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Home / Business / Economy

Wall St down as bank shares plunge

BusinessDesk
28 Jun, 2012 08:30 PM3 mins to read

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Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Wall Street dropped as JPMorgan shares plunged and economic data indicated further weakness ahead on both sides of the pond.

Claims for US unemployment insurance payments fell by 6,000 to 386,000 in the week ended June 23 from a revised 392,000 the prior period that matched the most this year, according to Labor Department figures.

American gross domestic product rose at a 1.9 per cent annual rate in the first quarter, the Commerce Department said. The pace of expansion, unchanged from a prior reading, was well below the 3 per cent increase in the fourth quarter. Motor vehicle output accounted for more than half of this quarter's advance.

None of these data bode well for the second quarter.

"We view the economy as vulnerable to negative shifts in sentiment and escalating uncertainty," Michael Gapen, a senior economist at Barclays in New York, told Reuters.

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Shares of JPMorgan shed more than 4 per cent on a report in the New York Times that its trading losses from credit derivatives may total as much as US$9 billion, surpassing the company's initial estimate.

In another surprise, President Barack Obama earned a key victory as a ruling by the US Supreme Court upheld the centrepiece of his signature healthcare overhaul law that requires that most Americans to get insurance by 2014 or face a penalty.

In Europe, bank stocks didn't fare much better after record fines for Barclays, announced yesterday, for falsifying London interbank offered rate submissions sent the stock into a tailspin amid concern lawsuits will follow.

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In late afternoon trading in New York, the Dow Jones Industrial Average fell 1.38 per cent, the Standard & Poor's 500 Index dropped 1.24 per cent, while the Nasdaq Composite Index declined 1.98 per cent.

Meanwhile, European Union leaders began a two-day summit that is widely expected to produce less than impressive results as opinions about how to stem the debt crisis vary between German Chancellor Angela Merkel and other European leaders.

"Angela Merkel was very adamant about the fact she isn't going to give an inch or two - the markets at this point may be looking at the statement [at the conclusion of the summit] to see if the actions match her rhetoric," Fred Dickson, chief market strategist, DA Davidson & Co in Lake Oswego, Oregon, told Reuters.

The mood wasn't helped by data showing Germany's jobless rate climbed more than expected in June, rising for the fourth month in a row. It's another clear indication that the euro zone's largest economic engine is starting to sputter too.

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That's clearly dampening confidence. An index of executive and consumer sentiment in the euro zone fell to 89.9 in June from a revised 90.5 in May, according to European Commission statistics. That's the lowest since October 2009.

Spain's bond yields rose, with the 10-year yield rising as high as 7.01 per cent, according to Bloomberg News. It was last steady at 6.93 per cent.

Europe's Stoxx 600 Index closed the day with a 0.5 per cent slide on the previous session. Benchmark indexes fell in Frankfurt, London and Paris.

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