Wall St dips on credit woe, sales doubts

By Ellis Mnyandu

NEW YORK (Reuters) - U.S. stocks edged lower on Monday as shares of financial services companies sold off anew as investors fretted about the prospect of more loan losses and the impact of the housing slump on the economy.

Standout losers included shares of Citigroup Inc, the largest U.S. bank, whose stock slid more than 3 percent, putting it among the Dow and S&P 500's leading decliners.

Shares of home builders, including KB Home, also took a beating following a broker downgrade of the sector, sending the Dow Jones home construction index sliding nearly 4 percent.

Doubts about the strength of the holiday shopping season added to the negative tone, with shares of No. 2 U.S. discounter Target Corp down more than 3 percent. Both the S&P financial index and the S&P retail index were off nearly 2 percent.

"The financial sector looks really, really ugly. The sloppy trading has spread to many of the sectors that I consider economically sensitive," said Bruce Zaro, chief Technical Strategist at Delta Global Advisors, Inc. in Plymouth, Massachusetts.

On the holiday season, "it's too early to make judgments and predictions based on what we've seen over the last few days. On a fundamental basis, I expect the Christmas season to be relatively disappointing."

The Dow Jones industrial average was down 3.33 points, or 0.03 percent, at 12,977.55. The Standard & Poor's 500 Index was down 5.95 points, or 0.41 percent, at 1,434.75. The Nasdaq Composite Index was down 6.90 points, or 0.27 percent, at 2,589.70.

In the latest sign of trouble in housing, Freddie Mac and Fannie Mae fell sharply after UBS downgraded the mortgage finance companies, citing increased mortgage losses and erosion of other home-loan investments.

The sell-off in shares of financial services companies coincided with a report from Goldman Sachs saying that HSBC, Europe's biggest bank, would likely need a further $12 billion in provisions for its U.S. subprime mortgages and home equity loans.

HSBC on Monday provided up to $35 billion to support its two structured investment vehicles, or SIVs. SIVs have been battered by the recent subprime-related credit turmoil.

Citigroup shares last traded near four-year lows, down 3.6 percent at $30.54 on the New York Stock Exchange, while shares of Bank of America Corp, the No. 2 U.S. bank, fell 1.3 percent to $42.58.

KB Home shares shed 5.6 percent to $20.42 on the NYSE after Citigroup cut its rating on the stock and on shares of other home builders.

Shares of Fannie Mae, the No. 1 U.S. home financing source, slid 7.5 percent to $29.80 and Freddie shares dropped 7.1 percent to $24.61.

Wall Street stock indexes had rallied on Friday as consumers, many of whom hit the stores before dawn, stormed malls and shopping centers, raising optimism about consumer spending.

Retail sales nationwide rose 8.3 percent the day after Thanksgiving compared with a year ago, according to the National Retail Sales Estimate from ShopperTrak.