Wall Street plummets after Obama's proposal on bank regulations

NEW YORK, Jan. 21 (Xinhua) -- Wall Street plummeted on Thursday, erasing the Dow Jones Industrial Average's gain for the year, after President Barack Obama proposed to limit the size and scope of large banks.

In a Thursday speech, President Obama proposed to impose new limits on the size of the nation's biggest banks as well as restrict their risk-taking abilities. Obama also said banks should no longer be allowed to own, sponsor or invest in hedge funds for proprietary profit.

"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Obama said.

Major banks, including Bank of America, Citigroup and JPMorgan Chase, tumbled more than 4 percent after Obama's speech, as tightening the rules on risk-taking and trading at banks could hurt profits at these companies.

A jump in the U.S. dollar also weighed on the market as global commodity prices came under pressure. Benchmark crude oil settled more than 2 percent lower at around 76 dollars a barrel while gold prices dropped below 1,100 dollar an ounce, dragging resource- related stocks down.

Thursday's economic data came mixed. The Labor Department said workers filing for unemployment benefits for the first time rose by 36,000 to 482,000, while economists had expected a small decline. In the meantime, the four-week average rose for the first time since August.

The Philadelphia Federal Reserve said its index of regional manufacturing conditions fell to 15.2 in December from a revised 22.5 last month, spurring more concerns on the strength of economic recovery.

Meanwhile, according to the Conference Board, its leading economic indicators rose 1.1 percent, the most in three months and better than a slight increase of 0.7 percent economists had projected. This was a sign the economy will keep growing through the first half of the year.

Among stocks in focus, Goldman Sachs tumbled 4.12 percent to 160.87 per share even though it posted a profit of 4.79 billion dollars in the fourth quarter, beating market anticipation.

The Dow Jones tumbled 213.27, or 2.01 percent, to 10,389.88. Broader indexes also traded lower. The Standard & Poor's 500 index dropped 21.56, or 1.89 percent, to 1,116.48 and the Nasdaq fell 25. 55, or 1.12 percent, to 2,265.70.