Stocks extended their losing streak for a third day Friday, dropping the Dow into negative territory for the year, as President Obama's proposed new restrictions on the financial industry continued to ripple through the market.
Today's descent was initially shallow but became steeper as the day went on. In the final hour of trading, the Dow and S&P were off more than 1.5 percent, while the Nasdaq was off more than 2 percent.
GE, McDonald's and P&G led the Dow as the VIX volatility gauge spiked and investors returned to some comfort foods and products. American Express, one of last year's most stellar performers, was at the bottom of the pack, along with Alcoa and Intel.
Today's volatility is a sign of things to come, said Jeff Kleintop, chief market strategist at LPL Financials, as the market grapples with earnings, China and a tighter grip from Washington.
"Volatility is going to be a key characteristic of 2010," Kleintop said. "I think we've got to get used to that kind of market."
Obama proposed limiting banks' size and risk-taking ability, including preventing them from trading with their own money and owning hedge funds.
"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Obama said Thursday. "Never again will the American people be held hostage by a bank that is too big to fail."
This could be the first in a string of global moves to clamp down on banks, Pimco's Mohamed El-Erian said on CNBC this morning.
We as investors have to be able to navigate these new factors, because that's the reality," said El-Erian, CEO of the world's largest bond fund. "This thing is going to intensify. You're going to read about it in other countries."
There was some good news on the earnings front: Dow components General Electric and McDonald's beat expectations this morning, following beats by both Google and American Express last night.
General Electric reported its earnings fell for an eighth straight quarter but topped expectationsfor both earnings and revenue as cost-cutting measures helped offset sluggish demand for jet engines and other heavy equipment.
McDonald's edged past forecasts for both earnings and revenue as global same-store sales rose 2.3 percent.
Overall, it's been a decent earnings season: With about a quarter of the S&P 500 reporting, about 80 percent of the companies have beat expectations.
Still, Kleintop said they're not beating by as much as expected and that has taken a toll on the stocks of some companies that beat.
After the bell Thursday, Google and American Express beat estimates but both stocks fell sharply today.
AMD and Capital One beat but experienced double-digit percentage declines today.
Suntrust Banks held onto a modest gain after the regional bank reported its loss narrowed in the most recent quarter but said conditions remained challenging.
Regional banks did well yesterday in a down market amid the perception that they would be affected far less by President Obama's planned reforms than big banks, and amid some signs of improving credit trends.
The TV food fight between Cablevision and Scripps Networks finally ended today as the companies reached an agreement to return Food Network and HGTV to Cablevision customers.
And at the candy counter, Hershey will not counterbid for Cadbury, , the Financial Times reported. Earlier this week, Cadbury agreed to be bought by Kraft Foods in a $19 billion deal.
