U.S. Stocks Shaky At The Open Amid Financial Sector Warnings

NEW YORK (MarketWatch) -- U.S. stocks started lower Monday, with a warning of a profit miss from broker E-Trade Financial Corp. and further signs of trouble at Countrywide Financial Corp. further fueling the investor anxiety that sent Wall Street tumbling last week.

"This negative sentiment continues to overshadow the market. Every time a stone is unturned, the subprime mess opens up," said Peter Cardillo, chief market economist at Avalon Partners.

After dropping at the start, the Dow Jones Industrial Average reversed course, rising 23.3 points to 13,066.0.

The S&P 500 fell 2.35 points to 1,451.35, while the Nasdaq Composite dropped 6.70 points to 2,621.24.

Late Friday, E-Trade backed off an earning forecast that the online broker made less than a month earlier, after the value of its asset-backed securities portfolio fell further.

E-Trade also said it was the target of an informal inquiry launched by the Securities and Exchange Commission regarding its loan and security portfolios, prompting at least one downgrade on its stock. .

Less than 10 minutes after the opening bell, E-Trade stock was down 45%.

Investors' focus on financial was also plain to see in financial results from Blackstone Group LP , the private-equity powerhouse that reported a third-quarter loss of $113.2 million from a year-ago profit of $372.5 million.

HSBC Holdings plc is expected to write down more than $1 billion on its portfolio of high-rise subprime U.S. mortgages, according to a Times of London report. The bank is scheduled to release third-quarter results for its U.S. unit on Wednesday, the newspaper reported.

And in a regulatory filing, troubled mortgage lender Countrywide Financial said if its credit ratings fall below investment grade, its access to the public corporate-debt markets "could be severely limited."

Adding to market jitters was a large industrial fire in London that caused stock futures to dip briefly before the start of U.S. trading. .

On the technology front, International Business machines Corp. said it would acquire business software maker Cognos Inc. for $5 billion in cash in a deal expected to close in the first quarter of 2008.

In early commodities trading, gold futures fell $29.40 to $805.20 an ounce, while crude-oil futures declined $2.73 to $93.59 a barrel.

By Kate Gibson