The Dow Jones Industrial Average plummeted 312.95 points, or 2.36 percent, to close at 12,932.73, logging its biggest one-day drop in almost a year. Bank of America and JPMorgan were the biggest blue-chip laggards.

The S&P 500 tumbled 33.86 points, or 2.37 percent, to finish at 1,394.53. The Nasdaq slumped 74.64 points, or 2.48 percent, to end at 2,937.29.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped near 19.

All key S&P sectors ended firmly in the red, led by energy nd financials.

Apple fell more than 3 percent, pushing the tech giant down a jaw-dropping 20 percent from its all-time high of $705.07 in mid-September. The stock finished the session in bear market territory.

Obama was re-elected president Tuesday night, put over the top by the crucial battleground state of Ohio following the most expensive election in U.S. history.

Meanwhile, ratings agency Fitch said Obama needs to move quickly to avoid the "fiscal cliff," adding that failure to address the issue would likely result in a downgrade in 2013. Moody's said it would make a decision following the budget negotiations, though going over the "fiscal cliff" would not immediately trigger a downgrade.

Wall Street had favored Romney and the Republican ticket in part because it preferred their approach of retaining tax cuts, and making spending cuts. The Obama Administration favors raising taxes on the richest Americans, and also increasing capital gains and dividend taxes. (Read More: Fixing 'Fiscal Cliff' Will Mean 'High, Higher' Taxes)

Across the pond, European shares reversed their gains o close sharply lower following ECB President Mario Draghi's negative comments on the region's economy. Draghi said economic activity in the euro zone area is expected to remain weak and the slowdown may have reached Germany.

And the members of Greece's parliament are expected to vote on a new package of austerity measures with the government's majority under threat. If the bill doesn't pass, Greece will not receive its next financial aid installment of 31.5 billion euros ($40.2 billion) on Monday.