Banks lead Dow lower after JPMorgan Chase earnings
NEW YORK (AP) — Bank stocks fell sharply Thursday, dragging the market lower, after JPMorgan Chase & Co. reported that a slowdown in investment banking hurt its results in the third quarter.
The Dow Jones industrial average fell 103 points, or 0.9 percent, to 11,415 at 12:15 p.m. Eastern. JPMorgan fell 6.3 percent, the most of the 30 companies in the Dow. Other banks also fell. Citigroup Inc. dropped 6.1 percent, Morgan Stanley 5.3 percent and Bank of America Corp. 5.7 percent.
JPMorgan is the first big U.S. bank to announce quarterly results. Next week Wells Fargo & Co., Citigroup Inc. and Morgan Stanley will report. JPMorgan is considered one of the industry's leaders, so their results don't bode well for other financial companies, said Jason Lilly, a portfolio manager at Rockland Trust Investment Management Group.
JPMorgan's net income fell 4 percent in the July-September period. Fees from investment banking dropped 31 percent because of severe turbulence in financial markets this summer. The bank said it was concerned about the ability of consumers and businesses to manage their debts.
The Standard & Poor's 500 index fell 11, or 1 percent, to 1,195. Financial stocks fell 5.7 percent, the most of the 10 company groups that make up the index.
The Nasdaq composite fell 3, or 0.1 percent, to 2,601.
Investors were also disappointed by a report that China's trade surplus narrowed for a second month in September. That suggests the Chinese economy is slowing more than previously thought, which could hurt demand for exports from the U.S.
In Europe, there was more progress toward strengthening a financial rescue fund aimed at shoring up the region's banks. Slovakia's parliament approved a measure that would release large amounts of money to European banks and governments before a full-blown crisis sets in. Slovakia had blocked the bill Tuesday, becoming the only one of the 17 countries that use the euro to do so.
Wall Street has been fearful for months that one of Europe's shakier economies could collapse. If countries like Greece, Spain and Italy can't repay their debts, global banks that own those countries' debt would be at risk. That could make banks even more leery of lending to each other and to businesses. If that escalates enough, it could cause another international financial crisis similar to what happened in late 2008.
Markets rallied over the last week as officials in Europe seemed like they were making progress toward shoring up European banks. In addition to the stronger bailout package, European Commission leaders had said they would require banks to hold more capital to protect them against losses. But without specifics on how those reforms will be accomplished, traders are getting concerned that the plans will deteriorate.
In corporate news, BlackBerry-maker Research in Motion Ltd. Fell 1.7 percent after a three-day outage that cut off service to users across the world. The company said it had fixed the problem, which resulted from a breakdown in its European infrastructure.
The Blackstone Group LP lost 5.7 percent after a Citi Investment Research analyst dropped the private-equity firm from its list of favorite stocks, saying the firm won't be able to make strong real estate investments for some time because of the weak economy.