Market falls on dim outlook for financials

Stocks fell on Tuesday after a brokerage cut its earnings outlook for major Wall Street companies and as uncertainty about the outlook for a credit crisis recovery mounted.

Shares of Goldman Sachs, Lehman Brothers, Merrill Lynch MER.N and Morgan Stanley fell after JPMorgan Chase cut its earnings estimates on the brokerages, citing writedowns, slowdowns in mergers and acquisitions and reduced opportunities for other fees.

Stocks fell on Monday, snapping a four-day streak of gains that was fueled by raised expectations for an interest-rate cut by the Federal Reserve.

Financials are the main story, said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. We had the rate cut rally and now we have a jolt back to reality. The reality being, a slower economy and slower earnings.

The Dow Jones industrial average .DJI was down 65.68 points, or 0.49 percent, at 13,248.89. The Standard & Poor's 500 Index .SPX was down 10.64 points, or 0.72 percent, at 1,461.78. The Nasdaq Composite Index .IXIC was down 18.42 points, or 0.70 percent, at 2,618.71.

Adding to gloom on Wall Street, the U.S. Treasury official in charge of debt management said on Tuesday that the process of rebuilding confidence in financial markets will be long and slow.

Goldman Sachs cut its forecast for 2007 and 2008 operating earnings per shares for S&P 500 companies.

Goldman shares were down 2.7 percent to $220.77. Merrill shares were down 3.3 percent to $57.09. Lehman was down 3 percent at $59.56.

On the upside, shares of Dell rose 1.5 percent to $24.29 after the computer maker said its board has authorized a $10 billion stock repurchase plan and that it will resume buying back stock this week.

Shares of Merck & Co Inc were down 3 percent to $57.03 after the blue-chip drug maker gave an earnings forecast for 2008 whose range was mostly below expectations.

(Editing by Kenneth Barry)