Stocks retreated Friday for the third straight day on fresh concerns about President Barack Obama's proposed restrictions on banks.
The market is extending losses that gave the Dow Jones industrial average its biggest two-day drop since June. Not even upbeat earnings from General Electric and McDonald's were able to offset the new worries.
Obama chilled the market Thursday when he asked Congress for limits on how large big banks can be and to end some of the risky trading large financial companies have used in recent quarters to boost profits.
"It appears to be a move to put some shackles on risk takers," said Mitch Schlesinger, managing partner at FBB Capital Partners in Bethesda, Md.
That could push the market into a new period of uncertainty, and in turn, erratic trading. Similar concerns for the unknown defined the financial crisis and sent the market cratering nearly a year ago before its 10-month rally.
With a backdrop of potential new regulations, "the market seems to be in profit-taking mode," Schlesinger said. The upbeat earnings are giving traders a reason to pocket some gains, he added.
In morning trading, the Dow Jones industrial average fell 27.89, or 0.3 percent, to 10,361.99. The Standard & Poor's 500 index fell 4.25, or 0.4 percent, to 1,112.23, while the Nasdaq composite index declined 10.19, or 0.5 percent, to 2,255.51.
The Dow lost 213 points Thursday and 336 points, or 3.1 percent, during the past two trading sessions. The losses have erased all the early gains seen in 2010.
Overseas, Asian markets overnight followed the U.S. sharply lower. European markets are also falling.
General Electric Co. reported fourth-quarter profit that beat analyst expectations. The conglomerate also said it is seeing an increase in orders and a growing backlog for products and services, sure signs that the economy is starting to improve.
Fast-food chain McDonald's Corp. fourth-quarter sales and profit grew as its cheap fare drew in more customers looking for a deal.
GE shares rose 60 cents, or 3.8 percent, to $16.62, while McDonald's rose $1.38, or 2.2 percent, to $65.58.
In recent months, the Dow almost certainly would be higher after two components of the index reported positive quarterly results. The market's 10-month rally has been fueled by growing signs of economic improvement such as better-than-expected quarterly earnings.
Internet giant Google Inc. also provided an upbeat sign for the economy, posting robust fourth-quarter earnings that easily topped analyst estimates. The results were driven by a pickup in Internet advertising, which could be a sign companies are feeling more confident the economy will recovery and opting to spend more to draw in customers.
However, Google shares fell in morning trading as its revenue growth only matched expectations and, unlike its profit, didn't exceed forecasts. It declined $18.46, or 3.2 percent, to $564.52.
Credit card lender American Express Co. also beat expectations after it set aside less money for defaulting loans. Default and delinquency rates both fell from the previous quarter, another encouraging sign for the economy. American Express shares fell $1.63, or 3.9 percent, to $40.53.
High loan losses have plagued the financial sector and any declines in defaults would be a welcome sign that the consumer is starting to recover.
Large financial firms, including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. all plummeted Thursday. The three big banks, which have prominent consumer and investment banking operations, would likely be the hardest hit by Obama's new regulations. Shares of each all declined more than 5 percent.
Citigroup rose 4 cents to $3.31. JPMorgan was up 10 cents at $40.64. Bank of America fell 23 cents to $15.24.
Declining stocks outnumbered advancers by about 5 to 2 on the New York Stock Exchange, where volume came to 153.6 million shares, compared to 113.5 million traded at the same point Thursday.
Meanwhile, bond prices dipped Friday morning. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.62 percent from 3.59 percent late Thursday.
The dollar was mixed against other major currencies, while gold prices declined.
The Russell 2000 index of smaller companies fell 1.63, or 0.3 percent, to 626.73.
Overseas, Japan's Nikkei stock average fell 2.6 percent. Britain's FTSE 100 declined 1 percent, Germany's DAX index fell 1.1 percent, and France's CAC-40 dropped 1.1 percent.
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