Updated from 4:14 p.m. EDT

Stocks in the U.S. closed with modest losses Monday as worries about the health of the financial sector continued to swirl.

The

Dow Jones Industrial Average

lost 51.70 points, or 0.4%, to 13,543.40, and the

S&P 500

was down 7.48 points, or 0.5%, at 1502.17. The

Nasdaq

gave back 15.20 points, or 0.5%, at 2795.18.

Weighing on the mood all day was news out of

Citigroup

(C) - Get Report

that it would record writedowns of as much as $11 billion to cover added losses on mortgage-backed securities and collateralized debt obligations, an announcement that came as CEO Chuck Prince resigned under pressure.

Citi also restated its third-quarter profit lower by $166 million to fix the value of certain debt obligations, and its shares were down 4.9% to $35.90, a 52-week low.

Uncertainty about how deep the credit crisis really is have had the markets on edge since the summer, and despite the occasional sign that it's clearing up, big banks and financial companies continue to reveal that they still don't have a firm grasp on just how much pain they'll ultimately feel.

Indeed,

Federal Reserve

Governor Frederic Mishkin said during a speech that the stress of the past few months "has reminded investors and policymakers alike that financial instability, if allowed to develop fully, could have severely negative consequences not only for the functioning of financial markets but also, importantly, for the macroeconomic prospects of our country, as well as others."

During its past two meetings, Fed policymakers have moved to settle things down by cutting the fed funds target rate by a combined 75 basis points.

Those actions "should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and should help promote moderate growth over time," Mishkin said.

He also said that he "will want to carefully assess incoming data and gauge the effects of financial and other developments on economic prospects before considering further policy action."

Another Fed governor, Randall Kroszner, said in Washington that "conditions for subprime borrowers have the potential to get worse before they get better," because housing activity appears to still be weakening and the bulk of rate resets have yet to come.

Also pressuring the financials was a Lehman Brothers downgrade of the U.S brokerage sector to neutral from positive.

Bear Stearns

(BSC)

and

Merrill Lynch

(MER)

were both taken down to equal-weight from overweight, and the stocks lost more than 2%.

The KBW Bank Index was worse by 0.9%, and the NYSE Financial Sector Index was off 1.6%. The Amex Securities Broker/Dealer Index fell 2.7%.

World indices were weak along with the New York market. London's FTSE was down 1.1%, and Frankfurt's Dax slipped 0.5%. Overnight, Tokyo's Nikkei dropped 1.5%, and Hong Kong's Hang Seng sank 5%.

One of the top stories overseas was

PetroChina

(PTR) - Get Report

, whose global market value surpassed $1 trillion after its listing of shares in Shanghai, making it the biggest company in the world.

After the stock offer, Bear Stearns downgraded PetroChina to underperform from peer perform, citing its valuation. PetroChina's U.S.-listed shares plunged 12.9% to $222.10.

Meanwhile,

Home Depot

(HD) - Get Report

and

Lowe's

(LOW) - Get Report

each declined after Deutsche Bank cut its ratings on both home-improvement retailers to hold from buy.

Elsewhere, a few notable earnings were coming in.

Marvel Enterprises

(MVL)

topped estimates for the latest quarter and guided higher, while

Burger King

(BKC)

was essentially in line with expectations.

Treasuries were lower. The 10-year note was down 5/32 in price, yielding 4.34%, and the 30-year bond surrendered 8/32, yielding 4.63%. The dollar was mostly to the downside.

As for commodities, oil was down $1.95 to $93.98 a barrel, and gold was up $2.30 at $810.80 an ounce.

The session's lone economic report was the Institute for Supply Management's services index, which came in stronger than expected at 55.8. The consensus estimate was 54.