Concerns over how politicians will handle the fiscal cliff was the biggest driver behind why the Dow fell yesterday, tumbling more than 300 points in its biggest loss this year.
Political worries were exacerbated by worse than expected monthly sales from McDonald's Corp. (NYSE: MCD) and fears that Apple Inc. (Nasdaq: AAPL) had entered a bear market.
The fiscal cliff continued to dominate investor sentiment today as both Republicans and Democrats expressed their intentions of working together to find a solution to the impending crisis but failed to offer any concrete evidence of their willingness to budge from long-held positions.
Afraid that Republicans and Democrats will not compromise, even when the stakes are high, investors are bailing out. It is too close to the end of the year-too close to bonus time-to be a hero now.
In his victory speech following his re-election on Tuesday, U.S. President Barack Obama said that he is "looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together."
Senate minority leader Republican Mitch McConnell said, "To the extent [the President] wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him halfway."
Jim Manley, a former aide to Senate majority leader Democrat Harry Reid, hoped that President Obama would become more personally involved in the negotiations on the resolution of the fiscal cliff.
"He's simply going to have to take a more active and forceful role," Manley told Bloomberg News. "He never got involved in the nitty-gritty of the legislative process. In light of the hyper-partisanship that still surrounds Capitol Hill, he's going to have to change, and he's going to have to take more of a lead in breaking the logjam."