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Updated from 2:44 p.m. EDT with new stock prices

Government probes and various other crushing news helped pull financial stocks even lower than the waffling broad market Friday.

Merrill Lynch

( MER) was once again on the downswing, after

The Wall Street Journal

reported that the

Securities and Exchange Commission


looking into its asset-valuation practices. Regulators want to know exactly how much the New York broker knew regarding its mortgage difficulties vs. what it had disclosed to investors over the summer. Merrill's exposure to bad debt ultimately induced

colossal third-quarter writedowns, as it reported last week.

Merrill shares slid 7.9% as


(C) - Get Citigroup Inc. Report

gave up 2% and

Goldman Sachs

(GS) - Get Goldman Sachs Group Inc. (The) Report

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shed 4.4% on whispers of

big writedowns of their own.


Washington Mutual

(WM) - Get Waste Management Inc. Report


First American

(FAF) - Get First American Corporation (New) Report

were still declining a day after New York Attorney General Andrew Cuomo announced that he had sued First American unit eAppraiseIT for allegedly scheming with WaMu to

inflate house appraisals. WaMu said it halted its relationship with eAppraiseIT pending further internal investigation.

First American shares were off 0.3% to $30.40. WaMu tumbled 7.5% to $23.81, joining with Citi to weigh on the KBW Bank Index, which was falling 0.3% to 100.86.

Ambac Financial

( ABK), meanwhile, lost 20.5% after Goldman cut the stock to neutral from buy, citing concerns that the financial guaranty insurer might need to raise more capital. Shares of the New York firm were down $6.06 to $23.51.

National Financial Partners


, a New York-based insurance broker, surrendered 4.9% to $50.37, after estimating third-quarter "cash" earnings of 74 cents to 75 cents a share. That would come in at least 8 cents short of the average analyst estimate, according to Thomson Financial.

San Francisco broker

Thomas Weisel Partners

( TWPG) reported dwindling non-GAAP third-quarter earnings of a penny a share, or 9 cents shy of expectations, and

Nationwide Financial Services

( NFS) was two cents under with an operating profit of $1.09 a share.

Thomas Wiesel was down $2.37, or 16.4%, to $12.05. Nationwide Financial slumped 4.9% to $50.00.



Financial Sector Index, which tracks all but one of the above stocks, was losing about 98.95 points, or 1.1%, to 8,931.81.

But one of the sector's biggest price gainers was Georgia's

GB&T Bancshares

( GBTB), which leapt 20.8% after agreeing to a stock-swap merger with

SunTrust Banks

(STI) - Get SunTrust Banks, Inc. Report

worth roughly $153.7 million. That pans out at about $10.80 per GB&T share, as of SunTrust's closing price Thursday. The deal should close in the second quarter of next year.

GB&T was rising $1.83 to $10.63. SunTrust slipped 92 cents, or 1.3%, to $68.21.

Also gaining ground was New York brokerage

GFI Group


, which said third-quarter income shot up 53.1% from last year. Excluding items, the company posted a profit of $27.6 million, or 92 cents a share, on surging revenue of $254.7 million. Analysts were looking for just 86 cents a share on a top line of $249.1 million. Shares tacked on 10.27% to $90.60.

Elsewhere, online health insurance agency


(EHTH) - Get eHealth Inc. Report

upped its 2007 top- and bottom-line guidance to above-par ranges and beat third-quarter expectations, spurring shares 15.8% higher. And


( SWIM), which offers online brokerage and investor-education services, swung to a quarterly profit of $13 million, or 19 cents a share, from a year-ago loss. That smashes analysts' dime-a-share targets. Shares climbed 5.9% to $15.05.