Wall Street drops with financial stocks

Wall Street dropped, with financial and health care stocks leading the way.

Financial shares including Goldman Sachs fell amid concern about the industry because of Deutsche Bank, which is fighting a US$14 billion claim from the US Justice Department to settle an investigation.

A number of funds that clear derivatives trades with Deutsche Bank have withdrawn some excess cash and positions held at the lender, a sign of counterparties' mounting concerns about doing business with Europe's largest investment bank, Bloomberg reported.

"The chatter is adding a lot of short-term fear right now, especially in the financials sector," Jonathan Corpina, senior managing partner at Meridian Equity Partners, told the Wall Street Journal.

Wall Street slid. In 2.22pm trading in New York, the Dow Jones Industrial Average shed 1 per cent, while the Nasdaq Composite Index declined 0.8 per cent. In 2.07pm trading, the Standard & Poor's 500 Index dropped 1 per cent.

In the Dow, slides in shares of Goldman Sachs and those of Merck, last down 2.9 per cent and 2.4 per cent respectively led the decline. Bucking the trend were shares of Caterpillar and those of Verizon Communications, recently up 1.2 per cent and 0.3 per cent respectively.

Meanwhile investors are eyeing a speech from Federal Reserve Chair Janet Yellen later in the day for any fresh clues about the timing of a central bank interest rate increase.

A Commerce Department report showed US gross domestic product rose at a 1.4 per cent annual pace in the second quarter, up from the 1.1 per cent rate reported last month and exceeding analysts' estimates.

"It now appears that growth is slowly making its way back on to firmer ground," Michael Feroli, an economist at JPMorgan in New York, told Reuters.

Also moving to firmer ground were shares of ConAgra Foods, which jumped after the company posted better-than-expected quarterly earnings on improved margins. The stock last traded 7.6 per cent as of 2.28pm in New York.

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Earnings from continuing operations rose to 61 US cents last quarter, and up from 41 US cents in the year-earlier period, the company said. Analysts estimated 48 cents on average, according to Bloomberg and Reuters.

"Our efforts to infuse focus and discipline into our consumer businesses are clearly enabling us to expand our margins as we build a higher quality revenue base, improve efficiency, and deliver stronger, more consistent performance," Sean Connolly, chief executive officer of ConAgra Foods, said in a statement.

Oil advanced for a second day after the Organisation of Petroleum Exporting Countries unexpectedly agreed to pare output in a bid to encourage non OPEC producers to do the same and ease the global glut, and bolster prices.

The plan to cut output, which would be the first time it has done so in eight years, will be finalised at a November meeting.

In Europe, the Stoxx 600 Index finished the day with an increase of less than 0.1 per cent. France's CAC 40 Index gained 0.3 per cent, while the UK's FTSE 100 Index rose 1 per cent. Germany's DAX Index fell 0.3 per cent, as Deutsche Bank shares closed 6.6 per cent lower.