(Updates to early afternoon, changes byline)

By Caroline Valetkevitch

NEW YORK, Dec 27 (Reuters) - U.S. stock indexes dropped more than 1 percent each on Thursday, pressured by financial stocks after an analyst warned of larger write-offs in the sector and an assassination in Pakistan.

News that Pakistani opposition leader Benazir Bhutto had been killed sparked worries about global political stability, while a weak durable goods report raised concerns about the outlook for the U.S. economy.

Goldman Sachs analyst said Citigroup Inc <C.N>, Merrill Lynch & Co <MER.N> and JPMorgan Chase & Co <JPM.N> may face larger fourth-quarter debt write-offs than previously expected.

"People are starting to feel like we're not going to be out of the woods with regard to financials quite yet," said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray -in Minneapolis.

"The market hates uncertainty, and all of the write-offs are going to add to uncertainty," he said.

Orders for U.S. durable goods, which are big-ticket items such as computers and appliances, rose a slender 0.1 percent in November, well below economists' forecast for a 2 percent gain.

Shares of chip maker Intel Corp <INTC.O> led losses on the Nasdaq and were down about 2 percent at $26.92.

The Dow Jones industrial average <.DJI> was down 168.27 points, or 1.24 percent, at 13,383.42. The Standard & Poor's 500 Index <.SPX> was down 16.47 points, or 1.10 percent, at 1,481.19. The Nasdaq Composite Index <.IXIC> was down 31.15 points, or 1.14 percent, at 2,693.26.

Adding to the uneasiness about the economy's health, new applications for U.S. jobless benefits unexpectedly rose in the latest week.

An index of S&P financial shares <.GSPF> fell 1.8 percent. Merrill Lynch dropped 2.4 percent to $53.25 while JP Morgan shares fell 1.8 percent to $44.11 on the New York Stock Exchange.

The Goldman analyst also said Citigroup may have to slash its dividend by 40 percent to preserve capital, sending Citi's shares down 3 percent to $29.54. (Additional reporting by Kristina Cooke; Editing by Jan Paschal) (([email protected]; +1 646 223 6393; Reuters Messaging:[email protected])) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)) Keywords: MARKETS STOCKS

 
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