NEW YORK — Investors drew little hope Wednesday for a quick compromise in U.S. budget talks after President Barack Obama insisted that higher taxes on wealthy Americans would have to be part of any deal.
Stocks fell sharply, and even a signal from the Federal Reserve that it could introduce a program in December to speed job growth failed to encourage investors. The Dow Jones industrial average dropped 185.23 points.
Obama made clear he would seek higher tax revenue from the wealthiest Americans, which faces opposition among some Republicans in Congress. Obama said that a modest increase on the wealthy “is not going to break their backs.”
“The Street was looking for him to say some magic buzzwords about avoiding the ‘fiscal cliff,’ about cooperation,” Sal Arnuk of Themis trading, a New Jersey brokerage. Instead, Arnuk said, the remarks were “unyielding.”
The “cliff” is a package of tax increases and government spending cuts that will take effect Jan. 1 unless Obama and Congress reach a deal first.
Stocks have fallen steadily since voters returned Obama and a divided Congress to power Nov. 6. The Dow has fallen 675 points, including three single-day drops of more than 100 points.
The Standard & Poor’s 500 index has dropped 5 percent in that time, returning to where it stood in late July.
“Investors’ hopes that the election would end uncertainty remain unfulfilled,” said Lawrence Creatura, a portfolio manager at Federated Investors in Rochester, N.Y. “It’s very tough to determine what happens next.”
The Dow dropped 185.23 points to 12,570.95. The S&P slipped 19.04 points, or 1.4 percent, to 1,355.49, and the Nasdaq composite was down 37.08 points, or 1.29 percent, at 2,846.81.
Declining stocks outnumbered advancers by about 9-to-1. Consolidated volume was heavier than average at more than 4 billion shares.
Stocks are still up on the year, though they have pared gains since peaking in September. The S&P has fallen 7.5 percent since its Sept. 14 peak, and the Dow has fallen 7.6 percent, more than 1,000 points, since its Oct. 5 peak.
Among individual stocks, Abercrombie & Fitch, which sells teen clothes, bucked the trend of a declining market and was by far the best-performing stock in the S&P 500.
Abercrombie jumped $10.54 to $41.92 after reporting that its international business was thriving and that its net income soared 40 percent in the most recent quarter, more than financial analysts were expecting.
Facebook shares jumped $2.50 to $22.36. Wednesday was the expiration of a so-called lockup period that prevents insiders from selling stock immediately after a company goes public. About 850 million shares are being freed for sale.
Analysts had feared the stock would fall because of all the additional shares on the market. Youssef Squali, an analyst at brokerage Cantor Fitzgerald, said investors should take advantage of any “market dislocation” in the stock to buy more of it.
Business, Pages 28 on 11/15/2012