The broad indexes all saw declines of over 1% and the KBW Bank Index (I:BKX) was down over 2% to close at 46.68, with all 24 index components seeing declines for the session.
Financial stocks were weak early, but fell much harder after President Obama discussed the "fiscal cliff" during a White House press conference in the afternoon.
The president and the Republican majority in the House of Representatives are negotiating over which "revenue enhancements" and spending cuts will be agreed upon, to avert the expiration of the tax cuts enacted when George W. Bush was president and extended by President Obama in 2010, as part of an agreement to increase the federal debt ceiling. Without a compromise, in addition to the expiration of the tax cuts, there will be major federal budget cuts, which many economists have said could push the U.S. economy back into recession.President Obama said during the press conference that "we face a very clear deadline that requires us to make some big decisions on jobs, taxes and deficits by the end of the year. Both parties voted to set this deadline and I believe that both parties can work together to make these decisions in a balanced and responsible way." According to a Washington Post transcript, the president said "I am open to compromise and I'm open to new ideas, and I've been encouraged over the past week to hear Republican after Republican agree on the need for more revenue from the wealthiest Americans as part of our arithmetic if we're going to be serious about reducing the deficit." President Obama then outlined "two pathways" for federal income taxes: "Option one, if Congress fails to act by the end of this year, everybody's taxes will automatically go up, including the 98 percent of Americans who make less than $250,000 a year, and the 97 percent of small businesses who earn less than $250,000 a year. That doesn't make sense. Our economy can't afford that right now. Certainly, no middle class family can afford that right now. And nobody in either party says that they want it to happen."