US banks hit after S&P's downgrade

TECHNOLOGY shares buoyed the Nasdaq yesterday after positive broker comments on <strong>Qualcomm</strong>, but financial shares&rsquo; losses held back the Dow and the S&amp;P 500.<br /><br />Banks were hurt by a broad debt ratings downgrade from Standard &amp; Poor&rsquo;s and uncertainty over the government&rsquo;s extensive proposals for banking-industry reform. The KBW Bank index fell 3.3 per cent.<br /><br />Qualcomm was among the Nasdaq&rsquo;s leaders, up 3.8 per cent at $45.09 after Goldman Sachs added the wireless technology supplier&rsquo;s stock to its &ldquo;conviction buy&rdquo; list.<br /><br />Biotech companies also rose after <strong>Celgene</strong> said its experimental anti-inflammatory drug was effective in a mid-stage study. Celgene rose 4.2 per cent to $44.94.<br /><br />Analysts said there were no surprises in President Barack Obama&rsquo;s plans to reshape financial regulation but uncertainty remained about the regulations&rsquo; impact on the financial system and the wider economy.<br /><br />&ldquo;The reality is the government is going to create more costs for the financial industry and there&rsquo;s uncertainty in terms of what exactly those costs will be,&rdquo; said Rick Campagna, portfolio manager at Provident Investment Council.<br /><br />&ldquo;Because of the extra regulation, you probably end up having less leverage available to some financial institutions which, although (it) is a good thing systematically, creates lower return on equity across the board.&rdquo;<br /><br />The Dow Jones industrial average fell 7.49 points, or 0.09 per cent, to 8,497.18. The Standard &amp; Poor&rsquo;s 500 Index was off 1.26 points, or 0.14 per cent, at 910.71. The Nasdaq Composite Index gained 11.88 points, or 0.66 per cent, to 1,808.06.<br /><br />On the economic front, the closely watched Consumer Price Index, released before the opening bell, showed inflation is still not a worry.<br /><br />The S&amp;P 500 briefly fell below its 200-day moving average for the first time since the beginning of June but rallied to close above that level, a crucial technical gauge of market strength. <br /><br />After rising as much as 40 per cent from a 12-year low in early March, the US stock market pulled back slightly in recent days.