Stock futures fell on Monday after Goldman Sachs added Citigroup Inc to its sell list, citing prospects for more credit losses at the No. 1 U.S. bank.

Shares of Citigroup dropped more than 2 percent in Europe.

Separately, a Citigroup analyst upgraded the U.S. banking sector's shares.

Goldman said Citigroup could have to write off an additional $11 billion in the fourth quarter to reflect losses on securities linked to subprime mortgages and other investments.

The brokerage also cut its profit estimates for Citigroup through 2009.

We could see a new round of selling in some financial stocks, said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

A lot of investors had hoped there was a bottom in terms of the writedowns, but this quarter hasn't shown that there is a bottom.

S&P 500 futures fell 6.2 points and were below fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures dropped 40 points, and Nasdaq 100 futures slipped 9.25 points.

Goldman also cut its price target on Citigroup shares to $33, saying the bank will face many industry and company-specific challenges in the next six months.

In Europe, the head of Germany's Deutsche Bank said on Monday recent writedowns at major U.S. banks in the wake of a global credit crunch were rattling investor nerves again. Chief Executive Josef Ackermann also warned that credit-market problems could pressure the broader economy in Europe and the United States.

But Citigroup's Tobias Levkovich upgraded the U.S. banking sector to overweight from market weight, saying the shares' valuation was compelling.

Noting that his call on the sector may seem fairly controversial, Levkovich, the company's chief U.S. equity strategist, said that while the sector had taken some sharp hits due to the subprime woes, there appears now to be a pile-on effect that seems to be overdone.

U.S. stocks rose on Friday after a day of sharp price swings, helping the S&P 500 to narrowly avert a third straight week of losses. Bargain-hunting lifted the beaten-down technology sector, while shares of oil companies advanced on buoyant crude prices.

But shares of financial services companies fell on persistent worry that losses from mortgage defaults and the housing slump may worsen.

The S&P financial index notched its third straight day of losses, but was up for the week after a two-week losing streak.

(Editing by Kenneth Barry)

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