US STOCKS-Banks sink Wall Street, BofA below $5/share

NEW YORK (Dec 19): Banks dragged the U.S. stock market lower on Monday,
with losses accelerating late after Bank of America's stock price fell
below $5 for the first time in nearly three years.

Warnings of
deteriorating conditions in the euro zone and concerns about tougher
capital rules that could cut into big banks' profits pressured the
financials throughout the day.

When BofA, the largest U.S. bank,
plunged through $5, it ignited a late-day decline in the sector and the
broader market, which fell 1 percent. More than 29 million shares of
the stock traded, accounting for about 5.4 percent of the day's total
trading.

The bank's woes underscore the headwinds buffetting the financial sector on both sides of the Atlantic.

Comments from Mario Draghi, president of the European Central Bank,
weighed on sentiment after he said the economic outlook contained
substantial downside risks, adding that 2012 would be a difficult year
for banks.

"If you add up all the factors facing banks, this
just isn't a good environment for financials, and since the lion's share
of the worry in the market is related to financials, a bad deal for
them means a bad day for everyone," said Mike Shea, managing partner and
trader at Direct Access Partners LLC in New York.

BofA closed
down 4 percent at $4.99 while JPMorgan Chase & Co fell 3.7 percent
to $30.70 and Citigroup Inc slumped 4.6 percent to $24.82.

The
Dow Jones industrial average was down 100.13 points, or 0.84 percent, at
11,766.26. The Standard & Poor's 500 Index was down 14.31 points,
or 1.17 percent, at 1,205.35. The Nasdaq Composite Index was down 32.19
points, or 1.26 percent, at 2,523.14.

There were signs that
cautious investors were rotating into defensive sectors, with healthcare
and consumer staples falling the least.

Traders also cited a
Wall Street Journal report that the Federal Reserve was keen for U.S.
banks to hold more capital than required by U.S. law as weighing on bank
shares.

"Anything to monkey around with capital requirements
will slow down loan growth and slow down earnings, so any sign of
tweaking might have an exaggerated effect on trading," said John Norris
managing director of wealth management with Oakworth Capital Bank in
Birmingham, Alabama.

After falling nearly 3 percent last week,
Monday's losses brought the S&P 500 close to the 1,200 level, cited
by traders as an important support level. Losses could accelerate if
that level is breached.

"That we're nearing 1,200 is adding a bit of fuel to this fire," Shea said.

Investors eyed developments in North Korea after the death of its
leader, Kim Jong-il, and as state-controlled media hailed his untested
son as the "Great Successor."

Adding to worries, Fitch warned on
Friday it may downgrade the ratings of France and six other euro zone
countries, saying a comprehensive solution to the region's debt crisis
was "technically and politically beyond reach".

In company news,
Winn-Dixie Stores Inc surged 71 percent to $9.29 after agreeing to go
private in a $560 million all-cash deal with Bi-Lo LLC.

More
than three-fourths of companies traded on the New York Stock Exchange
fell while 76 percent of Nasdaq-listed issues closed in negative
territory. - Reuters