Dow plunges on Obama plan to curb big banks

NEW YORK (AP) — Stocks suffered their fourth sharp drop in five trading days as investors caved to growing anxiety about President Barack Obama’s plans to restrict big banks and earnings reports that just aren’t good enough.

The Dow Jones industrial average dropped 217 points Friday, having lost 552 points, or 5.2 percent, over the past three days.

Over the past five trading days, the Dow has fallen 537 points, having gained 115 points today.

The drop gave the Dow its worst week since the index hit a 12-year low in March.

All the major indicators fell more than two percent.

Investors are finding uncertainty and bad news wherever they look. Even before Obama announced his plan on Thursday, they were selling stocks on disappointing earnings and concerns that a possible slowdown in China’s economy might spread. The mood in the market was dark enough that upbeat earnings Friday from General Electric Co. and McDonald’s Corp. weren’t enough to sway investors.

The problem with earnings reports is that they’re not meeting investors’ high expectations. Tech stocks were among the big losers after Google Inc.’s fourth-quarter revenue didn’t meet forecasts, and after a Citigroup analyst lowered his rating on seven chip makers.

“We expect (earnings) to be better,” said Brett D’Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego.

“People are being more particular.”

In some respects, stocks’ big plunge isn’t a surprise. Many analysts have been predicting a correction, which technically is a drop of 10 percent from a recent market high, since before the start of the year. They have warned that investors were expecting too much from companies this early in an economic recovery.

Meanwhile, John Brady, a senior vice president of global interest rates at MF Global, said concerns surrounding Obama’s plan and China’s efforts to tame its economy have investors cutting their exposure to risk.

Obama spooked the market Thursday after asking 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 their profits. It’s not clear what will come of the proposed changes but investors are selling anyway.