That dimmed hopes for a quick resolution of the crisis since those higher taxes are strongly opposed by congressional Republicans.
The S&P/TSX composite index dropped 204.87 points 11,929.79, leaving the main index down about 25 points below where it started the year. The TSX Venture Exchange fell 28.2 points to 1,258.69.
The Canadian dollar lost 0.19 of a cent to 99.62 cents US.
U.S. indexes also tumbled with losses accelerating Obama's afternoon news conference.
"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 Dow Jones industrials plunged 185.23 points to 12,570.95, the Nasdaq dropped 37.08 points to 2,846.81 while the S&P 500 index backed off 19.04 points 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 the so-called fiscal cliff at the start of the year.
The cliff scenario refers to a series of tax cuts from the Bush-era due to expire at the first of the year. This 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.
Such a scenario is bad news for a resource-heavy market like Toronto's as slowing economies in other countries will slash demand for oil and metals and pressure mining and energy stocks.
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."
The TSX has dropped 3.49 per cent in the last week while the Dow industrials have fallen 5.09 per cent.
The gold sector led TSX decliners, down about four per cent with December bullion up $5.30 to US$1,730.10 an ounce.
Iamgold Corp. (TSX:IMG) tumbled 19.49 per cent to $22.98 after the miner reported a 10 per cent drop in revenue to $386.8 million in the latest quarter. Net earnings ran up 56 per cent to $78 million. Ex-items, earnings came in at 60.2 million, or 16 cents a share, down from $112.4 million a year ago. Analysts had called for adjusted earnings per share of 24 cents on $427 million in revenue.
"Gold prices at $1,730 are roughly flat for the year but cost pressures continue to go up for resource companies so that’s taking the shine off that sector for sure,"added Tsagarelis.
Elsewhere in the sector, Goldcorp Inc. (TSX:G) lost $1.65 to $41.28.
The base metals sector was down 2.49 per cent with December copper down two cents at US$3.45 a pound. Rio Alto Mining (TSX:RIO) lost 38 cents to $5.35 while Teck Resources (TSX:TCK.B) fell 60 cents to $32.21 even as the miner said it will pay a dividend of 45 cents per share on its outstanding Class A common shares and Class B subordinate voting shares on Jan. 2, 2013, up 12.5 per cent from the previous dividend.
The energy sector was off 1.1 per cent as December crude on the New York Mercantile Exchange rose 94 cents to US$86.32 a barrel. Prices found support on worries about supply disruptions from the Mideast after Israel killed the commander of the Hamas military wing in one of some 20 air strikes on the Gaza Strip Wednesday.
Suncor Energy (TSX:SU) declined 69 cents to $31.86.
Industrial stocks were also weak and shares in Bombardier Inc. (TSX:BBD.B) fell 11 cents to $3.19 after the S&P ratings agency lowered its long-term corporate rating one notch to 'BB' from 'BB+' with a stable outlook. S&P cited Bombardier's "significantly lower-than-expected" cash generation this year as customer advances and operating profit fell amid the weak global economy. Fitch Ratings recently did the same and Moody's shifted its outlook on the company from stable to negative and lowered its liquidity rating, citing similar reasons.
Financials also weighed as TD Bank (TSX:TD) backed off $1.23 to $79.13.
The consumer staples sector was higher amid positive earnings reports from the country's biggest grocers.
Loblaw Companies Ltd. (TX:L) shares ran up 29 cents to $33.64 as the company increased its quarterly dividend by nearly five per cent. The retailer also said net income fell by 5.9 per cent to $222 million or 79 cents per share, however, due to several items excluded from the adjusted earnings.
Metro Inc. (TSX:MRU) reported its quarterly net income was up 75.9 per cent compared with the same time last year, rising to $145.1 million or $1.46 per share. Metro’s overall sales were up 11.1 per cent to $2.9 billion, while same-store sales from locations open at least a year were up 1.1 per cent. Its shares ticked 42 cents higher to $59.