Stock market decline is muted, despite bank slump

Trader Michael Zicchi­nolfi works on the floor of the New York Stock Exchange, Fri­day, in New York. Finan­cial stocks are lead­ing the mar­ket lower in early trad­ing after JPMor­gan Chase dis­closed a huge trad­ing loss on Thurs­day. (AP Photo/Richard Drew)

JOSHUA FREED

AP Busi­ness Writer

JPMorgan’s sur­prise $2 bil­lion trad­ing loss prompted a sell-off in finan­cial stocks Fri­day, with smaller declines across the broader mar­ket as investors decided this was more of a prob­lem for invest­ment banks than for other industries.

Most of the 10 indus­tries in the Stan­dard & Poor’s 500 index were flat or posted mod­est declines; finan­cial stocks fell 1.1 percent.

For that, the other invest­ment banks could thank JPMor­gan, America’s biggest bank. The stock plunged 9.3 per­cent, drag­ging other banks with big Wall Street oper­a­tions down with it. Mor­gan Stan­ley fell 4.2 per­cent and Gold­man Sachs fell 3.9 per­cent. Cit­i­group fell 4.2 percent.

Retail-focused banks fared bet­ter. Wells Fargo edged up 0.4 percent.

JPMorgan’s blun­der comes in the midst of a polit­i­cal bat­tle over how closely to reg­u­late banks, though JP Morgan’s CEO Jamie Dimon said the trades would not have been affected by the so-called Vol­cker rule, expected to take effect this sum­mer. Still, the $2 bil­lion loss is sure to be used as ammu­ni­tion by those push­ing for tighter reg­u­la­tion of invest­ment banks.

“It’ll def­i­nitely have a polit­i­cal impact,” said Randy War­ren, chief invest­ment offi­cer for War­ren Finan­cial Service.

The Dow Jones indus­trial aver­age fell 34.44 points to close at 12,920.60. It had waf­fled around with small gains and losses through­out most of the day before set­tling into the red in the afternoon.

The Stan­dard & Poor’s 500 index fell 4.60 points to close at 1,353.39. The Nas­daq com­pos­ite index, which is heav­ily weighted with tech­nol­ogy stocks, was up 0.18 points to 2,933.82.

Microsoft and Intel both rose 1.4 per­cent after Intel told ana­lysts that it is on track to meet sales expec­ta­tions. Tech investors were relieved to hear that one day after Cisco Sys­tems prompted sell­ing in tech shares by being pes­simistic about sales. Semi­con­duc­tor maker Nvidia jumped 6.4 per­cent after report­ing rev­enue that was higher than ana­lysts were expecting.

Some con­sumer dis­cre­tionary stocks did well, with retailer Bed Bath & Beyond jump­ing 4.1 per­cent, one of the biggest gains in the S&P 500 index, and video stream­ing and DVD-by-mail com­pany Net­flix rose 6.9 percent.

Phar­macy ben­e­fits manger Express Scripts rose 1.4 per­cent after it reported pre­scrip­tion growth in its first quar­ter since split­ting with drug­store chain Walgreen.

Ver­i­zon and AT&T each rose about 1.5 per­cent after Credit Suisse ana­lyst Jonathan Chap­lin raised his earn­ings esti­mates for this year and next. They’re mak­ing phone upgrades more expen­sive for cus­tomers, which should help the phone com­pa­nies’ bot­tom lines, Chap­lin wrote.

Also Fri­day, the Labor Depart­ment said that the pro­ducer price index, which mea­sures price changes before they reach the con­sumer, dropped 0.2 per­cent last month. It was the first decline since Decem­ber and the biggest drop since Octo­ber. Declines were dri­ven by gas and energy prices. That’s good news for con­sumer spending.

Sep­a­rately, a closely watched mea­sure of con­sumer con­fi­dence from the Uni­ver­sity of Michi­gan released Fri­day morn­ing was bet­ter than ana­lysts had expected. The index was at its high­est level since Jan­u­ary 2008.

Oil prices fell 95 cents to $96.13 per bar­rel. Gold fell $11.50 to $1,584 per ounce.

In Europe, France’s CAC 40 index recov­ered from a slump and closed with a minus­cule loss. Other mar­kets also ral­lied into the close. Britain’s FTSE 100 ended up 0.6 per­cent and Germany’s DAX rose 1 per­cent; both were lower ear­lier in the day. Bor­row­ing costs for Ger­many and France fell, while costs for Italy and Spain rose as investors remain focused on Greece, where another gen­eral elec­tion is expected for next month fol­low­ing the fail­ure of attempts to form a government.

Posted by AP News on May 11 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.