The Dow dropped more than 200 points, or 2 percent Thursday as traders shook off encouraging earnings from Goldman Sachs and eBay, worried more about China and Obama's plan to crack down on Wall Street.
President Obama on Thursday proposed new limits on the size and trading practices of big banks, saying he wanted to prevent a return to the "old practices" that led to the financial meltdown.
"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 in a statement.
Amid news that China's GDP jumped 10.7 percentin the fourth quarter, Wall Street remains worried about its plans to curb lending and what that means for growth there.
In U.S. economic news this morning, jobless claims unexpectedly rose last week, climbing by 36,000 to a seasonally adjusted 482,000. Economists had expected the gauge to fall by 4,000 claims but the Labor Department clarified that it was an administrative uptick, not an economic one.
The 10 am numbers were pretty much a wash: The Philadelphia Fed index dropped to 15.2 in January from 22.5 in December, a worse decline than expected, but leading indicators rose 1.1 percent in December after an upwardly-revised 1-percent increase in November.
Crude inventories declined by about 400 million barrels last week, the EIA reported. The report came out a day later than usual due to the fact that markets were closed Monday for the Martin Luther King holiday.
The dollar was stronger, rising 0.4 percent, as the euro fell on concerns over Greece and other European nations.
McDonald's was the only Dow gainer in late-morning trading.
JPMorgan was at the bottom of the Dow pack, along with Alcoa .
Some encouraging earnings out of the financial sector: Goldman Sachs blew past expectations with earnings of $8.20 a share — a full $3 higher than analyst estimates.
Regional banks got a boost after encouraging reports from Fifth Third and KeyCorp. Fifth Third reported a much smaller-than-expected loss and, like Bank of America a day earlier, noted an improvement in credit trends. KeyCorp said its loss narrowed and also noted an improvement in economic conditions.
Among the early leaders: Fifth Third and SunTrust, which reports Friday, were up about 8 percent.
But PNC bank , despite beating earnings expectations, said it set aside more money for loan losses and hasn't yet given a timeframe for paying back government bailout money. Its shares tumbled more than 4 percent.
And news out of Washington that Obama wants to crack down on Wall Street risk takingalso weighed on the big banks: Goldman Sachs, Bank of America, Citigroup, JPMorgan and Morgan Stanley were all lower.
The president will speak at 11:40 am about the matter, which has Wall Street a little rattled.
EBay led the Nasdaq 100 after the online auctioneer beat estimates thanks to a healthy holiday shopping season and gave a rosy outlook.
Still to come: Earnings after the bell from chip maker Xilinx.
Apple ticked higher amid anticipation of an announcement from the company about a new tablet e-reader.
Starbucks beat estimates and posted its first quarterly same-store sales gain in two years and said its ready to explore the European market.
The Dow is coming off its biggest one-day percentage loss of the new year, and hasn't had four consecutive triple-digit moves since May 2009, one of the first few months of the market's recovery rally.
And GE's NBC has confirmed that it's signed a departure pact with "Tonight Show" host Conan O'Brien, with a full announcement to take place later in the morning.
Still to Come:
THURSDAY: Earnings from American Express, Google, AMD and Capital One after the bell
FRIDAY: House hearing on financial-industry compensation; earnings from GE, McDonald's, Schlumberger, Kimberly-Clark and SunTrust
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