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Updated from 2:18 p.m. EDT

Financial stocks were pressed lower Monday by the sinking broad market and further evidence of the credit-market crunch.


( CFC) stock helped pressure the


Financial Sector Index -- lately down 0.4% -- on late Friday's news the lender may

lay off 10,000 to 12,000 workers

, or up to 20% of its headcount, "in areas most impacted by lower mortgage market origination volumes." This will occur over the next three months. Shares closed off $1, or 5.5% to $17.21.

Zions Bancorp

(ZION) - Get Free Report

, meanwhile, took a hit after Friedman Billings cut the stock to market perform from outperform. The analyst cited broad-market concerns, saying the bank will be affected by what he believes will be very slow growth in the housing and debt markets.

Shares of the Salt Lake City bank sank 2.4%, to help pull down the KBW Bank Index, which lost 0.3%, to 102.97.

Another member of the index,

Washington Mutual

(WM) - Get Free Report

, slipped after CEO Kerry Killinger said the bank might have to boost its predicted 2007 loan-loss provision by another $500 million. He also said the housing industry is spiraling into a "near perfect storm." Shares shed 28 cents to close at $34.74.

On the other hand, life-and-health insurer

KMG America


rocketed 66.5% in furious trading after


(HUM) - Get Free Report

agreed to buy it for $6.20 a share in cash. The deal, which is worth some $187.7 million including debt assumption, should close in the first quarter of next year.

KMG shares soared $2.32 to close at $5.81; Humana, which expects earnings accretion of 4 cents to 5 cents a share next year, tacked on 28 cents to close at $63.86.

In more M&A news,

Great Lakes Bancorp


jumped 9.2% to close at $13.10 after agreeing to a roughly $153 million takeout by

First Niagara Financial


. That pricing pans out at roughly $14 a share in cash and stock. The transaction will likely close in the first quarter of 2008. First Niagara slid 3.7% to close at $13.39.

Elsewhere, education lender

First Marblehead


climbed 7.3% after saying it plans to sell private student loans in a securitization that should raise about $2.8 billion. The transaction should close on or around Sept. 20. Shares closed at $34.55.

In positive analyst research, finally,

Webster Financial

(WBS) - Get Free Report

added 2.2% to close at $43.46 after Bear Stearns upped the bank to peer perform from underperform and boosted its 2008 estimates, citing a recently improved balance sheet and less earnings volatility. Payment processor

Euronet Worldwide

(EEFT) - Get Free Report

ticked up 31 cents to close at $26.82 after A.G. Edwards stamped on a buy rating.