Dow Drops 370 Points

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Meanwhile, in the U.S., the Federal Reserve was pushing Citigroup (C) and rival Wells Fargo (WFC) to compromise over their competing bids for hobbled Wachovia Corp. (WB) that could result in them carving up its assets. Monday afternoon, the three companies announced that they have agreed to a standstill of all formal litigation activity effective immediately; cease any formal discovery activities; and cooperate in good faith to agree among themselves to secure orders here necessary in all applicable cases in all jurisdictions tolling any schedules for filing of litigation papers or court appearances or any other formal litigation deadlines, with goal of preserving status quo during the litigation standstill period.

After the market close, Bank of America (BAC) reported that earnings fell 68% to $1.18 billion, or 15 cents per share, for the July-to-September period from $3.7 billion, or 82 cents per share, in the same period last year. That missed analysts' forecast of 62 cents. To raise capital, Bank of America said it plans to sell $10 billion of common stock. It will also reduce its quarterly dividend to 32 cents from 64 cents.

Hartford Financial Services Group (HIG) announced a binding deal with Allianz SE (AZ), which provides for a $2.5 billion capital investment. Hartfor said Allianz will buy, at $31 per share, $750 million of preferred shares convertible to common stock after receipt of applicable approvals, $1.75 billion of 10% junior subordinated debentures. Hartford expects an $8.50-$8.80 third quarter loss per share (including $7.05-$7.25 in net realized capital losses), and $1.50-$1.60 core EPS before the effect of a DAC (deferred acquisition costs) unlock.

Fitch downgraded National City Corp. (NCC) and its National City Bank subsidiary's long and short-term Issuer Default Ratings (IDR). National City Corp.'s long-term IDR has been lowered to BBB+ from A while the bank's long term IDR has been lowered to A- from A. The bank and holding company's Individual rating has been lowered to C from B. Fitch placed all ratings on Negative Rating Watch.

Fitch said the near future is unlikely to offer National City Corp. any relief, and may very well result in additional asset quality problems as the economy weakens.