Markets swoon on Obama plan

Stock markets in Canada and the United States closed sharply lower on Thursday, as investors reacted to U.S. President Barack Obama'splan to impose tough restrictions on the wayWall Street banks do business.

A little before noon, Obama called for tougher regulations on banks that would limit the size and complexity of large financial institutions.

It's the second time in a week that the U.S. president has taken aim at the sector deemed to have been most at fault for the credit crisis.

The plan would allow commercial banks to continue to engage in so-called "proprietary trading" as long as they could show regulators that they are doing it for their clients, not for their own proprietary accountability to engage in high-risk trades.

A second part of the proposal would also make bank mergers much less likely.

The Dow Jones industrial average tumbled 213points to close at 10,390. The NASDAQ was down 26 points to 2,256.

"We've run a big rally here," said Sid Mokhtari, market technician at CIBC World Markets.

"We shouldn't be panicking by any means. It's more of a backing and filling [by the market], digesting what it's done so far and . . . looking for a reason why it should further pursue its uptrend."

Bank of Canada upbeat

Canada's central banksaid in its latest policy report that Canada's economy is becoming more solidly entrenched, with the private sector beginning to play an increasingly pivotal role in leading the country out of recession.

But the mildly upbeat assessment wasn't enough to light a fire under Canadian equities, as the benchmark S&P/TSX Composite Index ended the daydown 210 points to 11,469.

The financial sector shedalmost 1.8 per cent of its value.