* Financial shares drop on credit worries
* Big industrials down on economy fears
* IMF trims world growth forecasts -source
* Dow, S&P 500 and Nasdaq all down about 2 percent
(Updates to midday)
By Deepa Seetharaman
NEW YORK, Aug 25 (Reuters) - U.S. stocks slid on Monday on
persistent credit concerns and worries about the impact of
slowing global growth on big industrial companies.
American International Group Inc <AIG.N>, the world's
biggest insurer, was among the top drags on the Dow as its
shares fell to a 13-year low after Credit Suisse cut both its
price target and its third-quarter earnings estimate, citing
bigger losses from its derivatives business.
The financial sector was also weighed down by an 8 percent
drop in the shares of Lehman Brothers <LEH.N>, after a top
South Korean regulator voiced concern about state-run Korea
Development Bank's interest in buying a global bank. KDB on
Friday had said Lehman was among its acquisition options. For
details, see [].
Among industrial conglomerates that have big overseas
exposure, Caterpillar Inc's <CAT.N> shares shed 2.6 percent,
making it the biggest drag on the Dow.
Adding to the gloomy sentiment, the International Monetary
Fund trimmed its forecasts for 2008 and 2009 world economic
growth in a note prepared for a meeting of the Group of 20
nations, a G20 finance official told Reuters.
"It's going to be the tug of war that's going on as far as
market sentiment goes as to what inning are we in here on the
housing, financial, credit crisis," said Paul Nolte, director
of investments at Hinsdale Associates, in Hinsdale, Illinois.
"It's hard to value a lot of these (financial) companies at
this point," Nolte said. "Are we going to see additional
fallout from financials?"
The Dow Jones industrial average <> slipped 234.57
points, or 2.02 percent, at 11,393.49. The Standard & Poor's
500 Index <.SPX> dropped 24.53 points, or 1.90 percent, at
1,267.67. The Nasdaq Composite Index <> fell 50.24 points,
or 2.08 percent, at 2,364.47.
Further fueling concerns that there could be more fallout
from the credit crisis, bank regulators closed Columbian Bank
and Trust Company late on Friday, the ninth U.S. bank to fail
this year as the weakening economy and falling home prices take
a toll on financial institutions. []
In addition, the price of oil edged up, prompting concerns
about the impact of higher fuel costs on consumer spending and
profits.
Still, financials were the focus of Monday's market, Nolte
said, adding that if the "financial malaise" continues it could
further weigh on economic growth and profits.
Mortgage finance company Freddie Mac's <FRE.N> shares rose
more than 22 percent to $3.44 after solid demand for its $2
billion bill sale eased some worries about its ability to raise
cash. Shares of Fannie Mae <FNM.N>, the top U.S. home finance
provider, rose 8.8 percent to $5.44.
Fannie and Freddie "are on everyone's mind. It's a lot of
speculation but no developments," said Al Kugel, chief
investment strategist for Atlantic Trust in Chicago.
Investors increasingly believe in the likelihood of a
government bailout for the two companies.
Shares of Lehman fell 8 percent to $13.24. Lehman's shares
had soared on Friday after KDB said it was open to the
acquisition of an overseas financial institution, naming Lehman
as one option.
AIG's shares fell 5.8 percent to $18.71, after falling as
low as $18.64. Late on Friday, Fitch Ratings said it may cut
AIG's credit ratings.
An index of S&P financial companies <.GSPF> lost about 2.7
percent.
Industrial conglomerates were among the biggest sector
decliners on the S&P 500. Caterpillar fell almost 3 percent to
$68.23, while 3M <MMM.N> shed 2.7 percent to $70.34.
Technology shares also fell amid concerns about the global
economy. Apple Inc <AAPL.O>, whose shares fell 2 percent, was
the biggest pull on both the S&P 500 and the Nasdaq.
Blackberry-maker Research in Motion, whose shares fell
nearly 3 percent, <RIMM.O> was another major drag on the
Nasdaq.
On the economic front, the National Association of Realtors
said the pace of existing-home sales rose in July but the
inventory of homes hit a record high. The Dow Jones home
construction index <.DJUSHB> fell 1.9 percent.
(Editing by Leslie Adler)
