US STOCKS-Market drops on banks, big pharma; 3M weighs

                                
 * U.S. dollar slides; commodities, energy shares higher
                                
 * U.S. workers on jobless benefits hit record high
                                
 * Citi proposes exchange offer, reverse stock split
                                
 * Dow down 0.8 pct; S&P off 0.7 pct; Nasdaq off 0.4 pct
                                
 For up-to-the-minute market news, click [STXNEWS/US]
 (Updates to midday, changes byline)
                                
 By Rodrigo Campos
                                
 NEW YORK, March 19 (Reuters) - U.S. stocks fell on
Thursday due to profit-taking in financials, a drag from the
health-care sector and a bearish broker comment on 3M Co.
                                
 Investors were also unsettled by the implications of the
Federal Reserve's action to pump another $1 trillion into the
financial system, and the possibility of this stirring up
inflation in the long term.
                                
 Shares of diversified manufacturer 3M <MMM.N>, a Dow
component, dropped 3.2 percent to $47.64 after a brokerage cut
its price target, saying it saw near-term weakness in the
company's end markets. For details see [ID:nBNG446477]
                                
 Shares of large pharmaceuticals, including Pfizer <PFE.N>
and Merck <MRK.N>, fell more than 4 percent, making the sector
the top drag on the Dow industrials. A report said 2008 growth
of U.S. prescription drug sales was only about one third of
the growth in 2007. [ID:nN19514870]
                                
 Among financials, shares of JPMorgan <JPM.N> declined 7.5
percent to $25.11 as some investors opted to book profits
following the recent rally in bank shares. The KBW Bank index
<.BKX>, up 11 percent on Wednesday, slid 6.2 percent.
                                
 And Citigroup <C.N>  was down 7.1 percent at $2.86 after
it proposed an exchange offer of preferred shares that could
give the U.S. government a 36 percent stake in the bank. As
part of the plan, Citigroup would conduct a reverse stock
split. For details, see [nN19411332]
                                
 "There's so many cross currents in the market now. There
is rotation on a regular daily basis. One day people look at
financials favorably and having made money there, they sell
and move on," said Frank Husic, chief investment officer of
Husic Capital Management in San Francisco.
                                
 "Yesterday was a surprise day with the Fed actions. No one
in general was expecting the Fed to be as aggressive. There is
a knee-jerk reaction to move to gold and inflation
beneficiaries, and those groups were pretty heavily shorted
groups, so there's a lot of short covering in material stocks
and commodity stocks as well."
                                
 The Dow Jones industrial average <.DJI> dropped 59.90
points, or 0.80 percent, to 7,426.68. The Standard & Poor's
500 Index <.SPX> fell 5.53 points, or 0.67 percent, to 789.00.
The Nasdaq Composite Index <.IXIC> lost 5.84 points, or 0.39
percent, to 1,485.38.
                                
 In economic news, the number of U.S. workers drawing
continuous state unemployment benefits hit a fresh record high
early this month, according to government data that
highlighted the difficulties of getting new jobs in the
recession-hit economy. [ID:nN19413310]
                                
 But a weaker dollar following the Fed's action on
Wednesday also helped boost commodity prices and lift shares
in the energy and materials sectors, cushioning the market.
                                
 Shares of Chevron <CVX.N> rose 2.2 percent to $68.06 as
U.S. front-month crude <CLc1> jumped 6.5 percent to $51.25 a
barrel. Shares of U.S. Steel <X.N> surged 12.5 percent to
$21.56.
                                
 Also on the upside, auto parts suppliers' shares soared
following a pledge by the U.S. Treasury to provide the sector
up to $5 billion in financing support to help them survive a
massive downturn in car sales. [ID:nWAT011182]
                                
 Lear Corp <LEA.N> nearly doubled to $1.33 while Tenneco
<TEN.N> leaped 31 percent to $2.70. The Dow Jones automobiles
and parts index <.DJUSAP> rose 2.7 percent.
 (Editing by Jan Paschal)