TSX and the fiscal cliff

Photo: The Canadian Press. All rights reserved.

Bay Street in the heart of Toronto's financial district is seen on March 23, 2009. THE CANADIAN PRESS/Chris Young

The Toronto stock market was lower Tuesday amid relief that there was a clear-cut winner from Tuesday's U.S. presidential election, with Barrack Obama winning a solid majority of electoral college votes over Republican challenger Mitt Romney.

But that sentiment was tempered by the realization that there will likely be some tough slogging ahead as Democrats and Republicans try to extricate the government from automatically imposing tax hikes and steep spending cuts at the end of the year. Investors worry this so-called fiscal cliff scenario would send the U.S. back into recession.

The S&P/TSX composite index fell 82.91 points to 12,278.29 as Canadian investors also absorbed earnings reports from the resource and industrial sectors, with several heavyweights missing estimates.

The TSX Venture Exchange was 4.34 points lower to 1,298.8.

The Canadian dollar was down 0.16 of a cent to 100.67 cents US as commodities backtracked and traders took in another reminder of the fragile state of Europe's economy while looking ahead to a crucial vote in the Greek parliament later in the day.

New York markets were deep in the red as the Dow Jones industrials tumbled 174.56 points to 13,071.12, the Nasdaq composite index dropped 37.94 points to 2,973.99 while the S&P 500 index fell 19.21 points to 1,409.18.

There had been concern that America would have to endure a re-run of the protracted election of 2000.

But its arms of government remain divided, with the Democrats holding onto their majority in the Senate and the Republicans in control of the House of Representatives. That could still lead to a logjam in policymaking, not least over the state of the country's public finances.

"In other words, it's like nothing ever happened," observed Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.

Greece was also back in focus ahead of a crucial vote in its parliament later in the day that could determine whether the country stays in the eurozone. If lawmakers don't back a E$13.5 billion package of spending cuts and tax increases, the country faces the prospect of losing access to its bailout lifeline and potentially defaulting on its mountain of debt and leaving the monetary union.