* Worry over potential bank levy hits financials
* Alcoa misses forecasts, Chevron warns on Q4 profit
* Dow off 0.5 pct; S&P 500 off 1.1 pct; Nasdaq off 1.4 pct
* For up-to-the-minute market news, click []
(Updates to late afternoon, changes byline)
By Ellis Mnyandu
NEW YORK, Jan 12 (Reuters) - U.S. stocks slid in a broad
selloff on Tuesday as investors pummeled financials on concerns
about a potential government levy on banks, while Alcoa Inc's
disappointing results stoked unease about the economic
recovery.
Banks led the financial sector lower, with the KBW bank
index <.BKX> down nearly 2 percent, shares of Bank of America
<BAC.N> off 4.2 percent, and both Citigroup <C.N> and JPMorgan
<JPM.N> off 3 percent.
A senior U.S. official has confirmed President Barack
Obama is considering a levy on financial services firms to
recoup bailout losses as part of the fiscal 2011 budget he will
unveil in February.
It is unclear how much the Obama administration will seek
to recoup from banks, but a financial industry source in
Washington said on Tuesday the fee could raise more than $100
billion.
Investors feared that a levy might hurt bank profits at a
time when the sector was trying to recover from the financial
crisis, analysts said.
"Talk of a levy creates even more uncertainty for the
market and that's the reason for the financials to pull back,"
said Quincy Krosby, market strategist with Prudential Financial
in Newark, New Jersey. "The sooner they can clarify the rumors
the better for the market. Investors need to hear the specifics
regarding this potential proposal."
The Dow Jones industrial average <> shed 56.08 points,
or 0.53 percent, at 10,607.91. The Standard & Poor's 500 Index
<.SPX> dropped 12.10 points, or 1.05 percent, to 1,134.88. The
Nasdaq Composite Index <> slid 32.26 points, or 1.40
percent, to 2,280.15.
Shares of Alcoa, a Dow component, fell 11 percent to
$15.53, their biggest one-day percentage slide since March as
the aluminum company's weaker-than-expected results weighed on
sentiment.
Investors had hoped Alcoa would kick off the latest
quarterly earnings season on a positive note after their bets
on the economic recovery sent Wall Street to 15-month highs.
News that China's central bank was tightening monetary
conditions at a faster-than-expected pace in response to
increasing concerns about the economy overheating added to the
negative tone. []
Shares of other big manufacturers took a knock, with
Caterpillar Inc <CAT.N> sliding nearly 3 percent to $62.37.
Technology shares also fell, including Apple Inc <AAPL.O>, off
1.6 percent to $206.80.
The banking sector faced another potential hit after the
Federal Deposit Insurance Corp floated a proposal that banks
whose compensation plans encourage risk-taking would have to
pay more for deposit insurance. [].
Shares of big banks fared worse than their regional
counterparts. The Obama administration last estimated taxpayer
losses from TARP at about $141 billion on Dec. 6. Since then,
Citigroup, Wells Fargo and Bank of America have repaid their
government obligations.
Bank of America fell to $16.28, Citigroup dropped to $3.50
and JPMorgan fell to $43.21.
Chevron Corp <CVX.N> said its fourth-quarter profit would
be sharply lower than the previous quarter, sending its shares
down nearly 1 percent to $80.17.
Electronic Arts Inc <ERTS.O> cut its fiscal 2010 forecast,
citing weak holiday sales in Europe. The video game publisher
lost 8.3 percent to $16.74. [].
(Editing by Kenneth Barry)
