World stock markets dropped today after US regulators charged Goldman Sachs Group with fraud on subprime mortgages, while the euro dropped on worries about Greece's debt crisis.
Wall Street slid today, led by bank shares, after Goldman Sachs was charged with fraud by US regulators and after big company earnings fell short of heightened expectations.
Goldman fell to a session low at $155.57, off 15.6 per cent, after the US Securities and Exchange Commission alleged it committed fraud in the structuring and marketing of a debt product tied to subprime mortgages, which cost investors more than $1 billion.
Defaults on the mortgages and the unraveling of related derivatives and debt played a big role in the credit crunch that led to a Wall Street meltdown and the worst US recession since the 1930s.
"The first reaction is to sell (stocks) as people are trying to understand better what the potential ramifications could be," said Bobby Harrington, managing director at UBS in Boston. "The question is will there be more charges and have there been similar issues of questionable disclosure on other products."
The Dow Jones industrial average dropped 134.22 points, or 1.20 per cent, to 11,010.35. The Standard & Poor's 500 Index fell 19.64 points, or 1.62 per cent, to 1,192.03. The Nasdaq Composite Index lost 37.50 points, or 1.49 per cent, to 2,478.19.
After a rapid rally in recent weeks, Wall Street was down as Google, Bank of America Corp and General Electric Co all reported generally strong quarterly results, but showed some cracks.
Results "point to an economy where earnings are good, but you're not seeing the type of activity that would suggest there's going to be a momentum-building kind of thing," said Bernie McGinn, president of McGinn Investment Management in Alexandria, Virginia.
Bank of America lost 3.9 per cent to $18.73, following the Goldman news and after it reported higher-than-expected earnings but said loan demand remained low.
Goldman was down 11.5 per cent at $163.04 on the New York Stock Exchange.
The KBW Bank index dropped 3.5 per cent after having fallen more than 5 per cent.
Google fell 6.1 per cent to $558.82 after the internet giant posted a 23 per cent jump in quarterly revenue, but some investors hoped for even better results.
General Electric Co shed 3.4 per cent to $18.84 after quarterly revenues came in lower than expected.
The pan-European FTSEurofirst 300 also was down 1.52 per cent.
Overall, global shares edged off 16-month highs today as persistent uncertainty over Greece's ability to pay its debts tempered optimism over the global economic recovery.
The euro remained pressured and Greek bond yields rose after Athens said it was preparing to activate an IMF/EU financial aid package. The euro was down 0.64 per cent at $1.3492 from a previous close of $1.3579.
In currencies, the dollar was up against a basket of major trading-partner currencies, with the US Dollar Index up 0.44 per cent at 80.837 from a previous session close of 80.482.
Against the Japanese yen, the dollar was down 0.96 per cent at 92.10 from a previous session close of 92.990.
The euro retreated against the dollar, snapping a five-day winning streak due to renewed worries over Greece's ability to service its sovereign debt.
Greece lurched closer toward asking for international aid after it requested official talks with European authorities and the International Monetary Fund.
European Central Bank president Jean-Claude Trichet told euro zone finance ministers that the situation for Greek banks remains difficult and could deteriorate further.