Dow Jones: Bank concerns translate to markets

US SHARES fell last night on worries the economic recovery was slowing, with banks also pressured by congressional negotiations on a financial regulatory overhaul.

Democrats, in charge of hammering out a final bill, appeared likely to force through restrictions on banks' trading and investment activities that could crimp profits.

Dow component JPMorgan Chase & Co fell 1.8 per cent and the KBW bank index lost 0.9 percent.

A drop in initial jobless claims and a rise in a gauge of long-lasting manufactured goods failed to offset recent weak economic data, and the Federal Reserve on Wednesday gave a subdued assessment about the economy's recovery..

Retailer stocks were among the top decliners, with JC Penney down 4.7 per cent and the S&P retail index off 1.7 per cent.

"There hasn't been too much good news, from housing and all the way down this week," said Alan Lancz, president at Alan B. Lancz & Associates in Toledo, Ohio. "There are clouds on the horizon with the financial regulatory reform and more talk on that front hurting banks."

The Dow Jones industrial average dropped 145.79 points, or 1.42 per cent, to close at 10,152.65 while the Standard & Poor's 500 index fell 18.34 points, or 1.68 per cent, to 1,073.70. The Nasdaq Composite index lost 36.81 points, or 1.63 per cent, to 2,217.42.

European shares hit a two-week closing low in choppy trade, with banks among the top decliners on heightened concerns over over the global economic recovery. The FTSEurofirst 300 index of top European shares ended down 1.9 per cent at 1,020.33 points.