Wall Street posted its first weekly loss of the year, ending the second week of 2010 with a nearly 1 percent drop triggered by a disappointing earnings report froom JPMorgan Chase and a weak reading on consumer confidence.
Stocks closed Friday off their worst levels of the day but still down as bank shares broadly sank 2 percent, while industrials and technology also contributed to the bout of selling.
Investors took a dim view of JPMorgan, which posted earnings of 74 cents per share, easily beating expectations of 61 cents. But weak top-line revenue and continued credit losses left Wall Street looking for more from the banking titan.
Investors worried that the credit losses in particular could spell-long term trouble for banks particularly if charge-offs and commercial credit defaults keep piling up.
"Quantitative easing is done, rates are going to go higher, unemployment is at 10 percent. If their credit losses are $1 billion this quarter, it's just going to get worse," said Dave Rovelli, managing director of US equity trading for Canaccord Adams. "That's what's giving people the jitters."
Investors also dumped shares of Intel, which reported quarterly profit of 40 cents per share, 10 cents above estimates, and giving a bullish outlook as well.
The earnings twists clashed with economic reports showing growth but not at a high enough level to start triggering inflation worries.
Consumer prices rose 0.1 percent in December from November on modest gains in food and energy costs, while the Empire State manufacturing index hit 15.92 in January, a huge leap from its 4.50 reading in December.
Financials led the S&P 500 lower, joined by utilities and energy.
The broad index saw all 10 of its sectors in negative numbers in the worst loss since Nov. 27. Volume also was the highest in about three weeks, suggesting more overall conviction from sellers than buyers.
Officemax was the S&P's biggest gainer, surging more than 9 percent after JPMorgan upgraded the company to "overweight" from "neutral."
Elsewhere on the indexes, Kraft Foods led a group of just three Dow gainers, while Bank of America combined with JPMorgan as banks weighing on the bluechip index. Outside of financials, Cisco Systems also sustained a big loss.
Intel helped bring a broad swath of semiconductors into red numbers, with Micron Tech the biggest percentage dropper in the group.
The Dow US Semiconductor index was off 2.3 percent while the US Banks index dropped 2.5 percent. Tobacco and home improvement were the only two Dow indexes to show positive numbers.
The day's other economic indicators did little to brighten the mood.
Stocks fell further after the Reuters/University of Michigan consumer sentiment survey showed little change in early January, despite expectations that the reading would improve.
On the plus side, Interactive Data shares surged after the provider of financial market information said it was exploring strategic alternatives, which could include a sale of the company.
In deal news, a major move in the cosmetics industry was helping move markets.
Japan's Shiseido is buying San Francisco-based Bare Escentuals for $1.7 billion, the biggest acquisition in Shiseido's 138-year history. The deal, which equates to a 43 percent premium of $18.20 a share, lifted Bare Escentual's shares about 42 percent.
Published reports this morning say Citigroup plans to dole out bonuses for 2009 that will be similar to 2008 payouts, and that Citi may cap individual cash payouts at about $60,000.
Market volume was solid if unspectacular, with 1.4 billion shares changing hands on the New York Stock Exchange. Breadth was sharply negative, with losers beating gainers more than 2 to 1 on both the NYSE and the Nasdaq.