NEW YORK – Stocks sank Thursday, ending the fastest rally for the Standard & Poor’s 500 index since March 2009.
Bank stocks dragged the market lower after JPMorgan Chase & Co. reported that a slowdown in investment banking hurt its results in the third quarter.
The Dow Jones industrial average fell 58 points, or 0.5 percent, to 11,457 at 3:45 p.m. Eastern. JPMorgan fell 5.5 percent. Other banks also fell. Citigroup Inc. dropped 5 percent, Morgan Stanley 4.4 percent and Bank of America Corp. 5 percent.
JPMorgan is the first big U.S. bank to announce quarterly results. Next week Wells Fargo & Co., Citigroup Inc. and Morgan Stanley will report. JPMorgan is considered one of the industry’s leaders, so their results don’t bode well for other financial companies, said Jason Lilly, a portfolio manager at Rockland Trust Investment Management Group.
JPMorgan’s net income fell 4 percent in the July-September period. Fees from investment banking dropped 31 percent because of severe turbulence in financial markets this summer. The bank said it was concerned about the ability of consumers and businesses to manage their debts.
An afternoon rally in technology stocks trimmed some of the market’s losses. Yahoo Inc. rose 1.5 percent as investors speculated the company might be bought. Technology stocks in the Standard & Poor’s 500 index rose 0.8 percent, the most of any industry group in the index. The technology-focused Nasdaq composite rose 8, or 0.2 percent, to 2,613.
“There’s a mounting interest in Yahoo and that has filtered out into tech stocks,” said Quincy Krosby, a market strategist for Prudential Financial.
The Standard & Poor’s 500 index fell 5, or 0.5 percent, to 1,201. Financial stocks fell 2.4 percent, the most of the 10 company groups that make up the index.
Investors were also disappointed by a report that China’s trade surplus narrowed for a second month in September. That suggests the Chinese economy is slowing more than previously thought, which could hurt demand for exports from the U.S.
Prior to Thursday, stocks had soared for a week on signs that Europe was starting to get a handle on its financial crisis. The Dow had rallied 8.1 percent since last Tuesday, when it hit its lowest point of the year. The Standard & Poor’s 500 index rose even more in that time, 9.8 percent. That was the biggest 7-day jump for the S&P since March 2009, when the market hit 12-year lows.
The sharp highs and lows are typical of the volatility that has plagued markets since August, when investors began reacting to fears that indebted economies in Europe would collapse and the U.S. would slide back into recession. Many analysts think the market is in for more big swings until a resolution to Europe’s debt is reached.
“Europe will definitely contribute to more volatility. That story isn’t done.” said Lilly.
In Europe, there was more progress toward strengthening a financial rescue fund aimed at shoring up the region’s banks. Slovakia’s parliament approved a measure that would release large amounts of money to European banks and governments before a full-blown crisis sets in. Slovakia had blocked the bill Tuesday, becoming the only one of the 17 countries that use the euro to do so.
Wall Street has been fearful for months that one of Europe’s shakier economies could collapse. If countries like Greece, Spain and Italy can’t repay their debts, global banks that own those countries’ debt would be at risk. That could make banks even more leery of lending to each other and to businesses. If that escalates enough, it could cause another international financial crisis similar to what happened in late 2008.
Markets rallied over the last week as officials in Europe seemed like they were making progress toward shoring up European banks. In addition to the stronger bailout package, European Commission leaders had said they would require banks to hold more capital to protect them against losses. But without specifics on how those reforms will be accomplished, traders are getting concerned that the plans will deteriorate.
In corporate news, BlackBerry-maker Research in Motion Ltd. Fell 1.7 percent after a three-day outage that cut off service to users across the world. The company said it had fixed the problem, which resulted from a breakdown in its European infrastructure.
The Blackstone Group LP lost 5 percent after a Citi Investment Research analyst dropped the private-equity firm from a list of favorite stocks, saying the firm won’t be able to make strong real estate investments for some time because of the weak economy.
Chip-maker Broadcom Corp. rose 2.2 percent after an analyst upgraded the company, saying it was selling more chips for smartphones.
Netflix Inc. rose 2.8 percent after the company secured a deal with Warner Bros. Television Group and CBS Corp. to stream programs from the CW television network.