U.S. stocks dropped on Friday as proposed sweeping restrictions on U.S. banks and the delayed confirmation of Fed Chairman Ben Bernanke overshadowed solid earnings from General Electric and McDonald's.
The S&P 500 and Nasdaq both slid about 1 percent, with the S&P turning negative for the first time in the new year.
U.S. President Barack Obama threatened to fight Wall Street banks on Thursday with a new proposal to limit financial risk taking, sending stocks and the dollar tumbling.
Yesterday's announcement potentially, longer term, changes the entire ballgame, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
The U.S. Senate will not vote this week on whether to confirm Federal Reserve chairman Bernanke for a second four-year term, Democratic aides said, leaving little time before his current term expires.
He'll get confirmed, but it's just another piece of uncertainty that is overhanging the market here, said Mendelsohn.
The Dow Jones industrial average <.DJI> dropped 70.81 points, or 0.68 percent, to 10,319.07. The Standard & Poor's 500 Index <.SPX> fell 9.48 points, or 0.85 percent, to 1,107.00. The Nasdaq Composite Index <.IXIC> lost 25.14 points, or 1.11 percent, to 2,240.56.
General Electric Co
Materials stocks lost ground after Goldman Sachs downgraded the U.S. metals and steel sectors to neutral from attractive, saying China's credit tightening may further weigh on the group.
U.S. Steel Corp
(Editing by Jeffrey Benkoe)