JANUARY 21, 2010, 2:53 P.M. ET
By Peter A. McKay and Kristina Peterson
A plunge in financial stocks weighed heavily on the broader market as President Barack Obama proposed the most extensive curbs on banks' risk-taking since the outbreak of the recent financial crisis.
J.P. Morgan Chase and Bank of America were two of the worst performers. J.P. Morgan fell 4.2% and Bank of America was down 3.9%. Goldman Sachs Group fell 3.5%, despite reporting stronger-than-expected earnings before the bell. Citigroup slid 4.1%.
The Dow Jones Industrial Average was recently off 173 points, or 1.6%, at 10430.01. If that decline persists through the closing bell, it would represent the average's second straight triple-digit point decline, the first such slide since late October.
In comments just before midday, Mr. Obama spelled out a plan that would effectively restore some provisions of the Depression-era Glass-Steagall Act, which separated firms' commercial and investment activities until it was repealed in 1999. Mr. Obama endorsed what he called the "Volcker Rule," after measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. The proposals would likely face a tough fight to get through Congress, which has already been subject to heavy anti-regulation lobbying by major firms in recent months.
After the president's remarks, traders and analysts also debated how effective the plan might be if implemented. "This probably should've been done a year or two ago," said Bill King, a strategist at M. Ramsey King Securities in Burr Ridge, Ill. But he added: "You can't entirely legislate the solutions to this rather than let the markets work, either. As long as the Fed is keeping interest rates low, the Street is going to take on a lot of risk."
But even amid the market slide, some traders were nonchalant about the harm that Mr. Obama's proposals might inflict to major banks. "There were a lot of firms on the Street before Glass-Steagall was repealed that were still able to function quite profitably," said John O'Donoghue, head of equities at Cowen & Co. He said he viewed Mr. Obama's speech as an attempt to gain back popular opinion after Democrats lost one U.S. Senate seat in Tuesday's Massachusetts election.
The Nasdaq Composite Index was down 0.6%. The S&P 500 was off 1.4%, hurt by a 1.5% decline in its financial sector. All the index's other categories traded lower as well, including a 3.4% slide in basic materials as fears of global monetary tightening continued to simmer.
Commodities were also under pressure, especially oil, which neared a one-month low after government data showed a plunge in refinery activity due to weak fuel demand. Crude futures were recently off $1.77 to $75.97 a barrel on the New York Mercantile Exchange. "Refineries just don't want to produce product as demand is lackluster and the money is not there," said Mike Zarembski, senior commodities analyst with OptionsXpress in Chicago.
Investors are also skittish over movement in the dollar, which on Wednesday broke through a 200-day moving average against a basket of other currencies. Data showing growth in China's economy and subsequent reports of a tightening lending environment have made the market more cautious recently.
In other markets, gold futures also slipped and Treasurys climbed. The 10-year note was up 9/32 to yield 3.619%.
Source: http://online.wsj.com/article/BT-CO-20100121-714406.html?mod=WSJ_latestheadlines
A plunge in financial stocks weighed heavily on the broader market as President Barack Obama proposed the most extensive curbs on banks' risk-taking since the outbreak of the recent financial crisis.
J.P. Morgan Chase and Bank of America were two of the worst performers. J.P. Morgan fell 4.2% and Bank of America was down 3.9%. Goldman Sachs Group fell 3.5%, despite reporting stronger-than-expected earnings before the bell. Citigroup slid 4.1%.
The Dow Jones Industrial Average was recently off 173 points, or 1.6%, at 10430.01. If that decline persists through the closing bell, it would represent the average's second straight triple-digit point decline, the first such slide since late October.
In comments just before midday, Mr. Obama spelled out a plan that would effectively restore some provisions of the Depression-era Glass-Steagall Act, which separated firms' commercial and investment activities until it was repealed in 1999. Mr. Obama endorsed what he called the "Volcker Rule," after measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. The proposals would likely face a tough fight to get through Congress, which has already been subject to heavy anti-regulation lobbying by major firms in recent months.
After the president's remarks, traders and analysts also debated how effective the plan might be if implemented. "This probably should've been done a year or two ago," said Bill King, a strategist at M. Ramsey King Securities in Burr Ridge, Ill. But he added: "You can't entirely legislate the solutions to this rather than let the markets work, either. As long as the Fed is keeping interest rates low, the Street is going to take on a lot of risk."
But even amid the market slide, some traders were nonchalant about the harm that Mr. Obama's proposals might inflict to major banks. "There were a lot of firms on the Street before Glass-Steagall was repealed that were still able to function quite profitably," said John O'Donoghue, head of equities at Cowen & Co. He said he viewed Mr. Obama's speech as an attempt to gain back popular opinion after Democrats lost one U.S. Senate seat in Tuesday's Massachusetts election.
The Nasdaq Composite Index was down 0.6%. The S&P 500 was off 1.4%, hurt by a 1.5% decline in its financial sector. All the index's other categories traded lower as well, including a 3.4% slide in basic materials as fears of global monetary tightening continued to simmer.
Commodities were also under pressure, especially oil, which neared a one-month low after government data showed a plunge in refinery activity due to weak fuel demand. Crude futures were recently off $1.77 to $75.97 a barrel on the New York Mercantile Exchange. "Refineries just don't want to produce product as demand is lackluster and the money is not there," said Mike Zarembski, senior commodities analyst with OptionsXpress in Chicago.
Investors are also skittish over movement in the dollar, which on Wednesday broke through a 200-day moving average against a basket of other currencies. Data showing growth in China's economy and subsequent reports of a tightening lending environment have made the market more cautious recently.
In other markets, gold futures also slipped and Treasurys climbed. The 10-year note was up 9/32 to yield 3.619%.
Source: http://online.wsj.com/article/BT-CO-20100121-714406.html?mod=WSJ_latestheadlines
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P.S. President Obama was originally a Community Organizer from what I've heard. Well, since taking office he has specialized in a new field; He's now becoming an Economy Destroyer. Perhaps he ought to be called Mr. T, as in Tyrant. His aspirations as president surpass that of chief executive of our federal government. I believe he sees his office as royalty; Obama may see himself as a latter day Napoleon, Emperor of the District of Columbia: Lord of the Pax Americana (Nobel Laureate)?
All this meddling with every facet of American free enterprise is absurd, and quite disturbing.
Arsenio.
.