NEW YORK — Banks were the market’s big performers on a day when the Dow Jones industrial average fell almost 9 points and the other major indexes had only slim gains.
Bank stocks outdistanced the rest of the market after congressional negotiators agreed on a banking-overhaul bill that regulates the complex investments known as derivatives, but much less strictly than investors had feared.
Analysts said the deal removes a cloud that has hovered over the financial industry for much of this year. Investors have feared that intense regulation would devastate bank profits. Now, the market seems to believe that financial companies would do well even with the new limitson their businesses.
“They come out of this bigtime winners,” Bob Froehlich, senior managing director at Hartford Financial Services, said of financial companies. “Two years later, people will look back and say ‘My gosh, nothing really changed.’”
Investors had feared that the financial-regulation bill would sharply curtail bank profits by limiting financial companies’ ability to trade in derivatives. Companies and investors often use derivatives to hedge against losses. But some derivatives are purely speculative investments, and some of these derivatives have been blamed for contributing heavily to the collapse of the housing market and the 2008 financial crisis.
“The bill could have been a lot worse,” said Alan Valdes, vice president at Hilliard Lyons in New York. “It’s a bill we can live with.”
The stock market’s overall gains were limited by the government’s final report on the gross domestic product for the first quarter. The Commerce Department said the GDP, the broadest measure of the economy’s health, rose at a 2.7 percent annual pace rather than the 3 percent previously estimated.
The Dow fell 8.99, or 0.1 percent, to 10,143.81. The broader Standard & Poor’s 500 index rose 3.07, or 0.3 percent, to 1,076.76, and the Nasdaq composite index rose 6.06, or 0.3 percent, to 2,223.48.
The indexes fluctuated for much of the day, in part because of the annual reshuffling of stocks in the Russell indexes. That forces investors to buy and sell certain stocksif they have portfolios that follow the indexes.
The Russell 2000 index of smaller companies rose 11.94, or 1.9 percent, to 645.11.
Treasury prices rose, driving down interest rates. The 10-year Treasury note’s yield fell to 3.11 percent from 3.14 percent late Thursday.
Almost four stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to a heavy 6.28 billion shares, a result of the buying and selling in Russell index component stocks.
The FTSE-100 index in London fell 1 percent, while Paris’ CAC-40 index fell 1 percent and Frankfurt’s DAX index lost 0.7 percent. Earlier, the Nikkei 225 index in Tokyo closed down nearly 2 percent.
Business, Pages 30 on 06/26/2010