(Refiles to fix typo in headline)
(Updates to midday, changes byline)
*Financial stocks tumble on credit jitters
*Tech, retail sectors gain on economic data
*Oil, gold prices seen swaying market direction
By Walker Simon
NEW YORK, May 28 (Reuters) - U.S. stocks fell in choppy
trading on Wednesday as renewed fears about the health of the
financial sector overshadowed stronger-than-expected data on
business investment that suggested an improving economy.
American International Group <AIG.N>, the world's largest
insurer, fell 4.6 percent and dragged the major indexes lower
after Citigroup said the insurer may need even more capital
after raising $20 billion just last week.
Deepening concerns about the banking sector, KeyCorp
<KEY.N> said mounting loan losses could cause write-offs to
double from its prior forecast, sending its shares more than 11
percent lower.
But government data showing a surprise jump in business
investment last month, combined with a steadying oil price and
retailers' profits, bolstered the view the economy might be in
better shape than had been feared.
The retail sector gained after Polo Ralph Lauren Corp
<RL.N> reported sharply higher quarterly profit on Wednesday
that soared past Wall Street estimates, sending the clothing
maker's shares up 11 percent to $68.46.
"You have a tug of war going on between the good news and
the bad news," said Jim Awad, chairman of W.D. Stewart and Co.
Ltd. in New York. "The good news (is) business spending and
Ralph Lauren profits, and the bad news is the financials
downgrades and Key Corp."
The Dow Jones industrial average <> was down 45.43
points, or 0.36 percent, at 12,502.92. The Standard & Poor's
500 Index <.SPX> was down 6.50 points, or 0.47 percent, at
1,378.85. The Nasdaq Composite Index <> was down 14.85
points, or 0.60 percent, at 2,466.39.
"The swing factor that will referee this and push (the
market) one way or another will be oil and gold," he added.
Underscoring concerns about the outlook for financial
stocks, J.P. Morgan Securities cut its profit view on three
large U.S. investment banks and suggested investors avoid the
brokerage sector as earnings estimates continue to appear too
bullish.
Stocks started the session in positive territory, helped
by pullback in oil prices. Crude oil futures <CLc1> which had
fallen more than $2 a barrel, reversed course to rise $1.45 to
$130.29 a barrel.
Gold bounced off a two-week low as oil reversed its losses,
highlighting the metal's appeal as a hedge against inflation.
Spot gold <XAU=> was trading at $900.50 an ounce, up from an
earlier low of $889.35 but down from Tuesday's $907.10.
The news on KeyCorp, a large Midwest bank, rattled other
regional banks.
Ohio-based Fifth Third, <FITB.O> fell 3.41 percent to
$18.87 and Texas-based Comerica <CMA.N> fell 4.8 percent to
$35.31.
"The KeyCorp news last night showed we are not out of the
woods yet in financials," said Kurt Brunner, portfolio manager
at Swarthmore Group in Philadelphia, Pennsylvania.
Shares of AIG fell 4.7 percent to $34.89.
