JPMorgan's loss hurts US stocks

NEW YORK: JPMorgan's stunning US$2 billion derivatives loss pummelled US stocks on Friday, the bank's 9.3 percent fall pulling other bank shares and the main market indices down with it.

Shares opened sharply lower on the JPMorgan loss, but rebounded into positive territory at mid-session, helped by a rise in the University of Michigan's consumer sentiment index.

But in afternoon trade share prices gave up their gains amid worries of wider repercussions in the financial system from the JPMorgan news.

The Dow Jones Industrial Average closed down 34.44 points, or 0.27 percent, to finish at 12,820.60, while the S&P 500 fell 4.60 (0.34 percent) to 1,353.39.

But the tech-rich Nasdaq barely bucked the trend, gaining 0.18 (0.01 percent) to 2,933.82.

JPMorgan ended the day with some US$14 billion wiped off its market capital, closing down 9.3 percent at US$36.96. Also falling were Bank of America, down 2.0 percent, Citigroup, down 4.2 percent, and Goldman Sachs, down 4.2 percent.

"The health of the credit markets and the banking system are critical to the economic recovery. The JPMorgan announcement is a blow to hopes that the US financial sector is steadily recovering from the debt implosion of recent years," said Dick Green at Briefing.com.

JPMorgan's shock losses "will likely impact all capital market-sensitive stocks due to increased concerns of a more restrictive Volcker rule," Citigroup said, warning that "it would severely impact liquidity in the markets."

On the positive side, telecoms firm AT&T added 1.4 percent and rival Verizon rose 1.5 percent, both benefiting from ratings upgrades from Credit Suisse.

The Nasdaq got a boost from 1.4 percent gains by both Microsoft and Intel, offsetting a 0.7 percent fall by Apple. -- AFP