By DANIEL WAGNER

AP Business Writer

The election behind them, U.S. investors dumped stocks Wednesday and turned their focus to a world of problems — tax increases and spending cuts that could stall the nation’s economic recovery and a deepening recession in Europe.

The Dow Jones industrial average plummeted as much as 369 points, or 2.8 percent, in the first two hours of trading. The average was on track for its worst decline in a year.

The Standard & Poor’s 500 index fell as much as 40 points, or 2.8 percent.

Energy companies and bank stocks took some of the biggest losses. Both industries presumably would have faced lighter and less costly regulation if Mitt Romney had won the election.

“It does look ugly,” said Robert Pavlik , chief market strategist at Banyan Partners LLC. He said it’s hard to untangle Europe-related selling from nerves about the nation’s fiscal policy, he said.

“It’s a combination of all that, quite honestly,” Pavlik said.

Stocks seen as benefiting from President Barack Obama’s decisive win rose. They included hospitals, free of the threat that a Romney administration would have sought to roll back Obama’s health care law, and renewable-energy companies.

With the election over, traders’ attention returned to an increasingly sickly European economy, dragged down by a debt crisis for more than three years. The 27-country European Union said unemployment there could remain high for years.

The European Commission, the executive arm of the EU, said that it expects the region’s economic output to shrink 0.3 percent this year. In the spring, the group predicted no change.

For next year, the commission predicted 0.4 percent growth, barely above recession territory. It predicted 1.3 percent last spring.

U.S. stock futures were higher overnight after Obama cruised to victory. They turned sharply lower after the European forecasts and discouraging comments from Mario Draghi, president of the European Central Bank. European markets turned negative as well.

Now that the U.S. election has been resolved, it’s natural for traders to focus on Europe’s problems, said Peter Tchir, who manages the hedge fund TF Market Advisors.

What they’re tuning in to, he said, is the failure of a major European summit last week and minimal progress on the issues that are holding the region back.

“People can only digest one or two stories at a time, and people had put Europe on the back burner” before the election, he said.

Obama’s win followed a costly campaign that blanketed markets with uncertainty about possible changes to tax rates, government spending and other issues seen as crucial to the prospects of some industries and the broader economy.