Wall Street drops on Obama plan, Bernanke delay

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US stocks dropped on Friday as proposed sweeping restrictions on US 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.

US 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 US 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 dropped 70.81 points, or 0.68 percent, to 10,319.07. The Standard & Poor's 500 Index fell 9.48 points, or 0.85 percent, to 1,107.00. The Nasdaq Composite Index lost 25.14 points, or 1.11 percent, to 2,240.56.

General Electric Co shares advanced 3.7 percent to USD16.61, while McDonald's Corp rose 1.6 percent to USD64.20 as the top Dow gainer after both companies reported earnings that topped expectations.

Materials stocks lost ground after Goldman Sachs downgraded the US metals and steel sectors to "neutral" from "attractive," saying China's credit tightening may further weigh on the group.

US Steel Corp, which Goldman removed from its Conviction Buy list, dropped 4.5 percent to USD55.06. The S&P Materials index lost 1 percent.