NEW YORK — The dawn of the Obama presidency could not shake the stock market from its dejection over the rapidly deteriorating state of the banking industry.

Financial stocks, many of them falling by double-digit percentages, led a huge drop on Wall Street yesterday that left the major indexes down more than 4 percent and the Dow Jones industrials down 332 points, its worst finish ever for an Inauguration Day.

Although traders on the floor of the New York Stock Exchange paused to watch the inauguration ceremony and Obama's remarks, the transition of power didn't erase investors' intensifying concerns about struggling banks and their impact on the overall economy.

The market's angst, which began with multibillion dollar losses reported last week by Bank of America Corp. and Citigroup Inc., intensified after the Royal Bank of Scotland's forecast that its losses for 2008 could top $41.3 billion.

The collapse in bank stocks was swift: State Street Corp. plunged 59 percent, Citigroup fell 20 percent and Bank of America lost 29 percent. Royal Bank of Scotland fell 69 percent in New York trading.

"The reason we're having a panic drop is the fact that Europe is catching our cold, and we could have deeper and deeper problems that could require more and more money. And eventually the government is going to have to stop spending," said Keith Springer, president of Capital Financial Advisory Services. "It's a dangerous situation to be in."

The shrinking value of bank stocks means the financial industry accounts for less than 10 percent of the Standard & Poor's 500 index for the first time since 1992. At the end of 2006, banks made up 22 percent of the stock market benchmark.

And the market's retreat yesterday means Wall Street has eaten through most of the advance it made from Nov. 20 through Jan. 6.

The S&P 500, which had been up as much as 24 percent, is now up only 7 percent from its November low.

Fears about banking eclipsed the shift in Washington. Royal Bank of Scotland's forecast for what would be the biggest loss ever for a British corporation left investors fearful that governments would have to nationalize banks to keep them from collapsing. The British government injected more money into the struggling bank Monday and announced another round of bailouts for the country's banks.

Acknowledging the global economy's woes, Obama suggested Wall Street would see greater oversight: "Without a watchful eye, the market can spin out of control," he said in his address outside the Capitol.

Obama warned the economic recovery would be difficult and that the nation must choose "hope over fear, unity of purpose over conflict and discord" to overcome the worst economic crisis since the Great Depression.

Investors are expecting Washington will be a central part of the economic recovery. But the first hours of the new administration did little to ease their concerns.

"At this stage, markets in general and bank investors specifically are really looking to government as the way out," said Jack Ablin, chief investment officer at Harris Private Bank. "Certainly, of just about all of inaugurations that I can recall, today's event probably has not only the symbolic importance but really tangible importance to the stock market."

During much of Obama's address, the average was down about 150 points. Traders hadn't appeared so focused on TV screens since Sept. 29, when the House initially voted against the banking bailout package and the Dow tumbled 777 points.