US stocks declined on Monday, led lower by financial shares, as a rush by savers to withdraw deposits at a large British mortgage lender fuelled worries the credit market turmoil would spread. Shares of US banks fell, including Citigroup Inc and Bank of America, as did investment banks and brokerages with mortgage market exposures.
Several big Wall Street companies will report earnings this week that investors fear could reveal a deeper impact from the credit rout. Thousands of savers pulled their deposits from Northern Rock, the fifth largest UK mortgage bank, after it was rescued by an emergency loan from the Bank of England on Friday. Northern Rock's shares plunged 35 percent.
"There are worries about that, and about broker earnings coming out this week. We're going to find out the extent that the credit crisis has hurt the earnings of these big investment banks," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average was down 37.47 points, or 0.28 percent, at 13,405.05. The Standard & Poor's 500 Index was down 6.67 points, or 0.45 percent, at 1,477.58. The Nasdaq Composite Index was down 16.56 points, or 0.64 percent, at 2,585.62.
On the Nasdaq, Microsoft Corp shares fell 1.2 percent to $28.69, weighing on both the S&P and the Nasdaq after it suffered a decisive antitrust defeat in Europe on Monday.
The US central bank is widely expected to lower rates on Tuesday to cushion the US economy from the financial turmoil. The Federal Reserve has not lowered rates by more than 25 basis points at a single meeting in almost five years, but this time some analysts feel a deeper cut is needed.
In further fallout from the subprime mortgage losses, Merrill Lynch & Co Inc said its subprime lending unit, First Franklin Financial Corp, is cutting jobs. Merrill's shares fell 2.3 percent to $72.94. Bank of America was down 0.9 percent at $49.50 and Citigroup fell 1.5 percent to $45.96. Morgan Stanley shares were down 2.2 percent at $64.70.