A disappointing jobs report, retail sales that were less than expected, and worries over bank foreclosures could not derail the best stock picks from their upward march last week. Despite all of these factors, the Dow fell only 0.19% Friday, the S&P 500 was off just 0.18%, and the Nasdaq fell 0.25%. But all of the major indices were higher for the first week of the new year.

On Friday, financial stocks led a minor round of profit-taking with Dow components JPMorgan Chase & Co. (NYSE: JPM) off 1.9% and Bank of America (NYSE: BAC) down 1.3%. Banks hit the skids following a Massachusetts State Supreme Court ruling that two foreclosures from U.S. Bancorp (NYSE: USB) and Wells Fargo & Company (NYSE: WFC) were invalid because the banks failed to show that they held the mortgages at the time of the foreclosure. USB fell 0.76% and WFC was hit with a loss of 2.02%.

The technology sector, up 2.7%, and financial sector, up 1.7%, led the S&P 500 for the week, despite a slight pullback in financial stocks on Friday. Telecommunications and retail stocks were weak throughout the week.

In economic news, the unemployment rate fell to 9.4% in December from 9.8% in November, but a substantial number of drop-outs from the national pool of workers made the percentage decline almost meaningless. About 8.4 million jobs were lost during the recession, and in 2010 only 1.1 million were added.

In testimony before the Senate Budget Committee, Federal Reserve Chairman Ben Bernanke said, “Overall, the pace of economic recovery seems likely to be moderately stronger in 2011 than it was in 2010.” There was no indication that the Fed is likely to waver on its November decision to purchase $600 billion of Treasurys.

Treasury prices rose on Friday due to the lower-than-expected jobs number with the benchmark 10-year note at a yield of 3.329%. The euro fell to a four-month low at $1.2910, down from $1.3015 on Thursday on worries over a slow euro zone recovery.

At Friday’s close, the Dow Jones Industrial Average fell 23 points to 11,675, the S&P 500 fell 2 points to 1,272, and the Nasdaq lost 7 points at 2,703. The NYSE traded 1.1 billion shares with decliners over advancers by 1.3-to-1. The Nasdaq exchanged 515 million shares with decliners ahead by 1.7-to-1. For the week, the Dow gained 0.8%, the S&P 500 rose 1.1%, and the Nasdaq was up 1.9%.

Crude oil for delivery in February fell 35 cents to $88.03 a barrel. The Energy Select Sector SPDR (NYSE: XLE) rose 49 cents to $68.28. February gold was down $2.80 to $1,268.90. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) rose 0.31 points to 211.3.

What the Markets Are Saying

Despite poor numbers from the important unemployment report, and sentiment and internal indicators that are very overbought, stocks held their own on Friday. And that’s a good sign since a disappointment from such an important report would normally lead to a sell-off.

But with internal and sentiment numbers at what S&P analyst Mark Arbeter calls “the limits of excessiveness,” how long can the market continue to move forward? We saw the indicators hold at relatively high levels for weeks last year before enough sellers emerged to turn stocks lower. From March to April, and again from September to November, both the internal and sentiment indicators held above what is considered “excessive” before buyers finally ran out of steam.

However, when the market hit the wall in May and finally headed south, it resulted in a jarring loss of almost 15%. On the other hand, the November/December correction was mild at just 5%. And even though the spring sell-off rocked the market, it gave traders enough advance warning that something was amiss when the Dow’s 20-day moving average gave way, followed in just three days by a bizarre crush of the 50-day moving average. At that point, everyone should have sold “at the market.”

In November, the 20-day gave way, and it took 10 days before the Dow slightly penetrated the 50-day moving average and turned up. It was clear in November that sellers were not going to be able to generate the massive attack of early May.

Conclusion: Even though the internal and sentiment indicators are at very high levels, the market continues to ignore “bad news.” Short- , intermediate-, and long-term trends are still up, and strong group rotation led stocks to new highs in the first week of January. The bull is still on the field and investors are waiting in line to ride.

For one stock to buy now, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.