North American stock markets tumbled Wednesday as investors feared that a failure to resolve the looming American "fiscal cliff" crisis will send the U.S. into recession and pull down other economies.

In Toronto, the S&P/TSX composite index closed with a loss of 204.87 points, or 1.69 per cent, at 11,929.79.

The Canadian dollar lost 0.19 of a cent to 99.62 cents US.

In New York, the Dow Jones industrials slipped 185.23 points, or 1.45 per cent, to 12,570.95, the Nasdaq dropped 37.08 points, or 1.29 per cent, to 2,846.81 while the S&P 500 index backed off 19.04 points, or 1.38 per cent, to 1,355.49.

Stock markets have registered a series of losses over the last week after the results of the U.S. election essentially left the political landscape unchanged — and amid heightened pessimism that lawmakers can come together and arrange a compromise to avoid a so-called fiscal cliff at the start of the year.

That's when a series of tax cuts from the Bush-era expire, which would raise tax bills for almost all Americans.

As well, huge spending cuts are automatically set to take effect, which would take a huge chunk out of U.S. gross domestic product and likely push the economy back into recession, taking other countries' economies with it.

President Barack Obama said Wednesday the economy cannot afford a tax increase on all Americans and President Barack Obama said Wednesday that the U.S. can't afford plunging into tax increases at the start of the year.

And he called on congressional Republicans to support an extension of existing tax rates for households earning $250,000 US or less.

S&P down 3.7% since election

"The Street was looking for him to say some magic buzzwords about avoiding the fiscal cliff, about co-operation," Sal Arnuk, of Themis trading, a brokerage firm in Chatham, New Jersey.

Instead his comments were "very consistent with some unyielding positions he's had over the years."

The S&P 500 has fallen 3.7 per cent since Obama won re-election Nov. 6, and has dropped 6.5 per cent from Sept. 14, when it hit the highest point of the year.

Even signals from the Federal Reserve that it would increase its bond-buying program failed to lighten the mood of investors.

Losses have been especially severe on U.S. markets this past week with selling across all sectors because investors are worried they will be paying substantially higher dividend and capital gains taxes in the new year.

“That's what's driving a lot of it these days — taxes are bound to go up," said John Tsagarelis, managing director and senior portfolio manager at Manulife Asset Management.

"It may not be the full effect that is the doomsday scenario, but at the margin, I think taxes will go up."

December bullion closed up $5.30 at $1,730.10 US an ounce and copper for December delivery finished down three cents at $3.44 US a pound.

December crude on the New York Mercantile Exchange rose 94 cents to $86.32 US a barrel after Israel killed the commander of the Hamas military wing in one of some 20 airstrikes on the Gaza Strip Wednesday, in retaliation for renewed rocket fire on southern Israel.

With files from The Canadian and The Associated Press