* Oil surges as Libya clashes intensify
* Banks slide after Merrill downgrades Goldman, Citigroup
* Indexes off: Dow 1.3 pct, S&P 1.2, Nasdaq 1 pct
* For up-to-the-minute market news see []
(Updates to late afternoon; changes byline)
By Angela Moon
NEW YORK, March 4 (Reuters) - Wall Street erased all of its
weekly gains on Friday as fears of more geopolitical turmoil
and the impact of high oil prices drove investors to sell risky
assets like stocks.
Brent crude prices <LCOc1> rose above $116 a barrel as
Libyan security forces cracked down on protesters in Tripoli
and clashed with rebels near the major oil terminal of Ras
Lanuf.
Worries about extended supply disruptions and the potential
for unrest to spread to other producers kept the stock market's
anxiety high. The CBOE Volatility Index VIX <.VIX>, Wall
Street's so-called fear gauge, rose 8 percent to 20.09.
Data earlier in the week had raised expectations about
Friday's employment report, lifting stocks to their biggest
gains in three months on Thursday. But after the report showed
February job gains roughly in line with expectations, investors
quickly turned their focus to rising oil prices and political
unrest in northern Africa and the Middle East.
"After the kind of rally we had, the market is more
vulnerable to news events, and more so these days on a spike in
oil prices," said Randy Frederick, director of trading and
derivatives at the Schwab Center for Financial Research in
Cincinnati, Ohio.
"But despite the day's decline, the market is still
slightly more bullish than bearish. Unless we get some
significant news like (the unrest) spilling over to Saudi, the
market is likely to have up and down days mixed."
In brokerage news, first-quarter earnings of large U.S.
banks could be hurt by rising oil prices as well as by reduced
client activity, Bank of America Merrill Lynch said.
The brokerage downgraded shares of Citigroup Inc <C.N> and
Goldman Sachs Group Inc <GS.N> to "neutral" from "buy." For
details see [].
Goldman fell 2.3 percent to $160.68 and Citi dropped 3
percent to $4.54. The KBW bank index <.BKX> lost 2.1
percent.
The Dow Jones industrial average <> was down 155.19
points, or 1.27 percent, at 12,103.01. The Standard & Poor's
500 Index <.SPX> was down 16.33 points, or 1.23 percent, at
1,314.64. The Nasdaq Composite Index <> was down 26.78
points, or 0.96 percent, at 2,771.96.
About 5.53 billion shares traded on the New York Stock
Exchange, NYSE Amex and Nasdaq so far in the session.
The Labor Department said payrolls rose by 192,000 in
February, slightly above the 185,000 gain expected by a Reuters
poll, and the unemployment rate unexpectedly dipped to 8.9
percent from 9 percent. [].
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SNAP ANALYSIS: U.S. jobs data showing some consistency
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Among consumer-related shares, the homebuilding sector was
hurt the most. The PHLX housing index <.HGX> fell 1.9 percent
with Weyerhaeuser <WY.N> down 2.8 percent to $23.44 and KB Home
<KBH.N>, Ryland Group <RYL.N> and MDC Holdings <MDC.N> all down
about 3 percent.
(Reporting by Angela Moon, Editing by Kenneth Barry)
