The Dow Jones Industrial Average dropped 122.43 points on Wednesday, losing 1.14 percent to close at 10,603 on fears that the Asian led economic recovery may stall because of government tightening.

Basic materials and energy stocks suffered the most on fears that continued government tightening may curb demand for infrastructure spending. The Dow Jones U.S. Oil & Gas Index lost 1.70 percent and the Dow Jones U.S. Basic Materials Index lost 1.63 percent.

The Chinese government continued with its hawkish policies today by ordering some big banks to curb lending for the rest of January. According to the Associated Press, Chinese Banking Regulatory Commission Chairman Liu Mingkang said lending is expected to fall to $1.09 trillion for the year, down from $1.39 trillion in 2009.

This also marks the first week that Chinese banks operated under the newly increased reserve requirements of 16 percent total assets. The Chinese central bank unexpectedly announced the 0.5 percent hike last week.

Commodity currencies like the Australian dollar and Canadian dollar fell today on fears of slowing commodity demand. The Australian dollar fell 144 pips against the US dollar from its London opening, to trade at 0.9081 in the New York afternoon session. The Canadian dollar fell 157 pips against the US dollar to trade at 1.0471.

Big banks reported earnings with mixed results before the US markets opened. Bank of American (NYSE:BAC) reported a loss of $0.60 per share, Morgan Stanley (NYSE:MS) reported a gain of $0.14, and Wells Fargo (NYSE:WFC) reported a gain of $0.08 per share.

Despite missing Wall Street expectations, Bank of America is trading up 1.04 percent. Wells Fargo is trading down 1.63 percent even though it beat expectations. Morgan Stanley missed expectations and is trading down 1.7 percent.

The biggest losers of the Dow were IBM (NYSE:IBM), down 2.9 percent, Alcoa (NYSE:AA), down 2.50 percent, and Kraft (NYSE:KFT), down 2.21 percent.

IBM reported earnings of $3.59 per share after the market closed on Tuesday, beating analyst expectations. Alcoa, the aluminum giant, sank with the basic materials sector. Kraft dropped on its plans to buy Cadbury and a downgrade of its debt by Fitch Ratings.

Bank of america