Source

BOSTON (MarketWatch) -- The U.S. financial sector traded sharply lower Thursday as President Barack Obama proposed new limits on proprietary trading and other regulatory reform at big banks in an effort to scale
back risk in the financial system after the credit crunch.

Large-cap bank stocks absorbed the brunt of the damage as investors worried new restrictions on "too-big-to-fail" banks could eat into their bottom line.

"While the financial system is far stronger today than it was a year one year ago, it is still operating under the exact same rules that led
to its near collapse," Obama said. See full story on Obama's speech.

Proprietary trading, in which banks risk their own capital for profit, "has been the sweet spot for leading investment banks over the last few
years, and executives will be concerned that Washington will be taking
away the frosting," said David Easthope, senior analyst at Celent, a
Boston-based financial research and consulting firm.

Goldman Sachs Group Inc. /quotes/comstock/13*!gs/quotes/nls/gs
(GS
160.97,
-0.19,
-0.12%)

was out with quarterly financial results Thursday. The Wall Street
firm, which has faced criticism over big pay packages, said it swung to
a fourth-quarter profit that exceeded forecasts by a wide margin as it
also cut its compensation-to-revenue ratio. See full story on Goldman earnings.

Goldman shares were off by more than 4% in recent action, while J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm
(JPM
40.40,
-0.14,
-0.35%)
, Morgan Stanley
/quotes/comstock/13*!ms/quotes/nls/ms
(MS
29.25,
-0.09,
-0.31%)
and Bank of America Corp.
/quotes/comstock/13*!bac/quotes/nls/bac
(BAC
15.37,
-0.10,
-0.65%)
also weakened.

The Financial Select Sector SPDR Fund /quotes/comstock/13*!xlf/quotes/nls/xlf
(XLF
14.61,
-0.05,
-0.34%)
, which tracks large-cap financial stocks, was down nearly 3% as the sector's earnings parade continued.

Despite weakness in the overall financial sector, several regional banks rallied following better-than-expected quarterly results from
some of the group's key lenders.

KeyCorp /quotes/comstock/13*!key/quotes/nls/key
(KEY
7.29,
-0.05,
-0.68%)
, Fifth Third Bancorp
/quotes/comstock/15*!fitb/quotes/nls/fitb
(FITB
11.96,
-0.06,
-0.50%)
, Regions Financial Corp.
/quotes/comstock/13*!rf/quotes/nls/rf
(RF
6.87,
+0.01,
+0.15%)
, Huntington Bancshares Inc.
/quotes/comstock/15*!hban/quotes/nls/hban
(HBAN
4.60,
+0.07,
+1.55%)
, SunTrust Banks Inc.
/quotes/comstock/13*!sti/quotes/nls/sti
(STI
24.49,
-0.04,
-0.16%)
and Zions Bancorp
/quotes/comstock/15*!zion/quotes/nls/zion
(ZION
18.35,
-0.01,
-0.05%)
were all up at least 6% at last check.

Fifth Third and KeyCorp reported narrower fourth-quarter losses before Thursday's opening bell and led the stocks higher.

Also gaining on upbeat earnings reports were Knight Capital Group Inc. /quotes/comstock/15*!nite/quotes/nls/nite
(NITE
16.55,
+0.31,
+1.88%)
and Comerica Inc.
/quotes/comstock/13*!cma/quotes/nls/cma
(CMA
36.35,
+0.53,
+1.48%)
.

Conversely, shares of PNC Financial Services Group Inc. /quotes/comstock/13*!pnc/quotes/nls/pnc
(PNC
55.40,
-0.30,
-0.54%)
and Legg Mason Inc.
/quotes/comstock/13*!lm/quotes/nls/lm
(LM
28.70,
+0.38,
+1.34%)
lost ground in the wake of their latest results.

Legg Mason said it swung to a fiscal third-quarter profit but investors worried about heavy outflows in the firm's investment products. The
stock shed nearly 7%. See full story on Legg Mason results.

PNC shares were also under pressure Thursday as the company posted a quarterly profit but net charge-offs jumped. Read article on PNC earnings.

Berkshire Hathaway Inc.
/quotes/comstock/13*!brk.a/quotes/nls/brk.a
(BRK.A
107,705,
+3,505.00,
+3.36%)

/quotes/comstock/13*!brk.b/quotes/nls/brk.b
(BRK.B
72.40,
-0.32,
-0.44%)

said Wednesday that shareholders voted for a 50-for-1 split of the
firm's Class B shares. The new shares began trading on the New York
Stock Exchange on Thursday.