Obama's pushback on banks sends stock lower again
Stocks retreated Friday for the third straight day on uncertainty about President Barack Obama's plans to restrict big banks and disappointment over companies' earnings reports.
The market's pullback extended losses that gave the Dow Jones industrial average its biggest two-day drop since June. The Dow slid nearly 100 points in afternoon trading. All the major indicators fell about 1 percent, AP reported.
Investors seemed to find uncertainty or bad news wherever they looked. Even before Obama announced his plan on Thursday, they were selling stocks on disappointing earnings and concerns that a possible slowdown in China's economy might spread. The mood in the market was dark enough that upbeat earnings Friday from General Electric Co. and McDonald's Corp. weren't enough to sway investors.
John Brady, a senior vice president of global interest rates at MF Global, said concerns surrounding Obama's plan and China's efforts to tame its economy have investors cutting their exposure to risk.
And while earnings reports in recent days have frequently beat analyst expectations, major companies are disappointing investors by still taking a very cautious stance about the U.S. economy.
"We expect (earnings) to be better," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego. "People are being more particular."
The market's reaction to Google Inc.'s earnings showed how uneasy investors are. The Internet search giant posted earnings that topped analyst estimates, but its stock fell as revenue growth only matched expectations and, unlike its profit, didn't exceed forecasts.
Obama spooked the market Thursday after asking Congress for limits on how large big banks can be and to end some of the risky trading large financial companies have used in recent quarters to boost their profits.
"It appears to be a move to put some shackles on risk-takers," Mitch Schlesinger, managing partner at FBB Capital Partners in Bethesda, Md., said of the new proposals.
Obama's push for tighter regulations comes at the same time China is moving to cool its economy with measures such as reining in lending and stepping up regulatory oversight of that country's banks.
There is more uncertainty for the markets next week, and not just because more earnings reports will arrive. The Federal Reserve holds its first meeting on interest rates of 2010, and investors are also waiting to see if the Senate will confirm the reappointment of Fed Chairman Ben Bernanke. Some lawmakers are holding Bernanke responsible for the economy's lingering problems.