 cents (0.29%) to $9.79 and Westpac gained $2.03 (1.54%) to $133.56.

The strong run-up in Treasury prices Wednesday got tripped up briefly after the US government drew subpar demand to it benchmark 10-year debt sale. At 7:45 AM (AEST), the 10-year Treasury note yield was 1.64% and the 5-year yield was 0.67%.

The US dollar rose to a two-month high against a basket of major currencies Wednesday as equity markets tanked, giving up gains initially scored in the wake of President Barack Obama's election to a second term. The dollar initially softened on reinforced expectations that the Federal Reserve will continue with its program of monetary stimulus, which is seen as a negative for the dollar.

Worries over the euro-zone crisis's impact on powerhouse Germany and fiscal issues in the US combined to beat the air out of European stock markets, overshadowing an initial relief rally after the US presidential election.

The Stoxx Europe 600 index tumbled 1.4% to close at 271.04, after having traded as high as 276.56 earlier in the session.

Shares of Delhaize Group rose 1.9%, as the Belgian food retailer said third-quarter profit rose 33% due to a tax benefit and that revenue climbed 9.1%. Shares of Carlsberg AS gained 2.8%. The brewer said third-quarter performance was in line with expectations and that it sees growth in its share of the Russian market.

However, shares of Vestas Wind Systems AS tanked 13%, as the turbine maker said it would step up cost-cutting efforts after its third-quarter loss widened.

As far as broader trading sentiment across Europe, investors initially cheered President Barack Obama's victory in Tuesday's election. Attention, however, soon turned to how the president will solve the problem of the looming fiscal cliff.

Also Wednesday, German industrial production for September showed a 1.8% monthly decline. Meanwhile, the European Commission lowered its 2013 growth forecast for the euro zone to 0.1% from an earlier May estimate of 1%, and revised its 2012 growth forecast to a 0.4% contraction from a previous forecast of a 0.3% decline.

Separately, European Central Bank President Mario Draghi said in remarks prepared for delivery in Frankfurt that the euro-zone debt crisis is beginning to have an impact on the German economy.

Greece's parliament was set to vote on a package of austerity measures after the European market close.

The Athens General Index lost 0.8% to 825.80.

Among major European stock movers, shares of Veolia Environnement SA climbed 4.9% as the water-and-waste firm confirmed targets for the full year.

Also in France, shares of BNP Paribas SA gained 1.1% after the bank's third-quarter profit beat expectations and more than doubled from a year earlier.

The CAC 40 index, however, closed 2% lower at 3,409.59, with shares of oil heavyweight Total SA falling 2.9%.

Germany's DAX 30 index gave up 2% to 7,232.83. Deutsche Bank AG shares fell 4.4%, while shares of Commerzbank AG dropped 3.2%.

Banking shares were also lower in the U.K. Shares of Royal Bank of Scotland Group PLC lost 2.7% and HSBC Holdings PLC shares gave up 2.2%.

Shares of oil giant BP PLC fell 1.3%, while those of BG Group PLC sank 3.9%.

The FTSE 100 index dropped 1.6% to 5,791.63.

Rio Tinto weakened 69.50 pence (2.18%) to 3,166.58 pence and BHP Billiton dropped 42.50 pence (2.13%) to 2,005.53 pence.

Asian markets shed early wariness and finished mostly higher Wednesday after reports emerged US President Barack Obama has been re-elected as the country's president.

The Hang Seng and the S&P/ASX All Ordinaries gained 0.7% each while the Sensex added 0.5%. The Nikkei and the Shanghai Composite ended flat after pulling off from losses earlier in the session.

Sentiment was cautious at open as market participants awaited the outcome of the presidential election. But stocks gained ground soon after President Obama's victory as investors were hopeful ongoing monetary easing policies would continue under his tenure.

Gains, however, were limited as investors kept an eye on developments in Greece where a parliamentary vote is expected later today on a fresh batch of austerity measures that the country must implement in order to secure its next tranche of international bailout funds. More than 35,000 Greeks hit the streets in Athens Tuesday as they went on a 48-hour general strike to protest against the proposed measures.

Car manufacturer Nissan Motor Co. zoomed ahead 4.1% in Tokyo even after the company slashed its full-year operating profit as investors were hopeful of robust growth in North American sales.

Sumitomo Metal Mining soared over 6% after the company slashed its full-year operating profit outlook to a more than expected 73 billion yen.

DeNA Co. Ltd. added 1.8% after posting better than expected first-half results. In Hong Kong, resources stocks posted sharp gains. Aluminum Corp. of China rose 2.9% while gold miner Zijin Mining jumped over 6%.

Among energy players, China Petroleum & Chemical Corp. gained 1.5% while PetroChina was up 1.1%. Property firms also scored higher-Sun Hung Kai Properties rose over 2% while New World Development Corp. enhanced more than 3%. In earnings related moves, bourse operator Hong Kong Exchanges & Clearing Ltd. added 1.9% despite posting lower third quarter net profit. Fashion clothing retailer Esprit Holdings soared 5.5% after the trading debut of the company's rights issue. But Foxconn International Holdings slumped more than 5.7% after surging more than a record 30% in the previous session following a ratings upgrade by Citigroup and HSBC.

In Mumbai, telecom giant Bharti Airtel finished flat% after its second quarter net profit declined nearly 30%. Among metal players, Hindalco Industries, which reported latest earnings yesterday, gained 1% while Tata Steel and Sterlite Industries were up around 0.8% each. The country's largest public sector bank SBI rose around 2% while private lender ICICI Bank tacked on a percent.

Base metals mostly closed in the red on the London Metal Exchange Wednesday, the initial boost of US President Barack Obama's re-election undone as investors shifted their gaze back to the euro zone.

Crude-oil fell to the lowest level since July after the Energy Department reported rising US gasoline supplies and falling demand. Post-election jitters across markets put oil on a downward slope early in the session, but data showing a 2.9 million barrel increase in US gasoline supplies, coupled with a sharp drop in East Coast fuel demand due to superstorm Sandy, led to a big tumble through the afternoon.