NEW YORK -- Stocks dropped sharply Thursday after the U.S. Supreme Court upheld the central provision of President Barack Obama's health care overhaul, a requirement that almost all Americans carry health insurance.
The Dow Jones industrial average, the broader Standard & Poor's 500 index and the Nasdaq composite index were all sharply lower in afternoon trading.
Health care stocks were down significantly, but bank stocks were the biggest losers in the market. The court ruled that the requirement to have health insurance can be construed as a tax. Under the law, Americans must either carry health insurance or pay a penalty.
JPMorgan Chase fell the most of the 30 stocks in the Dow average after published reports that its loss from a complex trade that went wrong could swell to $9 billion, much larger than the bank has acknowledged. The bank had said previously the loss was $2 billion but could get larger. JPMorgan lost $1.51, or 4.1%, to $35.27.
Stocks of major insurance companies fell sharply as analysts sorted through the ruling. UnitedHealth Group declined 3%, WellPoint almost 6% and AFLAC 1.5%.
Hospital chains rose. Hospital Corp. of America was up 7%. Quest Diagnostics, which runs laboratories, was up 2.5%.
Investors were also punishing bank stocks because British regulators escalated their inquiry into the manipulation of a key interest rate. Citigroup, Britain's HSBC, Switzerland's UBS and the Royal Bank of Scotland were also named by British regulators in the probe.
Barclays Bank of Britain has already been fined $453 million for manipulating the benchmark interest rate to its advantage between 2005 and 2009. The London interbank offered rate, or LIBOR, is used for setting rates on a wide variety of loans including consumer loans and mortgages.
The U.S.-listed shares of Barclays plunged 15%, giving up $1.84 to $10.49. UBS lost 50 cents to $11.02 and Citigroup fell 50 cents to $26.58.
Bank stocks fell the most of the 10 industries tracked by the Standard & Poor's 500 index. All 10 indexes were down.
There was little for investors to like in new reports on the U.S. economy.
The U.S. economy grew at an annual rate of just 1.9% in the January-March quarter, according to a new government estimate. Consumer spending, which accounts for a huge part of the economy, grew 2.5%, below the previous 2.7% estimate. The four-week average of applications for unemployment benefits didn't decline, a sign that layoffs aren't easing.
News Corp. fell 1% after the media conglomerate said it would separate its publishing and entertainment businesses into two public companies. The stock or Rupert Murdoch's sprawling media empire, which includes The Wall Street Journal, the Fox TV network, Fox News Channel and newspapers in Australia and Britain, gave up 35 cents to $21.96.
Family Dollar Stores fell $2.23 to $66.90 after the discount retailer of household goods and food reported earnings and revenue that were short of what Wall Street analysts were expecting.
Paychex dropped $1.21 to $30.72. The company, which provides payroll, human resources and benefits services to employers, reported revenue was shy of what analysts were expecting.
It's likely, too, that investors are still keeping an eye on the European debt crisis. European leaders are gathering in Brussels trying to figure a way out of the continent's vicious debt cycle, but hopes for a fix are weakening with little consensus, leaving global markets on edge Thursday.
Stocks fell and the euro edged lower as expectations for the European Union summit on Thursday and Friday diminished in the wake of comments from German Chancellor Angela Merkel that jointly issued eurobonds would not resolve Europe's debt crisis on their own.
Many in the markets as well as a number of Europe's leaders, including those from France, Italy and Spain, say eurobonds are a key ingredient in the resolution of the crisis as they would help lower indebted countries' borrowing costs.
But Merkel says she is reluctant to expose Germany to new potential costs and is concerned that such bonds would ease the pressure on countries like Greece and Spain to reform their economies.
"In the past, there's been a lot of optimism leading into these summits, sending stocks and other risky assets higher," said Craig Erlam, market analyst at Alpari. "With so much experience now of these summits producing nothing, a wait and see approach is now being taken. "
Much of the FTSE 100 index of leading British shares' fall was due to the performance of its banks, notably Barclays PLC, which dropped around 5% a day after it was slapped with fines totaling $453 million for the manipulation of key interest rates.
The euro was also being dogged by lack of optimism over the summit and was trading 0.4% lower at $1.2430.
Figures showing that German unemployment fell only modestly to 6.6% in June - a month that usually sees big demand for seasonal jobs - added to the prevailing sense of unease.
Earlier, a few Asian markets posted gains as they tracked gains in the previous session in Europe and the U.S. following positive housing and manufacturing reports out of the U.S. on Wednesday.
Japan's Nikkei 225 rose 1.7% to 8,874.11. South Korea's Kospi rose marginally to 1,819.18 while Hong Kong's Hang Seng gave up earlier gains to fall 0.8% to 19,025.27.
Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index down 1% to 2,195.84, the lowest closing in almost five months. The Shenzhen Composite Index lost 1% to 909.28.
Oil prices fell below the $80 a barrel mark as sentiment in the markets turned sour. Benchmark oil for August delivery dipped 36 cents at $79.82 a barrel in electronic trading on the New York Mercantile Exchange.