By Kate Gibson

A sharp-sell off on Wall Street Tuesday highlighted the challenges facing the new administration of President Barack Obama, who is inheriting a stock market that collapsed during predecessor George W. Bush's second term, according to a leading market tracker.

Bush's final week as president left the Dow Jones Wilshire 5000 Index -- as of Friday's close -- down 5.5% on an annualized basis during his second term. In combination with the 1% gain eked out during his first four years, Bush leaves office with the stock market down 2.3%, annualized, over eight years.

The devaluation of the stock gauge gives Bush the dubious distinction of being the first president of the past five to oversee any decline at all, according to Wilshire Associates.

Ronald Reagan presided over a annualized gain of 12.1% in his first term, and then a climb of 16.1% during his second, translating into an overall annualized rise of 14.1% when he left office in 1989.

The downward trend persisted Tuesday, with the Dow Jones Industrial Average (DJI) falling 254.47 points, or 3.1%, to stand at 8,026.75.

Financials were the heaviest weights on the blue-chip index. Bank of America Corp. (BAC) dropped almost 20%, while Citigroup Inc. (C) plummeted 14%.

The broader S&P 500 Index (SPX) declined 36.33 points, or 3%, to 813.79, with financials again the greatest laggard, led by State Street Corp. (STT) off 48%, PNC Financial Services Group (PNC) off 32% and Bank of New York Mellon Corp. (BK) off 23%.

Shares of State Street dived on worries that the financial-services firm might have to bring troubled investment vehicles onto its balance sheet. .

The Nasdaq Composite Index (RIXF) shed 70.45 points, or 4.6%, to 1,458.88.

In his one and only term as president, George H. W. Bush presided over a 14.5% advance in annualized returns on the DJ Wilshire 5000.

Bill Clinton had the best results overall, at least in looking at yearly returns from the broad market gauge. The Wilshire rose 17.7% during his first term, which ended in 1997.

Of course, Clinton fared less well, in both political and in Wall Street terms, during his second term. Yet the index still climbed 13.5% for a collective 15.6% during his eight years in the Oval Office.

"When you look the previous administrations' stellar returns, some people would say the extraordinary performance over 20-plus years was the biggest bull market of our lifetimes, and valuations are just coming back in line. Yet over 28 years, from the beginning of Reagan to the end of Bush 43, it's a gain of about 9.5%. It drives home the point, the sound advice to be a long-term investor," said Bob Waid, vice president at Wilshire Associates Inc.

"If you need to have cash within a five- to seven-year period or are approaching retirement, it is better not to have large-risk exposure, and equities are a risky asset class," he added.

The global equities market already is off to a less than solid start for the year. January is showing "scary similarities to last January," according to Howard Silverblatt, senior index analyst at Standard & Poor's.

Last January posted one of the worst months up to that point, with global markets declining 8.39% and losing $3.28 trillion.

For the first half of this month, according to Silverblatt, the global market losses came to $1.23 trillion.

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.