Stock Market News for January 22, 2010 - Market News

President Barack Obama’s combative rhetoric sent traders on Wall Street scurrying for cover as proposals of greater restrictions on big banks led to concerns that profits at those firms will be impacted.  Lingering worries about China’s moves to contain liquidity to stay ahead of inflation and Greece’s debt problems also kept traders on the sidelines.

The president’s proposals, seen as populist politics, nevertheless are an effort to rein in big financials firms from taking excess risks as they call for government regulation.  While the proposals need congressional approval to take effect, market’s were quick to react yesterday as the slide wiped off Dow’s gains for 2010. 

In their biggest single-session drop since late October, all three major indexes shed at least 1% with the blue-chip Dow average plunging 213 points, or 2%, and the S&P 500 index sliding 21 points, or 1.9%, to 1117. The Nasdaq composite lost 25 points, or 1.1%, to 2266.

This morning’s stock futures suggest the market is set to open in the red and extend the slide as Google and General Electric’s better-than-estimated numbers have failed to draw investors to the buying table.  Dow Jones industrial average futures are off 17 points, or 0.2%, to 10,321. Standard & Poor's 500 index futures declined 1.10, or 0.1%, to 1,110.00, while Nasdaq 100 index futures are down 3.25 points, or 0.2%, to 1,844.25.

Yesterday, waning risk appetites sent investors running to the safety of government debt, driving the yield on the 10-year, which moves inversely to prices, down 5 basis points to 3.59%.  The CBOE Vix Volatility Index surged 19.2% to 22.27.  Volume picked up, with 1.50 billion shares trading on the NYSE, where decliners outran advancing shares by a four-to-one margin.

While regional banks were largely unaffected by the proposals, major banks were quick to take a blow, with Bank of America (NYSE:BAC) falling 6.2%, JP Morgan (NYSE:JPM) down 6.6%, Morgan Stanley (NYSE:MS) off 4.1%, and Citigroup (NYSE:C) down 5.5%.  Even Goldman Sachs' (NYSE:GS) better-than-expected results failed to inspire traders and the shares fell 4%.  Later, bank analyst Richard Bove, however, recommended Goldman purchase as a proposal-play, noting "Banks with large deposit bases have distinct advantages in certain sectors of the market. If the banks are told they cannot use deposits in this fashion, it levels the playing field for companies like Goldman Sachs."

All ten S&P sectors were in the red, with basic material shares’ 4.6% drop leading the list of losers.  The US dollar rise impacted resource shares, as well as industrial firms (-1.8%) selling products abroad. Crude prices fell 2.3% to $76.03; gold prices fell 1.5% to $1103.  Financials dropped 2.5%, with full-line insurers off 4%.

Today's calendar, while devoid of economic posts, includes numbers from General Electric (NYSE:GE), McDonald's (NYSE:MCD), Schlumberger (NYSE:SLB), Kimberly-Clark (NYSE:KMB), SunTrust (NYSE:STI), and Exelon (NYSE:EXC).

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