Stocks Fall On Fresh Woes In Banking Sector

Stocks fell sharply today, led lower by the financial sector, with the Dow Jones industrial average declining more than 200 points and closing below 13,000. It was the Dow’s lowest close since the depth of the markets’ plunge in August.

The retreat started after Citigroup was downgraded to “sell” by a Goldman Sachs analyst, who warned that the company’s write-downs of assets tied to complex debt instruments could reach $15 billion by the end of next year’s first quarter. Citi has already announced $8 billion to $11 billion in fourth-quarter write-downs.

The analyst’s report hit a raw nerve among investors, reigniting fears of a credit squeeze as financial giants struggle to dig out from poor bets on securities tied to subprime home loans. Shares of all the top brokerage firms were down, keeping pace with a 17.6 percent plunge for financial companies for the year. Citi’s stock dipped 5.9 percent, to $32, near a four-year low.

Staggering financials dragged down the Standard & Poor’s 500-stock index, which dipped 1.8 percent to 1,433.27. The Dow closed down 218.35, or 1.7 percent, at 12,958.44.

The Nasdaq composite index fell 1.7 percent, to 2,593.38, as technology stocks continued to struggle after being battered in recent weeks.

“It’s not a good thing to start the day with a downgrade of one of the biggest financial services where most people had assumed that the bad news was already over,” said Sam Stovall, chief investment strategist at Standard & Poor’s.

Unfortunately for investors, the bad news did not end there. Swiss Re, the world’s largest reinsurer, announced nearly $1 billion in losses on derivatives it had sold to protect clients against a downturn in investments linked to mortgages.

And investors were reminded yet again that the housing market remains deeply troubled. Shares of Lowe’s, the home-improvement retailer that competes with Home Depot, dropped 7.6 percent to a three-year low after it announced a 10 percent drop in third-quarter profit and lowered its annual earnings forecast.

In a news release, the company’s chief executive, Robert A. Niblock, cited “an even steeper decline in housing turnover, falling home prices in many markets, and a near record inventory of homes for sale.”

His remarks echoed a bleak report out today that showed record-low confidence among home builders. An index of builders’ sentiment measured by the National Association of Home Builders held steady at 19 for the second consecutive month, on a scale where readings below 50 imply a poor outlook. The report comes a day before the government is set to release data on new residential construction in October. Analysts expect that survey to hit its lowest level in over a decade.

Since surpassing the 13,000 mark in late April, the Dow has closed below that level only three times. Its lowest point came on Aug. 16, when it closed at 12,845.78. Markets have been extremely volatile in recent weeks, with the S.& P. losing 7 percent of its value in November alone.

“During a volatile period, any nervousness means sell now, and ask questions later,” said Quincy Krosby, chief investment strategist at The Hartford. “Put this all together and it’s basically a mosaic of negative information, negative rumors, negative macroeconomic policy.”

At least one analyst saw a seasonal explanation for the sell-off.

“There’s an old saying that the bears have Thanksgiving and the bulls have Christmas,” Mr. Stovall of S.& P. said. “This week could be a challenging one.”

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