Stock market sinks on more bank worries-WEB ONLY

U.S. stock markets sank today as investors booked profits from last week’s gains and new worries set in over banks’ profit reports.

The Dow Jones industrial average index plummeted 3.6 percent, to 7,841.60, the Standard & Poor’s 500 dropped 4.2 percent, to 832.42, and the NASDAQ composite fell 3.9 percent, to 1,608.21.

Worries about the financial industry overshadowed Oracle Corp.’s announcement that it would acquire Sun Microsystems Inc. for $7.4 billion and a $6 billion bid by PepsiCo Inc. to buy its two biggest bottlers.

Markets were encouraged last week by upbeat reports from U.S. banks Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc., although investors know that difficulties in the banking sector remain.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC in New Jersey, said traders are now viewing bank earnings with more skepticism amid concerns that even the better-than-expected results are disguising problems. Income from trading and low-cost borrowing rates have boosted results – but have not erased more difficult problems with bad debt, he said.

“They’re looking at bank numbers and are saying they are not that great,” Saluzzi said.

Investors are also awaiting results this week that could test a growing belief that the world economy and banking system have turned a corner. Among the hundreds of U.S. companies due to report are Coca-Cola, Microsoft, IBM and McDonald’s.

Bank of America Corp. said before the U.S. market opened today that it earned a surprise profit in the first quarter, but that it also set aside $13.4 billion to cover losses on souring debt.

Meanwhile, oilfield services company Halliburton Co. said its first-quarter earnings fell 35 percent as oil and natural gas producers cut back on exploration and drilling because of low prices.