Obama’s bank plans jolt investors

NEW YORK – The stock market suffered its worst setback in more than 10 months as investors rejected President Barack Obama’s plans to restrict big banks and earnings reports that just weren’t good enough.

The Dow Jones industrial average had its fourth big drop in five trading days Friday, sliding 217 points. All the major indexes fell more than 2 percent Friday. The Dow had reached its highest level since Oct. 1, 2008, only this past Tuesday, closing at 10,725.43.

Investors are finding bad news wherever they look. Even before Obama announced his plan on Thursday, they were selling stocks on disappointing earnings and concerns that a possible slowdown in China’s economy might spread. The mood in the market was dark enough that upbeat earnings Friday from General Electric Co. and McDonald’s Corp. weren’t enough to sway investors.

Another jolt to the market: mounting Senate opposition to the reappointment of Federal Reserve Chairman Ben Bernanke, whose term ends Jan. 31.

Stocks have had their worst showing since they began their recovery last March. The market also is seeing the kind of volatility that dominated the market’s long slide – the Dow has had triple-digit moves in five straight days for the first time since December 2008.

John Brady, a senior vice president of global interest rates at MF Global, said concerns surrounding Obama’s plan and China’s efforts to slow its economy have investors reducing risk.

Obama rattled the market Thursday after asking Congress for limits on how large big banks can be and to end some of the risky trading large financial companies have used in recent quarters to boost their profits. It’s not clear what will come of the proposed changes but investors are selling anyway.

“It appears to be a move to put some shackles on risk-takers,” Mitch Schlesinger, managing partner at FBB Capital Partners in Bethesda, Md., said of the new proposals.