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Stocks fell Friday as worries about the U.S. fiscal cliff weighed on world markets.

Shortlyafter the open in New York, the Dow Jones industrial average andS&P 500 index were down 1%, the Nasdaq composite index wa off 1.7%.

MORE: Boehner: We're still working on fiscal cliff

Republicansfailed Thursday night to pass their Plan B emergency fix, and ifCongress doesn't act by Dec. 31, taxes will rise and spending will beslashed.

Economists say the full force of those changes in 2013 could send the nation back into recession.

In Europe, Germany's Dax 30 was off 0.8%. Tokyo's Nikkei stock index finished down 0.99%.

Housespeaker John Boehner said there were not enough votes to pass Plan B,which would have returned taxes to Clinton-era rates for those earning$1 million or more and left tax cuts in place for all other taxpayers.

He sent the House home for Christmas, leaving the state of negotiations on the fiscal cliff in doubt.

Strategists say the best thing for investors to do now is hold tight. "The real economy is presenting good data," says Steven Wood, chief market strategist for Russell Investments.

Braveand optimistic investors should use fiscal cliff declines to buystocks, says Jason Moser of The Motley Fool. "The bottom line forlong-term investors is that these headline driven events can produceunique opportunities to buy major quality companies at excellent pricesin relation to their long-term earnings power," he says.

Woodnotes that companies trimmed spending and hiring plans in the summer,and that means the first half of 2013 will likely be one of slow growthfor the economy. "A lot of hiring has been postponed to the second halfof 2013," Wood says."We expect a soft first quarter, accelerating in thethird quarter of 2013."

WallStreet had been betting that some deal would be hammered out byyear-end, so stocks could sell off if that expectation is not met.

Fiscalcliff fears pushed 10-year Treasury note yields lower, to 1.76%, andthe dollar higher, as investors sought safe havens. Bond yields fallwhen prices rise.

Oil prices fell.

Today could beparticularly volatile because it's a quadruple witching day: theexpiration date for stock market index futures, stock market indexoptions, stock options, and individual stock futures.

Someworries about the fiscal cliff have been baked into stock prices, saysMark Hanna, manager of Paladin Long Short fund. But, he says, "Lastnight's inability for Boehner to show he has his own party's backingcalls into question any ability to get the deal done before year end."And, he says, " this shifts some power to the Democrats, which themarket would generally view as unfavorable especially in questions todividend and capital gain taxes."

Political uncertainty has beenblamed already for creating a high level of uncertainty for CEOs, whohave been reluctant to invest in their businesses and hire workersbecause they don't have clarity on what taxes will be, what their healthcare costs will be, and what regulations their companies will faceuntil lawmakers agree on a plan to fix the nation's fiscal problems.

"Politicsovershadow economics," is the way Barclays summed up the market'sreaction to the latest breakdown in the fiscal cliff talks.

Nearly all Americans would be affected by the fiscal cliff:

• Defense and non-defense spending would each be cut $55 billion.

• Tax rates would rise to 2000 levels, putting the top tax rate at 39.6%, vs. 35% now.

• The two-percentage-point cut in the payroll tax rate would end.

• Taxes on dividends would return to ordinary income tax rates - meaning a hike to as much as 39.6% from 15% now.

• Taxes on long-term capital gains would rise from 15% now to 20%.

•Thresholds for the alternative minimum tax, designed to ensure wealthytaxpapers pay some tax, would return to 2000 levels, raising taxes onabout 30 million taxpayers.

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