Financial Winners & Losers: JPMorgan

Financial stocks tumbled harder than the broader market Thursday amid reports that several firms are facing new trouble with mortgage-related assets and challenging credit markets.

The NYSE Financial Sector Index dropped more than 3% as the Dow Jones Industrial Average fell almost 2% on weak economic data.

JPMorgan Chase (JPM Quote) fell 2.2% to $38.81 as the bank said it will close down a business that structured interest-rate swaps for municipalities, as the bank faces further issues with its sales of credit default swaps and derivatives to local governments.

On top of a lawsuit filed late last month by a Pennsylvania school district, JPMorgan is facing investigations by the Justice Department and Securities and Exchange Commission, which could result in penalties, according to a Bloomberg report. Municipalities are accusing JPMorgan and other firms of charging high fees and selling complicated debt instruments whose costs and risks were not fully explained.

There were also indications on Wednesday that deals with Korean investors -- viewed as saviors for some firms grappling with housing- and credit-related losses -- are not panning out smoothly. Merrill Lynch (MER Quote) and Korea Asset Management Corp. have so far failed to agree on pricing terms for a deal to sell a big chunk of Merrill's troubled loans, according to Bloomberg. The Wall Street Journal also reports that Korea Development Bank is facing significant hurdles in its bid to acquire a joint stake in Lehman Brothers (LEH Quote).

Word that Japan's Tokyo Mitsubishi UFJ might also be eyeing a Lehman stake failed to prop its share price, which dropped around 7% to $15.73 in recent trading. Merrill was down more than 5% at $26.85.