US stocks skidded lower on Thursday as uncertainty over the final shape of the financial-overhaul bill weighed on JP Morgan Chase and Bank of America and disappointing earnings from Bed Bath & Beyond sent a wide swath of retail stocks tumbling.
Falling for a fourth straight session, the Standard & Poor's 500-share index posted its longest losing streak in seven weeks, since the four-day period that ended May 7. The S&P 500 fell 18.35 points (1.68%) to 1,073.69.
The Dow Jones Industrial Average dropped 145.64 (1.41%) to 10,152.8. The Nasdaq Composite slid 36.81 (1.63%) to 2,217.42, its second four-day losing streak this month.
The consumer-discretionary sector took the biggest hit, stung by weak earnings and outlooks from several retail and restaurant companies. Darden Restaurants, owner of Olive Garden, Red Lobster and other restaurant chains, slid $2.44 (5.8%) to $39.46, after its fiscal fourth-quarter earnings fell 6%. Bed Bath & Beyond fell $2.34 (5.6%) to $39.12, after its current-quarter earnings outlook fell below analysts' estimates. Nike declined $2.89 (4%) to $69.63, after the athletic-shoe and apparel maker's revenue growth missed analysts' expectations.
Other retailers tumbled as investors worried that consumers' spending power may be waning. Macy's fell $1.24 (6.2%) to $18.85, while JC Penney slid $1.42 (5.8%) to $23.24.
Energy stocks also tumbled, led by a decline in Anadarko Petroleum after shareholders filed the first oil spill lawsuit against the oil giant. Shares fell $2.09 (5.2%) to $37.77.
Uncertainty over the deep-water drilling moratorium also weighed on drilling companies. Diamond Offshore Drilling fell $2.77 (4.4%) to $59.85. Drilling contractor Nabors Industries slid 74 cents (3.7%) to $19.34.
Financial stocks were also weak as lawmakers worked to finalise financial-overhaul legislation that may tighten industry regulations more than investors initially expected. Among the proposals still being negotiated, one would allow the government to levy a fee on banks for any funds that aren't repaid to the Treasury's bank rescue program. Lawmakers also agreed to set new capital standards for banks, but rejected a provision that could force banks to pay for the wind-down of mortgage finance giants Fannie Mae and Freddie Mac. Shares of major banks dropped, including JP Morgan Chase, down 86 cents (2.2%) to $38.03, Bank of America, off 41 cents (2.7%) to $15.02, and Wells Fargo, down 46 cents (1.7%) to $26.86.
For Australian ADRs listed on the NYSE, BHP Billiton weakened $1.63 (2.34%) to US$67.98, Rio Tinto Plc dropped $2.06 (4.04%) to US$48.99, ResMed shed 56 cents (0.9%) to US$61.39, Telstra Corporation gained 7 cents (0.49%) to US$14.33, Telecom Corporation of NZ advanced 7 cents (1.02%) to US$6.94 and Westpac lost $4.80 (4.85%) to US$94.27.
In economic news, in a sign that improvement in the job market could be on the horizon, the number of US workers filing new claims for unemployment benefits dropped in the week ending June 19 by 19,000 to 457,000, less than the 465,000 economists were expecting.
Demand for US durable goods was pushed down by civilian aircraft in May, casting a shadow on an otherwise positive report. Outside of the transportation sector, orders for all other durables rose by 0.9%.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.14% and the five year yield was 1.95%.
European shares saw their declines accelerate at the close of trading on Thursday after the US Federal Reserve highlighted the region's debt woes as it provided a less upbeat outlook on growth.
The Stoxx Europe 600 index fell 1.8% to 249.78 after losing 1.5% over the last two trading sessions.
Federal Reserve policymakers said that the European debt crisis was negatively impacting the US recovery as they kept interest rates on hold at ultra-low levels and signalled rates are likely to say low for some time.
In a statement at the end of its two-day meeting, policy makers downgraded their outlook for the US economy, saying that the recovery was "proceeding" - not strengthening, as they had said in April.
European banks, which are big holders of European government debt declined on Thursday, with BNP Paribas shares down 5% and Santander shares down 3.8%.
The focus on Europe's debt woes put Greece back in the frame and the cost of insuring Greek sovereign debt against default hit a fresh record high on Thursday. Greek stocks were the worst performers by a long way, with the Greek ASE Composite Index down 3.7% at 1,469.
Of the major regional equity markets, the French CAC-40 index fell 2.4% to 3,555.36, the German DAX index lost 1.4% to 6,115 and the UK FTSE 100 index declined 1.5% to 5,100.23.
Miners were also lower in Europe as investors worried about economic growth and also tried to assess the implications of a change of leadership in Australia on a proposed super-tax for the sector.
Shares of Rio Tinto slid 3.1%, Xstrata shares declined 3.2% and BHP Billiton shares declined 0.6%.
Of companies updating investors, Swedish retailer Hennes & Mauritz lost 3%. The fashion retailer reported a 24% rise in fiscal second-quarter net profit and signalled optimism about its expansion plans, although its same-store sales dropped by more than expected in May.
Elsewhere in the retail sector, Tesco shares rose 0.9%. Warren Buffett, arguably the world's most famous investor, went shopping for Tesco shares earlier this week, adding to his stake in Britain's dominant supermarket retailer. A disclosure released to the London Stock Exchange showed Buffett's Berkshire Hathaway added nearly 2m shares in Tesco to take the group's stake past the 3% threshold.
Asian stock markets ended mostly lower, pressured by the Federal Reserve's downgrade of its outlook on the US economy. Japan's Nikkei Stock Average was flat, The Shanghai Composite index fell 0.1% and Hong Kong's Hang Seng index shed 0.6%.
New Zealand shares ended slightly lower, maintaining their recent pattern of very mild movement on slim volume as investors sat on the sidelines, with analysts saying they expect the benchmark index to continue trading in a narrow range. The benchmark NZX-50 Index ended 0.2% lower, or 4.82 points, at 3,049.47.
Base metals on the London Metal Exchange ended higher on better-than-expected US economic data and stronger consumer demand. Aluminium rose $30 (1.55%) to $1,970 while copper firmed $140 (2.14%) to $6,690 and nickel added $290 (1.50%) to $19,600. Zinc strengthened $55 (3.01%) to $1,880 and lead gained $30 (1.66%) to $1,840. Comex copper was last quoted at 300.75 US cents per pound.
Gold futures gained as stock-market declines sent investors looking for a safe haven, and a weaker US dollar prompted some to buy back previously sold positions. Spot gold was last quoted at $1,242.50. Comex gold futures climbed $11.10 (0.90%) to $1,245.90. Spot silver was last quoted at $18.65.
Crude oil inched higher, supported by a stronger euro but constrained by ongoing worries about tepid demand. West Texas Intermediate was last quoted at US$76.16 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8113 euros, 89.55 yen, 1.154 AUD and 67.02 pence.