* Financials fall on Madoff, JPMorgan downgrade
* Uncertainty over automakers aid lingers
* Fed in focus ahead of rate cut decision
* Dow off 1 pct, S&P off 1.4 pct, Nasdaq off 2 pct
* For up-to-the-minute market news, please click on
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(Changes byline, updates to midday)
By Deepa Seetharaman
NEW YORK, Dec 15 (Reuters) - U.S. stocks stumbled on
Monday, pulled down by big banks ahead of quarterly results
from Goldman Sachs and Morgan Stanley and tech companies hurt
by a drop in consumer spending.
JPMorgan Chase & Co <JPM.N> was the Dow's biggest drag
after Merrill Lynch downgraded the bank's stock and forecast a
fourth-quarter loss. For details, see [].
There was also continued concern about financials' possible
exposure to funds managed by Wall Street trader Bernard Madoff,
who authorities accuse of defrauding investors of $50 billion.
"If you throw in what's happening with Madoff, it has
people concerned and more people say, 'I'm going to the
sidelines'," said Kurt Brunner, portfolio manager, Swarthmore
Group in Philadelphia, Pennsylvania.
"The whole risk aversion hasn't disappeared."
Technology shares were another drag after Goldman Sachs cut
its rating on Apple <AAPL.O> to "neutral" and removed the iPod
maker from its conviction buy list, citing falling consumer
demand for its products. []
Apple stock tumbled 5.1 percent to $93.22 after the cut.
The Dow Jones industrial average <> was down 123.37
points, or 1.43 percent, at 8,506.31. The Standard & Poor's 500
Index <.SPX> was down 15.58 points, or 1.77 percent, at 864.15.
The Nasdaq Composite Index <> was down 35.72 points, or
2.32 percent, at 1,505.00.
With holiday shopping in full swing, concerns over consumer
demand spurred investors to sell off tech and telecom shares.
In addition to Apple, Oracle Corp <ORCL.O> also shed points,
falling 3.6 percent to $16.24, as did online retailer
Amazon.com <AMZN.O>, which fell 5.4 percent to $48.46.
Investor sentiment was also hurt by continued fallout from
scandal surrounding Madoff. More banks revealed exposure,
including Royal Bank of Scotland <RBS.L> and Man Group
<EMG.L>.
The S&P financial index <.GSPF> fell nearly 4 percent, with
JPMorgan falling 7.4 percent to $28.65. Goldman Sachs Group Inc
<GS.N> fell 3.3 percent to $65.50 ahead of results expected on
Tuesday in which it is expected to post its first quarterly
loss since going public in 1999.
Morgan Stanley <MS.N>, which also reports results this
week, shed 2 percent at $13.57.
One bright spot was the energy sector, which rose after a
jump in crude oil <CLc1> to above $50 a barrel ahead of
Wednesday's OPEC meeting at which ministers may make their
deepest oil supply cut ever. []
Shares of General Motors <GM.N> and Ford <F.N> also rose on
hopes that a financial lifeline could still materialize,
uncertainty on the timing and shape of a government aid package
still lingered.
GM stock rose 5.1 percent to $4.14 and Ford rose 3.3
percent to $3.14.
Investors were also looking ahead to an interest rate
decision from the Federal Reserve on Tuesday, with expectations
that the Fed -- the U.S. central bank -- will further cut rates
at its regularly scheduled monetary policy meeting in an effort
to push more money into the sputtering U.S. economy.
Still, shares of housing and building companies companies
fell sharply, after Developers Diversified Realty Corp <DDR.N>,
which owns and manages shopping centers, said it had not yet
reached an agreement to sell 13 assets. [].
Diversified's shares slumped 16.8 percent to $4.73.
The Dow Jones U.S. Home Construction Index <.DJUSHB>
slumped nearly 7 percent a day before the U.S. Commerce
Department is expected to report another monthly drop in
housing starts.
(Additional reporting by Leah Schnurr; Editing by James
Dalgleish)
