Financial stocks lead declines

Another writedown from Citi renews fears about more losses from other banks; upbeat reading on service economy helps pare broader market declines.

Stocks fell on Monday after Citigroup raised another warning flag for the financial sector, but pared losses after a reading on the service economy came in stronger than expected.

The Dow Jones industrial index fell about 0.3 percent more than 2-1/2 hours into the session. The broader S&P 500 index and the tech-fueled Nasdaq both lost about 0.4 percent.

Citi said it would write down an additional $8 to $11 billion due to the decline in value of subprime-related assets. The bank also announced the departure of CEO and Chairman Charles Prince.

The news dragged on the financial sector stocks, as investors worried additional losses could follow from other banks and brokerages.

"The immediate catalyst was Citigroup but the broader issue is it looks like you are getting another wave of asset writedowns," James Awad, chairman of WP Stewart Asset Management, said.

"The fear is if financial institutions go through another period of stress, it could create another seize up in the credit markets," he added.

On the economic front, a reading on the service sector of the economy came in above expectations. The Institute for Supply Management's index for measuring the health of non-manufacturing industries rose to 55.8, up from 54.8 in September and above analysts' estimates for a reading of 54. A reading above 50 indicates expansion in the sector.

Source - CNNMoney