Stocks fell sharply Thursday, led by financials, as President Obama rattled the market with plans to crack down on Wall Street risk taking.
The Dow dropped about 200 points, or 2 percent. Coupled with the prior session's loss, this is on track to be the biggest two-day decline since August.
President Obama 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.
Big banks were crushed by Obama's remarks: Bank of America , Morgan Stanley , JPMorgan and Goldman Sachs were all down about 5 percent.
The president's comments so rattled the sector that it overshadowed Goldman Sachs's stellar results: The bank blew past expectations with earnings of $8.20 a share — a full $3 higher than analyst estimates.
The impact was tempered by comments by Rep. Barney Frank, chairman of the House financial-services committee, a few hours later on CNBC. Frank said he would support bank-rule changes—but only over a longer time frame, which he said would be in the range of "three to five years."
Major indexes pared their losses after Frank's comments.
Regional banks, which wouldn't really be affected by Obama's new rules, continued to shine after some encouraging earnings 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.
Regional banks were some of the top (and only) gainers on the S&P 500, including Comerica, SunTrust, Fifth Third, Huntington Bancshares and KeyCorp, and several were at new 52-week highs, including Fifth Third, Comerica and SunTrust.
In fact, it's been quite a year so far for regional banks. While the broader market was stumbling through the first few weeks of 2010, most regional banks were enjoying double-digit percentage gains: Zion and Synovus are up more than 40 percent, while KeyCorp, Regions Financial and Marshall & Ilsley are up more than 30 percent. By comparison, Bank of America is up just 3 percent, while Citi, Morgan Stanley, JPMorgan and Goldman Sachs are all lower.
PNC Financial Services is an interesting story in the sector: It's one of the strongest survivors of the financial crisis and its stock is up 11 percent this year. Plus, it beat its earnings target today. But the stock is off 4 percent today as the company said it set aside more money for loan losses and hasn't yet given a timeframe for paying back government bailout money.
Worries about China also loomed large over the market, even as China's GDP jumped 10.7 percentin the fourth quarter.
The dollar was stronger as the euro fell on concerns over Greece and other European nations.
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.
In U.S. economic news: 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.
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
Send comments to firstname.lastname@example.org.