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Wall Street falls sharply on worries about banks

Wall Street dropped on Thursday, weighed down by Apple as well as selling in Wells Fargo, Citigroup and other major banks as investors worried about the health of Deutsche Bank.

twitter-logo Reuters        Last Updated: September 30, 2016  | 09:26 IST
Wall Street falls sharply on worries about banks
Photo: Reuters

Wall Street dropped on Thursday, weighed down by Apple as well as selling in Wells Fargo, Citigroup and other major banks as investors worried about the health of Deutsche Bank.

The S&P 500 financial index declined 1.49 per cent after Bloomberg reported that some hedge funds have withdrawn excess cash and positions held at the German lender.

Growing concerns over the stability of Germany's biggest bank have pushed its shares to record lows and its US-listed stock on Thursday tumbled 6.7 per cent.

"This Deutsche Bank story is really casting a very long shadow over equity markets," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York. "In some respects, it speaks to fears over large money-center banks having serious problems, and the last time we had that conversation was the financial crisis."

Adding to negative sentiment in the banking sector, Wells Fargo & Co lost 2.07 per cent after US lawmakers rebuked CEO John Stumpf over his handling of sales abuses.

Citigroup dropped 2.28 per cent and JPMorgan Chase fell 1.59 per cent.

Apple fell 1.55 per cent after Barclays cut its price target. The stock was the biggest drag on Wall Street.

The S&P healthcare index lost 1.84 per cent and also weighed heavily on the S&P 500 as shares of Merck and Johnson & Johnson declined.

Among the gainers, Qualcomm jumped 6.3 per cent after the Wall Street Journal reported the chipmaker is in talks to buy NXP Semiconductors. NXP surged 16.88 per cent.

Up 5 per cent this year, the S&P 500 is trading near 16 times expected earnings, above its 10-year average of 14, according to Thomson Reuters Datastream.

"Equity valuations are stretched and priced for perfection," said Mike Baele, managing director with the private client reserve group at US Bank in Portland, Oregon. "I would not be surprised to see additional volatility."

The CBOE Volatility Index, a gauge of near-term investor anxiety, jumped 14 per cent.

The Dow Jones industrial average slid 1.07 per cent to 18,143.45 points at the close, its sharpest decline since Sept 13.

The S&P 500 lost 0.93 per cent to end at 2,151.13 and the Nasdaq Composite dropped 0.93 per cent to 5,269.15.

The S&P utilities index, which is sensitive to interest rates, fell 1.45 per cent, its fifth day of losses in a row.

Oil prices were up a day after OPEC members agreed to curb production, even as analysts raised questions about the effectiveness of the deal.

Declining issues outnumbered advancing ones on the NYSE by a 3.87-to-1 ratio; on Nasdaq, a 3.09-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 82 new highs and 35 new lows.

About 7.7 billion shares changed hands on US exchanges, above the 7.0 billion daily average for the past 20 trading days, according to Thomson Reuters data.

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