JPMorgan, other banks lead stocks lower

[January 08, 2011]  NEW YORK (AP) -- A disappointing jobs report dragged stocks lower Friday. Banks took a hit after a Massachusetts court upheld a ruling in a foreclosure case against U.S. Bancorp and Wells Fargo & Co. that could lead to more trouble for lenders.

The Labor Department said employers added 103,000 jobs in December, less than analysts expected. Job growth has remained sluggish in the U.S. since the recession ended in June 2009.

A separate survey found that the unemployment rate fell to 9.4 percent last month. That's a decrease from 9.8 percent in November and the lowest rate in 19 months. But the drop came partly because many people gave up looking for work.

"On balance, this was a pretty disappointing report," said Hugh Johnson, chairman and chief investment officer of Johnson Advisors. It "suggests we have a long way to go to recover the 8.4 million jobs that we lost during the crisis."

The Dow Jones industrial average fell 22.55 points, or 0.2 percent, to close at 11,674.76.

Even after falling for two days in a row, the Dow still gained 97.25 points for the week. That's the sixth straight week of gains for the index.

The Standard & Poor's 500 index fell 2.35, or 0.2 percent, to 1,271.50. The Nasdaq composite fell 6.72, or 0.3 percent, to 2,703.17. For the week, the S&P 500 rose 1.1 percent, the Nasdaq 1.9 percent.

JPMorgan Chase & Co. and Bank of America Corp. were two of the biggest losers among the 30 stocks that make up the Dow. Banks fell as investors worried that the foreclosure ruling in Massachusetts could set a precedent for other cases against lenders. Bank of America, the largest holder of mortgages in the U.S., fell 1 percent to $14.25. JPMorgan lost 2 percent to $43.64.

The highest court in Massachusetts found that U.S. Bancorp and Wells Fargo failed to prove that they owned the mortgages in two cases where homeowners were in foreclosure. Lenders have been under scrutiny from law enforcement officials since last fall over accusations that they bungled foreclosure proceedings and had shoddy record-keeping practices.

"This court ruling is a reminder that banks are still facing some headwinds left over from the financial crisis," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "It's going to be tough sledding for the financial industry until they get these mortgage problems sorted out."

Wells Fargo fell 2 percent to $31.50. U.S. Bancorp fell 0.8 percent to $26.09.

In testimony on Capitol Hill, Federal Reserve Chairman Ben Bernanke said he was optimistic that the economy would grow this year. But he also said it could take up to five years for the unemployment rate to move significantly lower.

Bond prices rose, sending their yields lower. The yield on the 10-year Treasury note fell to 3.32 percent from 3.40 percent late Thursday. The yield helps set interest rates on many kinds of loans including mortgages.

KB Home rose 6 percent to $15.25 after the homebuilder surprised Wall Street with a profit.

Falling stocks outnumbered rising ones on the New York Stock Exchange by a small margin. Consolidated volume was 5.2 billion shares.

[Associated Press; By CHIP CUTTER and MATTHEW CRAFT]

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