* Worry over potential bank levy hits financials
* Alcoa misses forecasts, Chevron warns on Q4 profit
* Dow off 0.3 pct; S&P 500 off 0.9 pct; Nasdaq off 1.3 pct
* For up-to-the-minute market news, click []
(Adds volume)
By Ellis Mnyandu
NEW YORK, Jan 12 (Reuters) - U.S. stocks slid in a broad
selloff on Tuesday as investors pummeled financials on concerns
about a potential government levy on banks, while Alcoa Inc's
disappointing results tempered optimism about the economic
recovery.
The benchmark S&P 500 broke a six-day streak of gains as
banks led the financial sector lower, sending the KBW bank
index <.BKX> down almost 2 percent. Shares of Bank of America
<BAC.N> dropped 3.4 percent, while Citigroup <C.N> shed 3
percent and JPMorgan <JPM.N> declined 2.3 percent.
President Barack Obama is considering a levy on financial
services firms to recoup losses from the Troubled Asset Relief
Program as part of the fiscal 2011 budget, according to a
senior U.S. official.
The potential fee could raise as much as $120 billion to
cover taxpayer losses stemming from government bailouts,
according to official sources.
Investors feared that a levy might hurt bank profits at a
time when the sector was trying to recover from the financial
crisis, analysts said.
"Talk of a levy creates even more uncertainty for the
market and that's the reason for the financials to pull back,"
said Quincy Krosby, market strategist with Prudential Financial
in Newark, New Jersey. "The sooner they can clarify the rumors
the better for the market."
The Dow Jones industrial average <> dropped 36.73
points, or 0.34 percent, to 10,627.26. The Standard & Poor's
500 Index <.SPX> fell 10.76 points, or 0.94 percent, to
1,136.22. The Nasdaq Composite Index <> slid 30.10 points,
or 1.30 percent, to 2,282.31.
Shares of Alcoa, a Dow component, fell 11.1 percent to
$15.52, their biggest one-day percentage slide since March
after the aluminum company's weaker-than-expected results.
Investors had hoped Alcoa would kick off the latest
quarterly earnings season on a positive note after their bets
on a more upbeat economic recovery sent Wall Street to 15-month
highs.
News that China's central bank was tightening monetary
conditions in response to increasing concerns about the economy
overheating added to the negative tone. []
Any potential pullback in Chinese demand will be a major
setback for exporters, which include commodity companies like
Alcoa. Shares of other big manufacturers fell, with Caterpillar
Inc <CAT.N> sliding nearly 3 percent to $62.24 and Newmont
Mining <NEM.N> falling 3.3 percent to $48.52.
The S&P materials <.GSPM> index declined nearly 2 percent.
Technology, which along with financials led the market's
run-up from the March 2009 lows, was not spared. Apple Inc
<AAPL.O> shares fell 1.1 percent to $207.72. The semiconductor
index <.SOXX> slid 3.6 percent.
The banking sector faced another potential hit after the
Federal Deposit Insurance Corp floated a proposal that banks
whose compensation plans encourage risk-taking would have to
pay more for deposit insurance. [].
Shares of big banks fared worse than their regional
counterparts.
Bank of America, which on Tuesday was sued by U.S.
securities regulators for a second time over its takeover of
Merrill Lynch & Co, fell to $16.36, while Citigroup dropped to
$3.52 and JPMorgan fell to $43.49.
Chevron Corp <CVX.N> said its fourth-quarter profit would
be sharply lower than the previous quarter, sending its shares
down 0.6 percent to $80.41. Electronic Arts Inc <ERTS.O> cut
its fiscal 2010 forecast. The video game publisher lost 7.8
percent to $16.85. [].
Volume on the New York Stock Exchange was 1.10 billion
shares, below last year's estimated daily average of 2.18
billion. On the Nasdaq, about 2.40 billion shares traded, above
last year's daily average of 1.63 billion.
Declining stocks outnumbered advancing ones on the NYSE by
a ratio of more than 5 to 2, while on the Nasdaq as well the
ratio of decliners to gainers was about 5 to 2.
(Editing by Kenneth Barry)
