LONDON (ShareCast) - Concerns about the worsening health of the financial sector sends US stocks into a brisk retreat at the outset.

Across the markets, the Dow Jones 30 is down 176 at 11,886 and the broader based S&P 500 is 19 points lower at 1,323. The NASDAQ Composite is 45 points easier at 2,416.

MBIA is the day’s biggest faller after Moody's Investors Service downgraded it and fellow bond insurer Ambac Financial from triple A late last night. MBIA was cut to “A2” while Ambac was reduced to "Aa3".

Banks are friendless after Merrill Lynch suggested that investors are bailing out of regional bank stocks. National City, Suntrust Banks, Zions Bancorp, Regions Financials and Wachovia all occupy prominent positions among the laggards of the S&P 500.

Merrill Lynch itself is also among the major fallers in a financial sector that also sees mortgage finance companies Fannie Mae and Freddie Mac on the back foot after Lehman Brothers predicted burgeoning losses for the pair. Meanwhile rumours of that its second quarter results will feature more heavy write-downs is hitting Citicorp.

There are some bright spots in the financial sector, however. Hungtington Bancshares is higher after the regional bank assured shareholders that bad debts would be within the previously indicated range while Fifth Third Bancorp is wanted after Cincinnati Financial, its third largest shareholder, said it had no immediate plans to reduce its stake.

MF Global, the futures broker that was spun off from Man Group, loses about one-tenth of its value after Deutsche Bank reduced the share price target for the stock by 35%.

Continental and United Airlines-owner UAL both tumble after announcing a marketing alliance yesterday which they hope will raise revenue to offset the rising fuel costs.

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