The Dow Jones Industrials (DJINDICES:^DJI) opened the week on a mixed note, initially jumping to a new record level before falling back by nine points as of 11 a.m. EDT. With earnings season just about over, most market participants are paying more attention to economic data to see if the bull market can last, and key measures of manufacturing activity and construction spending didn't provide the unequivocal bullish sentiment that investors wanted to see. Yet even with lukewarm readings on the industrial sector of the economy, financial stocks JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) were the hardest-hit Dow stocks in early trading.

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News of more potential legal liability for JPMorgan Chase likely led to this morning's fall, as the city of Los Angeles in a lawsuit filed Friday accused the banking giant of discriminatory practices in mortgage lending and foreclosure activity. For some reason, JPMorgan hadn't been included in suits the city filed six months ago against other major banks, but it's clear that JPMorgan and other institutions can expect similar legal actions from other city and county governments across the nation. The never-ending litany of litigation is wearing down sentiment for investors in financial stocks both within and outside the Dow Jones Industrials, as many had hoped that resolutions of federal- and state-level disputes would be the end of the matter.

Another interesting development that could affect Goldman Sachs, JPMorgan Chase, and other players in the securities industry was the decision by the Financial Industry Regulatory Authority to start providing more information about trading in nontraditional market venues, including dark pools. Given the recent exposure that dark pools have gotten, most recently in the book Flash Boys from Michael Lewis on high-frequency trading, greater transparency was almost inevitable as a way for FINRA to address issues that could eventually become the subject of more formal regulatory efforts. As time goes by, major firms could change their practices when it comes to dark pools, especially if public perception becomes even more negative.

The problem for Goldman Sachs, JPMorgan Chase, and other investment firms is that financial regulation has already diminished their ability to earn profits from their traditional lines of business. As a result, investors in the Dow Jones Industrials can expect a constant back-and-forth as big banks seek new ways to profit while regulators clamp down on what they see as trouble points for the customers they aim to protect.