NEW YORK: The Dow blue chip index plunged more than 200 points for a second straight day on Friday amid concerns over US President Barack Obama’s bank revamp plans and doubts on Federal Reserve chief Ben Bernanke’s renomination.
The Dow Jones Industrial Average slumped 216.90 points (2.09 per cent) to 10,172.98, posting its third straight session of triple digit losses and its biggest weekly drop since February 2009.
The Nasdaq composite tumbled 60.14 points (2.67 per cent) to 2,205.29 and the Standard & Poor’s 500 index dropped 24.72 points (2.21 per cent) to 1,091.76.
Investors sold ahead of the weekend as the financial sector vociferously opposed Obama’s plans unveiled Thursday to limit the size and scope of US banks and finance firms in a new offensive against Wall Street excesses.
The measures would effectively force financial firms to choose between lucrative proprietary activities — trading in stocks and sometimes risky financial instruments for their own benefit — and traditional activities, like making loans and collecting deposits.
Analysts said the stock selloff over the last two days underscored market concerns.
“The president might be on the right warpath to soothe the American public, yet the market is telling him to be careful about using regulatory weapons of mass destruction,” said Patrick O’Hare of Briefing.com.
“What we see in front of us is a market that doesn’t like the idea of excessive regulation since excessive regulation curtails earnings potential,” he said.
Also Friday, doubts grew over Bernanke’s renomination as key Democrats voiced opposition, prompting a renewed expression of support from the White House.
“If he is not reappointed I think the markets would have a fit. Already we have seen that in the markets...what has happened in the last couple of hours is related to the events around Bernanke,” said Nariman Behravesh, chief economist at IHS Global Insight.
Two members of Obama’s party announced they would vote against Bernanke, underscoring a shift in the political landscape after the loss of a seat in Massachusetts that ended the Senate supermajority for the party.
Obama believes the Senate will confirm Bernanke, a White House spokesman told reporters traveling with the president en route to Ohio.
Beijing’s moves to clamp down on lending to cool an overheating Chinese economy also dragged down the market amid concerns over possible easing of the the global economic recovery from recession.
“Frankly, we see China tightening as the biggest factor at work this week. Its actions are highlighting for market participants that the easy money that fueled the 2009 rebound is going to be less easy to get in 2010,” O’Hare said.
“Naturally, this has to take some wind out of risk trades.” -- AFP
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