(Updates to midmorning)
By Ellis Mnyandu
NEW YORK, Nov 5 (Reuters) - U.S. stocks dropped on Monday
as Citigroup Inc's <C.N> warning of swelling loan losses fanned
a sell-off in financial services companies and investors
worried about the impact of the credit turmoil on the economy.
Stronger-than-expected growth in the vast services sector
last month briefly helped major indexes to cut their losses,
but the drag from financial companies' shares kept the market
under water.
Shares of Citigroup led declines on both the Dow and the
S&P 500, with a drop of more than 4 percent, after the largest
U.S. bank said it may have to write off $11 billion for risky
credit and that Chief Executive Charles Prince had quit.
Several brokerages cut their price targets on shares of
Citigroup, which said the write-offs could grow if markets
worsened.
"Financials are 20 percent of the S&P 500 and if that
sector doesn't do well ...all bets are off," said Brian
Gendreau, investment strategist at ING Investment Management in
New York. "People just don't know what's on the balance
sheets, and that sector is a big drag and will contine to be a
drag for a while."
The Dow Jones industrial average <.DJI> was down 80.64
points, or 0.59 percent, at 13,514.46. The Standard & Poor's
500 Index <.SPX> was down 10.40 points, or 0.69 percent, at
1,499.25. The Nasdaq Composite Index <.IXIC> was down 19.81
points, or 0.70 percent, at 2,790.57.
If the banks' credit losses mount, analysts say the
financial institutions' ability to provide money for business
investment may be hampered, threatening the outlook for the
economy and corporate profits.
Citigroup shares fell to $36.03 on the New York Stock
Exchange, while shares of Bank of America Corp <BAC.N>, the No.
2 U.S. bank, declined 1.8 percent at $44.28.
Shares of Goldman Sachs Group Inc <GS.N> declined 3.1
percent to $222.08. The S&P financial index <.GSPF> fell 1
percent.
Citigroup Chief Financial Officer Gary Crittenden said
"there's no way I think anyone can give you an assurance of how
things are going to move." The bank lowered its previously
reported figure for third-quarter earnings per share.
Until recently hope had grown that the worst of the credit
fallout was over. But Merrill Lynch & Co's <MER.N> ouster of
its chief executive last week and an $8.4 billion write-down
put the credit crisis back in the spotlight. Merrill Lynch fell
1 percent to $56.58.
Also adding to market jitters was the political crisis in
nuclear-armed Pakistan where President Pervez Musharraf has
imposed emergency rule, analysts said.
(Additional reporting by Kristina Cooke)
((Reporting by Ellis Mnyandu
Editing by Kenneth Barry
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