On Tuesday, stock prices on Wall Street fell, ending a six-day rise of the S&P 500 index, as investors were concerned about the announcement of a new tax on banks and a poor start to the quarterly earnings season for companies.
The Dow Jones index weakened by 0.34 percent, to 10,627 points, while the S&P 500 index fell by 0.94 percent, to 1,136 points. The Nasdaq index, on the other hand, plummeted by 1.30 percent, to 2,282 points. The financial sector was under the most pressure yesterday, following news that as part of the new budget, the U.S. government intends to introduce a tax on financial services to cover losses from the Troubled Asset Relief Program (TARP), which amount to $120 billion. This could lead to a decline in bank profits and undermine the recovery of the banking sector from the financial crisis. Therefore, the KBW index of that sector fell nearly 2 percent yesterday, with the stock prices of Bank of America and Citigroup dropping more than 3 percent, and JPMorgan by 2.3 percent.
Among the biggest losers yesterday was Alcoa’s stock, which fell by more than 11 percent, as investors were disappointed by the quarterly earnings results of the aluminum giant. Adding fuel to the fire was Chevron’s warning that its earnings in the fourth quarter of last year would be significantly weaker than in the previous quarter. This negatively affected sentiment as investors had hoped that the quarterly earnings season would start more positively, justifying the highest stock price levels in the last 15 months. Investors were also shaken by the news that the Chinese central bank is beginning to tighten monetary policy to prevent ‘overheating’ of the world’s third-largest economy and a resurgence of inflation.
