Stocks sink after GOP cancels budget vote

Investors sent Washington a reminder Friday that Wall Street is a power player in talks to avoid the "fiscal cliff."

Stocks fell sharply 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 lost 120.88 points to close at 13,190.84, a decline of 0.91 percent. Other indexes posted comparable losses. The Standard & Poor's 500 index fell 0.94 percent to 1,430.15. The Nasdaq composite index declined 0.96 percent to 3,021.01.

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 scrapped a vote on the bill 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 market's decline demonstrated investors' nerves are raw as they await a resolution.

The price of gold, which some buy when fear overtakes the market, climbed by $14.20 to $1,660.10 an ounce.

If the full "fiscal cliff" takes effect, economists say it could drag the United States into recession next year.

The uncertainty about military spending is already taking a toll on some of Long Island's aerospace and defense companies. Local companies have seen signs of slowing orders as the Defense Department grapples with the prospect of deep budget cuts; some firms are holding back on hiring and investment, officials have said.

Tax increases triggered by the fiscal cliff would also affect a broad swath of Long Islanders.

The impact would be gradual, and the tax increases and spending cuts could be retroactively repealed if a deal comes together after Jan. 1. Most economists, however, say it would be crucial to reach a deal within the first two months of 2013. With Carrie Mason-Draffen and Ted Phillips