US STOCKS-Wall St led lower by banks, jobs report weighs

                                

                                
 * Banks fall after court ruling on foreclosures
                                
 * Payroll gains miss estimates, but unemployment rate down
                                
 * Dow off 0.4 pct, S&P off 0.5 pct, Nasdaq off 0.7 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
  (Updates to late afternoon)
                                
 By Leah Schnurr
                                
 NEW YORK, Jan 7 (Reuters) - U.S. stocks stumbled on Friday
as financials were hit by a court ruling that voided two home
foreclosures and as data showed disappointing jobs growth last
month.
                                
 After trading flat earlier, stocks turned lower as the euro
fell further and oil prices turned negative.
                                
 Wells Fargo & Co <WFC.N> and US Bancorp <USB.N> lost a
ruling by Massachusetts' top court, which said the banks failed
to show they held the mortgages at the time they foreclosed.
The decision could affect foreclosures nationwide. For details,
see [ID:nN07198844]
                                
 "It's going to delay things at best and just increases the
uncertainty as far as the type of exposure they might have,"
said Alan Lancz, president of Alan B. Lancz & Associates Inc in
Toledo, Ohio.
                                
 Wells Fargo shares gave up 3.4 percent at $31.05 and US
Bancorp shed 1.1 percent to $25.99. The KBW Bank index <.BKX>
lost 1.6 percent.
                                
 The Dow Jones industrial average <.DJI> slipped 50.82
points, or 0.43 percent, to 11,646.49. The Standard & Poor's
500 Index <.SPX> fell 6.60 points, or 0.52 percent, to
1,267.25. The Nasdaq Composite Index <.IXIC> lost 17.92 points,
or 0.66 percent, to 2,691.97.
                                
 Even with Friday's decline, the S&P 500 and Dow were on
track for their sixth straight week of advances.
                                
 The broad S&P is up about 0.8 percent so far this week,
extending the market's rally during the final months of 2010.
Analysts said some profit-taking heading into the weekend
wasn't surprising.
                                
 Phil Orlando, chief equity market strategist at Federated
Investors in New York, noting the reaction to the foreclosure
ruling, said, "The market doesn't need a whole lot of
negativity to spark some profit-taking."
                                
 Investors treaded lightly after the mixed  employment
report that showed non-farm payrolls rose 103,000, below
analysts' expectations.  [ID:nN06134458]
                                
 The report also showed a surprisingly large number of
people gave up searching for work, tempering the positive news
of a big drop in the unemployment rate.
                                
 The euro fell to a near four-month low against the dollar.
Stocks and the euro showed a significant correlation last year,
with the currency viewed as a proxy for euro zone debt
concerns.
                                
 The court decision is the latest on the validity of
foreclosures conducted without full documentation. The issue
last year prompted an uproar that led lenders such as Bank of
America Corp <BAC.N>, JPMorgan Chase & Co <JPM.N> and Ally
Financial Inc to temporarily stop seizing homes.
                                
 The S&P 500 found support at its 14-day moving average,
which is around 1,262. The index briefly broke below that
before popping back up.
                                
 On Capitol Hill, Federal Reserve Chairman Ben Bernanke
sounded cautiously more upbeat than in the recent past, citing
improvements in consumer spending and a drop in claims for
jobless benefits as hopeful signs for the recovery.
[ID:nN06147394]
 (Reporting by Leah Schnurr; Editing by Kenneth Barry)