Financial worries, GE push Wall Street lower

NEW YORK (Reuters) - Stocks fell in choppy trading on Tuesday, led by a drop in shares of General Electric and lingering worries about the financial sector that derailed an advance spearheaded by technology companies.

Concern about whether a proposed $700 billion financial sector bailout will thaw frozen credit markets or help revive the struggling U.S. economy also weighed on the market even as congressional debate about the plan heated up in Washington.

GE, down more than 4 percent at $25, was a top drag on both the Dow and the S&P 500, after an analyst at Goldman Sachs cut the profit outlook on the diversified manufacturer.

Downgrades also weighed on shares of Citigroup , down some 7 percent, and Bank of America , off 4.3 percent, the first and second largest U.S. banks, respectively.

Earlier, technology bellwethers, including Microsoft Corp , led the market higher on hopes that the government's rescue plan would loosen up lending and boost spending.

While Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged Congress to pass the plan, some investors were skeptical it would prove a panacea for the market.

"If they pass this bill, maybe you'll get a short relief rally, but there are still a lot of problems we haven't solved," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"The big question is 'Will the banks lend if they get their balance sheets cleaned up?' We need that money to start flowing again, but if the unemployment rate is going up, banks might be a little hesitant. So in the short run, the path of least resistance for stocks is down."

The Dow Jones industrial average was down 157.86 points, or 1.43 percent, at 10,857.83. The Standard & Poor's 500 Index was down 19.61 points, or 1.62 percent, at 1,187.48. The Nasdaq Composite Index was down 23.07 points, or 1.06 percent, at 2,155.91

A drop in global commodity prices hurt shares of natural resource companies, including aluminum producer Alcoa , down nearly 4.2 percent at $25.66.

Citigroup fell more than 7,2 percent to $18.54 while Bank of America shares shed 4.3 percent to $32.64.

Oppenheimer & Co. bank analyst Meredith Whitney cut her profit outlook on both and forecast more dividend cuts for banks, saying the government's bailout plan had little hope of improving core fundamentals over the near and medium term.

General Electric fell 4.9 percent to $24.87 after an analyst at Goldman Sachs cut the profit outlook on the diversified manufacturer.

Microsoft, a Dow component, pared earlier gains but remained up 1.8 percent, making it a top gainer for the Nasdaq, though iPod maker Apple Inc fell 1.1 percent $129.64, reversing earlier gains.

Technology shares are considered among the better placed to gain if the government's bailout plan is passed, analysts said.

"If they can free up lending as a result of this package, I think that will spur business. If you want to capitalize on a recovery in the fourth quarter, you're going to go into growth stocks and that's in tech," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

Bernanke told the Senate Banking Committee, "Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy."

(Additional reporting by Ellis Mnyandu; Editing by Kenneth Barry)