Financial stocks dropped Friday as higher oil prices and a disappointing report on consumer spending and income weighed on the broader market.

The NYSE Financial Sector Index fell 0.7% and the

Dow Jones Industrial Average

fell 1% in morning trading.

Bank of New York Mellon

(BK) - Get Report

slumped 2.6% to $34.48. The company said Thursday that a data breach first disclosed in May involves information from 12 million individuals, about 8 million more than it initially reported.

Bond insurers gave up much of the

previous day's gains , with

MBIA

(MBI) - Get Report

declining more than 6% to $15.16, and

Ambac

(ABK)

down 4.5% to $7.09.

Government-supported mortgage giants

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

reversed course after a week of dramatic gains, dropping 12.2% to $6.98 and 13.1% to $4.59, respectively.

Indications that the credit crunch has spread to the shores of Puerto Rico also affected some stocks.

Popular

(BPOP) - Get Report

said Friday that it will take a $450 million loss to exit its U.S. mortgage business. Popular is selling $1.17 billion worth of mortgage and servicing assets to

Goldman Sachs

(GS) - Get Report

for a price of $700 million.

Popular shares rallied more than 20% following the news, but were recently trading up 11.6% at $8.07. Goldman rose to $162.86.

The Puerto Rico arm of Spanish banking giant

Banco Santander

(STD)

reported a

management shake-up and said it would halt its dividend on common shares, citing "continuing challenging general economic conditions in Puerto Rico and the global capital markets." Santander shares dropped 14 cents to $16.99.

Beleaguered regional bank

BankAtlantic

(BBX) - Get Report

surged 17.3% to $1.76 after major stockholder

BFC Financial

(BFF)

said it had bought 2 million shares over the past 10 days.

"BankAtlantic Bancorp's stock price has been unfairly depressed largely due to misinformation provided to the market," BFC CEO Alan Levan said in a statement.

BankAtlantic's stock has been hurt by

a report suggesting it may be in danger of collapsing. BFC shares also surged following its disclosure, recently trading up 19.2% to 62 cents, but had risen earlier as high as $3.99.