US stocks drop sharply after Republicans cancel tax vote; 'fiscal cliff' looms

NEW YORK, N.Y. – Stocks opened sharply lower Friday on Wall Street after House Republicans called off a vote on tax rates and left federal budget talks in disarray 10 days before sweeping tax increases and government spending cuts take effect.

The Dow Jones industrial average fell 140 points to 13,171 in the opening minutes of trading, a decline of 1 per cent. The Standard & Poor’s 500 index fell 15 points to 1,428. The Nasdaq composite index fell 52 to 2,997.

The House bill would have raised taxes on Americans making at least $1 million per year and locked in decade-old tax cuts for Americans making less. Taxes will rise for almost all Americans on Jan. 1 unless Congress acts.

House Speaker John Boehner had presented what he called Plan B while he negotiated with the White House on avoiding the sweeping tax increases and spending cuts, a combination known as the “fiscal cliff.”

But Boehner scrapped a vote on Plan B on Thursday night after it became clear that it did not have enough support in the Republican-led House to secure passage. He called on the White House and the Democratic-led Senate to work something out.

The House will not meet again until after Christmas, if then.

Technology stocks were among the hardest hit Friday in early trading. Tech stocks in the S&P 500 were down 1.5 per cent as a group. Apple, the most valuable company in the country, fell $10.04, or 2 per cent, to $511.69.

It was not the first time that Wall Street expressed worry about “fiscal cliff” talks.

On the day after the election, when voters returned divided government to power, the Dow dropped 312 points. On Nov. 14, when President Barack Obama insisted on higher tax rates for the wealthy, the Dow dropped 185 points.

Stocks closed sharply lower Friday in Asia after House Republicans cancelled their vote. The Nikkei index in Japan fell almost 1 per cent, and Hong Kong’s Hang Seng Index dropped 0.7 per cent. Stocks were also lower in Europe.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note fell 0.06 percentage point to 1.74 per cent, an indication that investors were moving money out of stocks and into safer government bonds.

The price of oil fell $2.02, or 2.2 per cent, to $88.12 per barrel.