Stocks sink on Europe, Fiscal Cliff

A trader works on the floor of the New York Stock Exchange on Nov. 7, 2012. / AP Photo/Henny Ray Abrams

(MoneyWatch) Don't blame today's stock sell-off on President Obama's win. For most of the pre-market session, futures were barely moving, and then the bottom fell out pushing down U.S. markets by more than 2.3 percent across the board. What happened?

About 2 hours before the opening bell, European Central Bank President Mario Draghi acknowledged that the euro zone crisis that has dragged down the southern economies of Greece, Spain, Italy and Portugal is now harming Germany. "Germany has so far been largely insulated from some of the difficulties elsewhere in the euro area. But the latest data suggest that these developments are now starting to affect the German economy." Uh-oh -- Germany and the wealthier Northern European countries were supposed to inoculate the eurozone against widespread disaster. Accordingly, investors were reminded that Europe remains a total mess, which is why European stock markets closed down by more than 2 percent.

Obama wins: Will your taxes rise?

On top of the European debt crisis rearing its ugly head, investors were spooked by tough words from partisan politicians over the nation's Fiscal Cliff. The combination of tax increases and spending cuts, which total more than $600 billion, are scheduled to go into effect in January and could send the U.S. economy back into a recession, according to the Congressional Budget Office. By some estimates, jumping off the cliff will cause the economy to shrink by half of a percent next year and unemployment could rise from 7.9 percent to over 9 percent.

Ratings agency Fitch drew the line in the sand this morning, saying that President Obama must quickly forge an agreement with Congress to prevent a series of tax increases and spending cuts that kick in next year, or risk losing the federal government's top 'AAA' rating next year. Last year, Fitch downgraded its outlook for the U.S. rating to negative after Congress and the Obama administration failed to meet a deadline for a plan.

Ailing Europe + Fiscal Cliff = Stock market sell off. Here's was the damage for the day:

As always, remember to "Keep Calm and Carry On" during major market moves. Here are 3 reminders so you don't shoot yourself in the foot and make a change to your portfolio out of fear or anxiety:

1) Don't make any rash decisions amid a big downturn

2) Maintain diversified balanced portfolio

3) Stick to your game plan!

[duzmafuzt]

There needs to be a big media bi partisan survey done, to demonstrate how our economy is doing. The survey, could show our confidence or lack of confidence, in our economy. Chances are that the only economically stable Americans, have a tax fed job, get some kind of fed entitlement, receive guaranteed tax payer bailout retirement funds monies, or are in the military working, at -2.00 an hour. This could give all serious believers in our economy an honest platform to work off of. Truth be told, those that have guaranteed government jobs, will never give those up. Keep on rolling America. One day, we will all have a government job!! Investing monies into the stock market will not make any sense. The only way to make any money will be through tax funded gigs. This is why monies, are filtering out of the stock market. It can be called "oh shoot, we are screwed" creep. I hope I am wrong.

[joesapper]

435 points down in two days , wreck ahead ?

well this is a signal of strong confidence ?

so if the bill was paid for 4 in Libya would that restore a stable bridge over the fiscal cliff , I think the divide is clear , but is mind set of both sides clear ?
I have no clue as to what ships will drift to close the gap or from what port.

[Rand-Paul-Revolution]

If you are for restoring limited Government, Freedom, and the Constitution please like our Facebook Page http://www.facebook.com/RandPaulRevolution

[smirk5]

I'm betting Rand Paul pulls a gov't salary and gets Gov't healthcare while espousing limited gov't.

[Merrica2012]

Increasing taxes for the rich won't put a dent in the dollars needed to fix this economy. The first poster was correct in his statement as we will never see this economy improve and we are heading for the biggest collaspe in history. The student loans are sitting on the 'bubble' right now. As the weeks progress, you will see the DOW continue to fall, businesses fail, corporations like Suzuki move out of the US and American will be in the Greatest Depression ever! The president deserves credit for nothing as he has not improved anything. He made the same promises made 4 years ago and remains in office because people believed his empty promises, but he doesn't have to worry these next 4 years, who is there to hold him accountable? He doesn't need you anymore, he got exactly what he wanted from you and now he will move on to his agenda he started way before 2008. He stopped needed the American people the minute Ohio moved to his column. I'm sure he and all his foreign buddies are laughing it up via conference call as we speak! Thank you Dems, thank you for handing over the country to a president that hates us and has committed treason. And mostly, thank you CBS and your cohorts in the media for blocking out the news and information that Americans needed to know and making this the most bias campaign ever wittnessed to date. Way to be! I suggest we all start taking Chinese lanuguage courses immediately.

[GhostF1ghter]

Meh. This is today's headline, by Friday it could regain all the losses. Then what will the wingnuts say?

[Merrica2012]

I wouldn't count on it! But whatever makes you sleep better at night.

[GhostF1ghter]

MERRICA2012 replies: I wouldn't count on it! But whatever makes you sleep better at night

---------------------

Of course you wouldn't count on it. Even though you've seen this happen dozens of times now. You won't count on it because it doesn't serve your purpose. You need that glass to be half empty so you can make a point.

So really, it's the bad news that helps you sleep, not the good news.

How screwed up is that?

[smirk5]

When the market was tanking for real in 2008, Cons voted for the guy who told them the fundamentals of the economy were strong. Now, one day is the President's fault since he's a Democrat? Why not blame Boehner for essentially telling us all that the Republicans still won't seriously put increased tax rates for the rich on the table?

[Ulgnud]

To let Obama have the "Credit Card" back is the height of stupidity. Be thankful there is still someone in position to tell him no. Of course he could roll back the spending he ushered in during his first two years. He won't lose an election anymore when the handouts dry up. He is "Term Limited". Keep in mind the Socialist Hitler was "rich bashing" too.

[smirk5]

Yep. We need to both cut defense spending in a big way and increase revenues from the rich. Then, we need single payer health care to reduce future medical spending. Actually, Hitler abandoned the socialists when he secured power. Check what happened to Ernst Rohm and why.

[nfission]

We need to abolish the stock market and return to a kinder gentler nation like Sweden. They let their bad banks go bust in the late 90s and started anew. Now they have the most robust economy in Europe. America isn't that sophisticated yet.

[johnnyaction]

Yes, let banks go bust and start anew, sticking the taxpayer with the bill for corporate welfare. The only thing that saved Sweden was a telecom boom that filled the hole.

Sophisticated is having regulations in place to prevent the bubble in the first place.

[wfw3536]

Folks know what is coming from Obama, higher taxes, more regulations on their businesses, and if you own a business Obamacare will really hurt you big time with additional costs. Amazing CBS continues to cover for Obama just like they held out information on libya until a few days before the election.

[smjhunt]

The Republicans want to fool us by simplistically grouping everything with the same name in the same category. Every tax increase is bad, every regulation is bad. Then all you have to do is declare that something is a tax increase or a regulation and they expect their followers to nod their heads in agreement with no need for analysis like so many zombies.

The real world is not anywhere near as simplistic as you imply. Whether a tax increase or a regulation is good or bad depends entirely on its purpose and who it targets.

Believe it or not, there are some people who earn significantly more than we do but pay significantly less taxes because of loopholes. Getting them to pay their fair share of taxes is not bad in my opinion.

As far as regulations go, you need to look at their costs vs benefits to see if they are good or bad. For example, compounding pharmacies must satisfy strict regulations regarding sterilization. Yes, this does require more work and hassle on their part but the alternative is what we witnessed with the meningitis debacle where a company didn't follow the regulations and many people died as a result. One of them could have been you or me.

There's also a hidden message in statements like yours, a re-broadcast from the Reagan era, that basically says that if you lower taxes and remove regulations on corporations they will use that advantage to hire more people and you will get trickle down of the benefits. That connection is no longer very strong in the days of multinational corporations. It used to be that their prime way of making money was to provide more products or services which required hiring more people. Now they have many more options.

[ThomasSense]

Hunt: well stated

[BWB2020]

The stock markets inversely track human misery, companies lay off workers, and the stock price rises. Expand business, hire more workers, or give existing ones raises, the stock price drops.

A falling market is not a bad thing, to blame them on a president is ridiculous, unless you also give the president credit for the social improvements also.

[cozzicon]

Thank you for being intelligent :)

[walkthetalk]

Those social improvements were totally free.