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Business update: Stocks sink on bank, consumer reports

Stocks slumped today after earnings reports from two big banks disappointed investors and a survey showed that consumers are becoming more pessimistic. The Dow Jones industrial average fell more than 190 points, and other major market indexes were also down more than 1 percent. The market fell at the opening after Citigroup Inc. and Bank of America Corp. released earnings.

Consumer prices dip for third straight month: Consumer prices fell for the third straight month, offering some bargains to American shoppers. The Consumer Price Index, the government’s most closely watch inflation barometer, dipped 0.1 percent in June, the Labor Department reported today. Less expensive energy bills were a big factor behind the drop. Prices for some food items, airlines fares, computers, telephone service and personal care products also fell last month.

Bank of America earns $2.78 billion in 2nd quarter: Bank of America said today its second-quarter net income rose 15 percent to $2.78 billion as improvements in the company’s consumer loan businesses made up for a drop in trading revenue.

The bank’s results beat expectations and provided further evidence that losses from failed loans at the nation’s big banks may have peaked in the first half of 2010.

Citigroup profit dips 10 percent, loan losses fall: Citigroup said today its second-quarter net income dropped 10 percent to $2.7 billion even as its losses from failed loans fell. The drop in income reflects the bank’s sale a year ago of the Smith Barney brokerage, which inflated its earnings at the time. Citigroup had a decline in trading revenue because of the stock market’s plunge this spring.

Google expansion helps economy, hurts stock price: Google Inc. is doing its part to stimulate the economy and hurting its stock in the process. With its payroll swelling at the fastest rate in four years, some of Google’s expenses are climbing faster than its revenue. That’s creating a drag on its earnings, which is pulling down the Internet search leader’s stock price. Both net income and revenue rose 24 percent from the previous year, but that didn’t impress investors because the earnings missed the target set by analysts.

Cost cuts help GE’s net income, but revenue falls: Cost cuts and an improved financial business helped General Electric Co. post its first increase in quarterly profit since 2007, but sales remained sluggish for the industrial giant. Overall revenue fell 4 percent, in part because GE is shrinking the size of GE Capital, its financial arm. GE’s quarterly net income rose 16 percent to $3.0 billion, or 28 cents per share, up from $2.6 billion, or 25 cents per share, a year earlier.

36 arrested in Medicare scams totaling $251 million: Federal authorities said today they are conducting the largest Medicare fraud bust ever in five different states and arrested dozens of suspects accused in scams totaling $251 million. Several doctors and nurses were among those arrested in Miami, New York City, Detroit, Houston and Baton Rouge, La., accused of billing Medicare for unnecessary equipment, physical therapy and HIV treatments that patients typically never received. Ninety-four suspects were indicted, and authorities said 36 people had been arrested as of Friday morning.