Banks take hit as stocks drop

NEW YORK – U.S. stocks dropped on Wednesday, with bank issues taking the brunt of the pressure, as Wall Street scaled back its economic growth outlook following another round of dour data.

“What is most concerning here is the pace of the economic fall-off, and the risk is growing that the downside isn’t over,” said John Brady, MF Global’s senior vice president of global interest rate products.

Tallying its worst single-day point drop since June 2010, the Dow Jones industrial average fell 279.65 points, or 2.2 percent, to 12,290.14. “This lower-yield environment is going to hurt the banks, which in order to heal balance sheets have been rolling loans off their books and making new loans at lower yields. The net interest margin for financials is really going to start feeling under pressure,” said Brady.

American companies added 38,000 employees to their payrolls in the past month, according to data from ADP Employer Services – a number much lower than what economists expected.