Stocks Open Week With Thud

Updated from 4:14 p.m. EST

Stocks in New York opened the week with steep losses Monday, putting the blue-chip Dow Jones Industrial Average and S&P 500 at levels not seen since 1997, despite a comparatively good day for the beaten-down banking sector.

The Dow lost 250.89 points, or 3.4%, to 7114.78, and the S&P was off 26.72 points, or 3.5%, at 743.33. The Nasdaq fell 53.51 points, or 3.7%, to 1387.72.

Despite a better-than-normal day for the large financials, the market didn't have much help otherwise. Word that a new round of government aid could be approaching for Citigroup (C), rather than a full-scale takeover of the institution that some investors had been fearing, lifted the company's shares 9.7% to $2.14.

The advance in Citigroup followed a report in The Wall Street Journal that Washington might convert its preferred shares in the bank to common equity.

While that would dilute the existing common stockholders, it appears to ensure that at least some interest in the company would remain privately held. Shares of Citi have been under extreme selling pressure in recent days as traders fretted that the common stock could be wiped out amid a government nationalization of troubled financial-services firms.

Fellow Dow stock Bank of America (BAC) rose 3.2% to $3.91. Only BofA and Citi closed higher among the 30 stocks on the industrial average. JPMorgan Chase (JPM), which had been positive for part of the session, ended lower by 2% at $19.51.

General Electric (GE) was another drag on the session, falling 5.7% to a multiyear low at $8.85 on worries about its real estate holdings.