By Donna Kardos Yesalavich, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks fell Friday after an adverse foreclosure ruling hit bank shares hard, but major indexes ended the first week of trading in the new year higher.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,675, -22.55, -0.19%) dropped 23 points, or 0.2%, to end at 11675. For the week, the Dow ended up 0.9%, notching its sixth weekly gain.
The Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,703, -6.72, -0.25%) fell 0.3% to end at 2703. The Nasdaq was up 1.9% for the week.
The Standard & Poor’s 500 index /quotes/comstock/21z!i1:in\x (SPX 1,272, -2.35, -0.18%) fell 0.2% to 1271. But the index logged a gain of 1.1% for the week.
Much of the week’s gains were made on Monday and Wednesday, with Monday’s rally coming on optimism for the new year while Wednesday’s climb followed a stronger-than-expected report on private-sector jobs for December.
But investors were disappointed Friday by monthly employment data showing nonfarm payrolls rose by 103,000 last month as private-sector employers added 113,000 jobs, missing economists’ estimate for a gain of 150,000 jobs. Read more on jobs.
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The Dow’s financial components led Friday’s decline, with J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 43.64, -0.84, -1.89%) slipping 1.9% and Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 14.25, -0.19, -1.32%) falling 0.8%. Weighing on the banks, the Massachusetts State Supreme Judicial Court upheld a decision that two foreclosures from U.S. Bancorp /quotes/comstock/13*!usb/quotes/nls/usb (USB 26.09, -0.20, -0.76%) and Wells Fargo & Co. /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 31.50, -0.65, -2.02%) were invalid because the banks failed to show they held the mortgages at the time of the foreclosure. Read more on Financial Stocks.
“That takes you back into the maelstrom of who is the valid holder of the mortgage, who owns the property and will this slow the rate at which the banks can process the foreclosures,” said Joseph Battipaglia, chief market strategist of the private client group at Stifel Nicolaus. “It comes down to the timing and speed at which banks can work through their troubled asset portfolios, and that delays the timing of an expected earnings recovery.”
U.S. Bancorp dropped 0.8% and Wells Fargo declined 2%. Neither stock is in the Dow. Read ETF Investing blog on a surge in volume in the Financial Select Sector SPDR Fund.
Investors fretted over how the ruling against U.S. Bancorp and Wells Fargo could influence similar cases for other banks. Among the other bank stocks that fell, Regions Financial Corp. /quotes/comstock/13*!rf/quotes/nls/rf (RF 7.02, -0.12, -1.68%) shares dropped 1.7% and BB&T Corp. /quotes/comstock/13*!bbt/quotes/nls/bbt (BBT 26.33, -0.56, -2.08%) declined 2%.
Economy adds fewer jobs than forecast
The jobless rate fell to 9.4% in December, its lowest level in 19 months, but the economy added just 103,000 new jobs, fewer than expected.
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The unemployment rate, obtained from a separate household survey, fell to 9.4% last month, the lowest level since May 2009 and the biggest fall in more than a decade. It beat expectations for a 9.7% rate, although it was impacted by a drop in the civilian labor-force participation rate to 64.3%, from 64.5%.
“What this is telling you is that this is not a rocketship recovery and it’s not a collapse either,” said Michael Church, president of Addison Capital. “It’s also telling you that the Fed’s not backing away.” Read more expert reaction to the jobs report.
Federal Reserve Chairman Ben Bernanke said Friday that the central bank remains “unwaveringly committed” to maintaining price stability. The Fed’s bond-buying program is justified, he said, because unemployment is likely to remain above 8% for the next two years and inflation will remain subdued. Read more on Bernanke.
The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2910, +0.0030, +0.2329%) slipped to $1.2913, from $1.3015 late Thursday, trading at its weakest level in more than a month against the dollar, as concerns heightened over the euro zone’s debt stresses. Among investors’ latest worries was that the Swiss National Bank’s rejection of Portuguese government bonds could trigger further rating downgrades, but the SNB noted the bonds were never part of its list of eligible collateral due to settlement reasons. Read more on Portuguese debt, European sovereign crisis.
The U.S. Dollar Index /quotes/comstock/11j!i:dxy0 (DXY 81.09, +0.08, +0.10%) , tracking the U.S. currency against a basket of six others, rose 0.4%. Treasurys rose, pushing the yield on the 10-year note down to 3.33%. Gold futures edged up while crude-oil futures slipped. Read more on currencies.
Among stocks in focus, Borders Group /quotes/comstock/13*!bgp/quotes/nls/bgp (BGP 0.92, +0.06, +6.86%) climbed 6.9% after The Wall Street Journal, citing people familiar with the matter, reported that the bookstore chain has been in discussions with restructuring advisers about ways to rework its balance sheet.
Liz Claiborne /quotes/comstock/13*!liz/quotes/nls/liz (LIZ 6.01, -0.89, -12.90%) tumbled 13%. The apparel maker cut its operating income forecast for the second half of 2010, citing “clearly disappointing” direct-to-consumer sales in December. Read more in Retail Stocks.
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| Jan. 8, 2011 | U.S. stock investors ready for earnings start | |
| Jan. 6, 2011 | Stocks fall on telecom, retail weakness | |
| Jan. 5, 2011 | U.S. stocks get labor lift; Dow at new ‘08 high | |
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| Jan. 3, 2011 | U.S. stocks cheer 2011 with biggest jump in month |
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