Barack Obama took office yesterday with the world's banks freefalling and the auto industry gasping - and Wall Street greeted the 44th U.S. president with its worst inauguration day trading session on record.
Obama vowed to meet a host of challenges including war, sagging confidence and an economy he said was "badly weakened" by "greed and irresponsibility."
But investors were hoping for more, even with an $825 billion (U.S.) stimulus plan and a second $350 billion financial bailout in the works.
"People were looking for something, new plans, new hopes," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, N.J. "They didn't hear something new."
Stock prices extended losses while Obama spoke, then continued to decline after he finished as investors expressed disappointment that they did not hear more specifics about his promises for bold and swift action, considering the depth of the U.S. recession.
The Dow Jones industrial average closed down 4 per cent, extending its 2009 slump to more than 9 per cent, while the S&P 500 sank 5.3 per cent, a record inauguration day decline.
And things weren't much better in Toronto, where the TSX finished down 3.8 per cent.
Financial stocks sold off on the banking sector's latest woes and sharp slides hit energy stocks.
Overall, the Dow dropped 332.13 points to 7,949.09 and Toronto's S&P/TSX composite index tumbled 336.55 points to 8,504.93.
Some investors were hoping for an "Obama bounce" but market historians pointed out that the Dow has fallen on 72 per cent of past inauguration days.
Markets were still feeling the aftershocks of Monday's announcement from the Royal Bank of Scotland that it will likely post a $41.3 billion loss for 2008 and that the British government will be bailing out banks for the second time in three months.
Investors fear the bailout might be a move to fully nationalize some British banks.
Then came news that fourth-quarter profit at State Street Corp., which had been performing better than most financial services firms, was down 71 per cent.
State Street announced that it was forced to take billions of dollars in writedowns on its commercial paper program and investment portfolio. Its shares plunged $21.46, or 59 per cent, to $14.89.
The TSX financial sector was down 5.8 per cent, with Royal Bank of Canada falling $1.76 (Canadian) to $30.84 and Manulife Financial off $2.10 to $20.11.
A sharp profit drop by online brokerage TD Ameritrade pushed down shares in TD Bank, which has a 40 per cent stake in the company. TD dropped $2.80 to $39.42.
U.S. bank stocks taking big hits included Citigroup and Bank of America.
The energy sector fell 6.8 per cent even as the February crude contract on the New York Mercantile Exchange gained $2.23 (U.S.) to $38.74.
Shares of Suncor Energy, the biggest decliner in Toronto, slumped 15.84 per cent to end at $22.10 (Canadian) after the oil-sands producer reported its first quarterly net loss in 16 years. It also said it would halt a $20.6 billion oil-sands expansion.
Statistics Canada said manufacturing sales decreased for a fourth consecutive month in November. Sales fell 6.4 per cent to $48.4 billion, the lowest level since December 2004. The Canadian dollar lost 0.81 of a cent to 78.89 cents (U.S.)
The TSX Venture Exchange fell 16.27 points to 856.68.
The Nasdaq composite index was off 88.47 points to 1,440.86, while the S&P 500 slipped 44.9 points to 805.22.
Gold stocks advanced 3.3 per cent as the February bullion contract rose $15.30 (U.S.) to $855.20 an ounce.
GRAPHIC: DANIEL ACKER bloomberg NEWS Traders work near screens inside the New York Stock Exchange showing the inauguration of U.S. President Barack Obama, who was sworn in on the steps of the U.S. Capital. World stock markets fell sharply as ongoing gloom surrounding the bank sector offset any optimism generated by the inauguration.
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