Wall Street ushered in the Barack Obama presidency with a record Inauguration Day slide Tuesday amid fresh signs the global bank crisis was far from over.
An index of bank stocks lost 19.7 percent on fears of more losses. The Dow Jones industrial average fell 332.13 points, or 4.01 percent, to end unofficially at 7,949.09. The S&P 500 Index slid 44.90 points, or 5.28 percent, to finish unofficially at 805.22.
The Nasdaq Composite Index tumbled 88.47 points, or 5.78 percent, to close unofficially at 1,440.86.
Meanwhile, the White House Tuesday outlined some of President Barack Obama's major policy objectives as he became the 44th U.S. president.
The first African-American to become U.S. president swore to preserve, protect and defend the Constitution against a backdrop of a deep economic downturn, a trillion dollar federal deficit and fears of more bank losses.
Barack Obama took office on Tuesday with bank shares tumbling, the car sector teetering and a world economy in tatters, and the new U.S. president vowed to meet the daunting challenges.
His aides vowed to go to work immediately, armed with the authority to spend the second half of the $700 billion financial rescue plan and a proposed stimulus package of $550 billion in spending and $275 billion in tax cuts.
"That we are in the midst of crisis is now well understood,' the new president said, mentioning war, a battered economy and sagging confidence. "Today I say to you that the challenges we face are real.They are serious and they are many. They will not be met easily or in a short span of time. But know this, America—they will be met,' he said upon taking the oath.
Obama pledged to revive a U.S. economy that he said had been badly damaged by "greed and irresponsibility" and an avoidance of hard choices. He said the economic crisis showed that markets can spin out of control "without a watchful eye" and that prosperity must be shared more broadly.
The new president did not delve into specifics about his proposed $825 billion economic stimulus package. But he said the plan that would pay for new roads, bridges, electrical grids and other projects would set the foundation for future growth.
Seeking to quell concern about the eye-popping price-tag for the stimulus plan, Obama promised to make government more efficient and ensure that money is spent wisely.
Later in the day, the White House said Obama administration aims to double production of alternative energy in the next three years. It hopes to modernize more than 75 percent of federal buildings and improve the energy efficiency of 2 million U.S. homes, saving consumers and taxpayers billions of dollars in energy costs. The administration aims to help create 5 million new jobs by investing $150 billion over the next decade to back private efforts to build clean energy sources.
Pledges to Ovehaul Wall Street Rules, Reform Health Care
Obama's reference to the lack of a watchful eye on markets signaled he would put a priority on revamping financial regulations. In an indication of how he may try to frame the debate over Wall Street reform, Obama praised the ability of markets to create wealth and spur freedom but insisted that careful oversight was also crucial.
Obama listed reform of the health care and education systems and action to tackle climate change as among his top domestic priorities. Obama envisions changes in the U.S. health care system, which is the world's most expensive although it trails many other countries in key quality measures.
The plan is intended to strengthen employer-provided health coverage, make insurance companies accountable and ensure a patient's choice of doctors.
The president pledged to make investments to ensure that within five years all medical records are computerized, moving away from paper records in a bid for greater efficiency. # Obama's 'Hard Choices': Insiders Weigh In # CNBC.com Special Inauguration Coverage
The administration wants to require insurance companies to cover pre-existing medical conditions. It also backs a new tax credit to help small businesses provide affordable health insurance to employees.
The White House seeks to allow the importation of medicines from other developed countries and increase the use of lower-cost generic drugs in public programs.
A CBS News/New York Times poll showed 79 percent of Americans are optimistic about the next four years. At the same time, George W. Bush leaves the White House as one of the most unpopular presidents in history, with his approval rating at 22 percent.
"The inauguration is crystallizing all expectations that the U.S. economy will be the first to recover from the recession,' said Marco Annunziata, global chief economist at UniCredit, Italy's second-biggest bank, in London.
But that did not help the Dow which was down about 2 percent at midday, extending its losses for the year to more than 7 percent.
Shares in major U.S. banks were down double digits after State Street Corp , the world's biggest institutional asset manager, posted rising unrealized losses in its commercial paper program and investment portfolio.
State Street stock plummeted 50 percent while Citigroup , Bank of America , JPMorgan Chase & Co and Wells Fargo were all battered.
Europe's banking index fell to a 14-year low on fears that lenders will need more state help to raise capital as recession bites and bad debts rise. Shares in Lloyds dropped 31 percent and Barclays fell 17 percent.
On Monday, Britain threw its troubled banks a second multibillion-pound lifeline in three months and gave its central bank approval to pump cash into the ailing economy because interest rates were close to zero.
"After yesterday's carnage, the smoke is still hanging over the market,' says Justin Urquhart Stewart, director at Seven Investment Management.
Concerns about the British banking sector pushed the British pound below $1.39 for the first time since June 2001. European shares fell 2 percent despite a better-than-expected ZEW analyst and investor sentiment index report in Germany.
The monthly poll of economic sentiment by the ZEW economic think tank rose to -31.0 from -45.2 in December. "This is mostly an expression of hope. The indicator is still clearly in negative territory. Nothing is changing in terms of the 2009 recession,' said Gerd Hassel, an economist at BHF-Bank.
Car Crisis
Except for banking, no sector has been harder hit than carmakers by the worst financial crisis in 80 years.
Italy's Fiat took a 35 percent stake in Chrysler, launching a venture designed to secure the beleaguered U.S. carmaker's future. The deal aims to give the Italian carmaker the scale it needs to survive and let Chrysler expand its product portfolio to include small, less-polluting cars.
After years of tense relations with Muslims following the Sept. 11 attacks seven years ago that prompted Washington's declared war on terrorism and deeply shaped Bush's policies, Obama offered conciliatory words to the Islamic community while issuing a warning to those who would wage terrorism.
In a message to the Muslim world, Obama said he would seek a "new way forward" based on mutual interest and mutual respect.
He added: "We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you."
In his first act of business, the Obama White House issued a proclamation declaring a national day of renewal and reconciliation and calling on Americans to serve one another.
Obama said the economic crisis was a consequence of "greed and irresponsibility" on the part of some and vowed that those who manage Americans' money "will be held to account." He also promised a "watchful eye" to ensure financial markets do not spin out of control.
Economic woes—the recession has saddled the country with a $1 trillion deficit and 11 million people unemployed—have become the top concern of the U.S. public and helped Obama beat Republican John McCain in the November presidential election.
"I don't care what color he is," said Garrell Winstead, a 67-year-old real estate investor who traveled to the Mall from Cincinnati, Ohio to see Obama sworn in. "If the economy doesn"t improve and if he doesn't create enough jobs, patience will evaporate." The inauguration took place amid unprecedented security.
About 8,000 police were deployed and a total of 32,000 military personnel were on duty or on standby. The Homeland Security Department said authorities were investigating a potential threat of "uncertain credibility" in connection with the inauguration.
Some estimates put the number of people expected to pack the Mall and inaugural parade route at more than 2 million. Crowds clogged the city's metro rail system and thronged the security check-points. "This is chaos now," said Judy Bailey, 42, of Cincinnati, Ohio, as police shunted her further and further away from the swearing-in ceremony early in the morning. "But it is amazing to be here. This is history in the making."
Polls show widespread U.S. public support for Obama and optimism about the coming four years of his presidency. Bush, leaving office after eight years with record lows in approval ratings, was returning home to Texas on Tuesday.
First Moves Former President George W. Bush waves as he boards helicopter after President Obama took the oath of office.
The Washington Post reported that in one of his first actions as president, Obama planned to name former Sen. George Mitchell as his Middle East envoy in one of his first actions as the new U.S. president.
Obama will also meet military commanders on Wednesday to discuss the possibility of accelerating the U.S. troop withdrawal from Iraq, to fulfill a campaign pledge to withdraw all troops within 16 months.
He is also expected to discuss the need for more forces in Afghanistan at the White House with a Pentagon delegation led by Defense Secretary Robert Gates and Navy Adm. Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, officials said. Copyright 2009 Reuters. Click for restrictions.
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