Stocks retreated Friday for the third straight day on uncertainty about President Barack Obama's plans to restrict big banks and disappointment over companies' earnings reports.

The market's pullback extended losses that gave the Dow Jones industrial average its biggest two-day drop since June. The Dow slid nearly 140 points in afternoon trading. All the major indicators fell more than 1 percent.

Investors seemed to find uncertainty or bad news wherever they looked. Even before Obama announced his plan on Thursday, they were selling stocks on disappointing earnings and concerns that a possible slowdown in China's economy might spread. The mood in the market was dark enough that upbeat earnings Friday from General Electric Co. and McDonald's Corp. weren't enough to sway investors.

John Brady, a senior vice president of global interest rates at MF Global, said concerns surrounding Obama's plan and China's efforts to tame its economy have investors cutting their exposure to risk.

And while earnings reports in recent days have frequently beat analyst expectations, major companies are disappointing investors by still taking a very cautious stance about the U.S. economy.

"We expect (earnings) to be better," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego. "People are being more particular."

The market's reaction to Google Inc.'s earnings showed how uneasy investors are. The Internet search giant posted earnings that topped analyst estimates, but its stock fell as revenue growth only matched expectations and, unlike its profit, didn't exceed forecasts.

Obama spooked the market Thursday after asking Congress for limits on how large big banks can be and to end some of the risky trading large financial companies have used in recent quarters to boost their profits.

"It appears to be a move to put some shackles on risk-takers," Mitch Schlesinger, managing partner at FBB Capital Partners in Bethesda, Md., said of the new proposals.

Obama's push for tighter regulations comes at the same time China is moving to cool its economy with measures such as reining in lending and stepping up regulatory oversight of that country's banks.

There is more uncertainty for the markets next week, and not just because more earnings reports will arrive. The Federal Reserve holds its first meeting on interest rates of 2010, and investors are also waiting to see if the Senate will confirm the reappointment of Fed Chairman Ben Bernanke. Some lawmakers are holding Bernanke responsible for the economy's lingering problems.

In late afternoon trading, the Dow Jones industrial average fell 137.54, or 1.3 percent, to 10,252.34, while the Standard & Poor's 500 index fell 16.31, or 1.5 percent, to 1,100.17.

The Nasdaq composite index fell 43.13, or 1.9 percent, to 2,222.57, reflecting a pullback in technology stocks in response to Google's earnings, and also an analysts' downgrade of chip makers.

The Dow lost 213 points Thursday and 336 points, or 3.1 percent, during the past two trading sessions. The losses have erased the gains seen in 2010.

Google dropped $26.45, or 4.5 percent, to $556.53.

Shares in GE and McDonald's both rose on their earnings, but didn't motivate investors to buy across the market.

GE reported a better-than-expected profit, but it also said orders and backlogs for its products and services are increasing, a sure sign its business will pick up in 2010. That helped its shares rise 33 cents, or 2.1 percent, to $16.35.

McDonald's fourth-quarter earnings showed that it was holding up better than its competitors as consumers cut back their spending. But sales growth at its U.S. restaurants slowed and net revenue fell for the year. The company's stock rose 73 cents, or 1.2 percent, to $63.93.

Credit card issuer Capital One Financial Corp. fell $4.50, or 10.5 percent, to $38.20 after the company reported after the end of trading Thursday that it saw an increase in the percentage of loans it expects won't be repaid.

Other credit cards fell after Fitch Ratings said delinquent balances on credit cards hit a record high in November and an analyst downgraded credit card companies. American Express Co. dropped $3.66 or 8.7 percent, to $38.50.

Two stocks fell for every one that rose on the New York Stock Exchange. Volume came to 894 million shares compared with 1.04 billion shares traded at the same point Thursday.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.61 percent from 3.59 percent late Thursday.

The dollar was mixed against other major currencies, while gold fell.

The Russell 2000 index of smaller companies fell 6.46, or 1 percent, to 621.90.

Overseas, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index lost 0.9 percent, and France's CAC-40 dropped 1.1 percent. Japan's Nikkei stock average fell 2.6 percent.