Updated from 1:19 p.m. EDT

Sliding names like Merrill Lynch ( MER) were the norm for financial stocks Friday as the sector generally underperformed the major indices.

New York-based Merrill gave up 0.7% after saying that "credit market conditions have continued to remain challenging in the third quarter" and that it "has made requisite fair value valuation adjustments" regarding certain exposures -- the risk of which, as it had stated in its most recent quarterly filing, "could adversely impact ... results of operations." These adjustments "are reflected in our third quarter to date results," the broker said today. Shares closed off 49 cents to $74.65.

Merrill also cited broad-market concerns in cutting American Express ( AXP) to neutral from buy Friday. The credit-card company could suffer, said Merrill, from the consumer-spending and employment downturns that might result from housing and financial-market woes. The New York-based company lost 2.7% to close at $58.94.

In earnings, personal auto insurer First Acceptance ( FAC) plummeted 34.8% to $5.05 after swinging to a fiscal fourth-quarter loss of $23.9 million, or 50 cents a share, from a 30-cent per-share profit last year. Fellow insurer Progressive ( PGR) said its August income plunged 37.3% year over year to $76.9 million, or 11 cents a share, as the value of premiums written and earned slipped from last year. Shares lost 2%.

Elsewhere, New York credit-ratings firm Moody's ( MCO) shed 0.9% after privately selling $300 million in senior unsecured bonds. Shares closed at $44.38.

The NYSE Financial Sector Index, pressured by all of the above stocks, was down about 7 points to 8956.85. The KBW Bank Index was up 0.4% at 106.

On the sparse upside today, meanwhile, Illinois-based Calamos Asset Management ( CLMS) gained on a Credit Suisse upgrade to outperform. The analyst cited improved fund performance and net flow expectations, and raised his price target by $2 to $29. Cincinnati bank Fifth Third ( FITB) was upped to market perform from underperform at Keefe Bruyette.

Calamos spiked $1.73, or 7.4%, to $25.24; Fifth Third tacked on 36 cents to $34.77.

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