* Dubai to ask creditors for debt standstill
* Stocks off lows in sign that risk appetite returns
* Dow drops 1.3 pct, S&P off 1.6 pct, Nasdaq off 1.4 pct
* For up-to-the-minute market news, click []
(Updates to add bank analyst's comment, declines in financial and
commodity-related stocks, details on dollar and oil prices)
By Edward Krudy
NEW YORK, Nov 27 (Reuters) - U.S. stocks fell more than 1 percent
on Friday as a possible debt default by a Dubai state-owned
conglomerate increased investors' uncertainty about the financial
system's strength.
U.S stocks sold off broadly, sliding 2 percent or more at the
opening, but selling was concentrated mainly in the financial and
commodity-linked sectors as investors pared positions in areas of
the market most sensitive to economic uncertainty.
But by midday, the flight to less risky assets seemed to be
subsiding, helping the major U.S. stock indexes recover from intraday
lows. The U.S. dollar, which had jumped sharply as investors looked
for a safe haven, pared gains and commodity prices stabilized.
Fears of a contagion effect from Dubai appeared to be ebbing
among investors as. European shares closed higher after a sharp
sell-off in the previous session.
"There were some big concerns overseas yesterday that you might
see a mushrooming effect from the Dubai World credit problems. But at
least so far in the U.S. markets, a lot of that has been shrugged
off," said Michael James, senior trader at Wedbush Morgan, a regional
investment bank in Los Angeles.
The Dow Jones industrial average <> dropped 140.12 points, or
1.34 percent, to 10,324.28. The Standard & Poor's 500 Index <.SPX>
fell 17.16 points, or 1.55 percent, to 1,093.47. The Nasdaq Composite
Index <> lost 29.50 points, or 1.36 percent, to 2,146.55.
At its session low, the Dow touched 10,231.25 earlier in the day,
when the S&P 500 fell as low as 1,083.74, and the Nasdaq dropped as
low as 2,113.99.
On Wednesday, Dubai said it would ask creditors of state-owned
Dubai World and Nakheel, the builder of its palm-shaped islands, for
a standstill agreement as a first step toward restructuring billions
of dollars of debt. For details, see []
It was uncertain how much exposure U.S. banks have in Dubai. But
influential bank analyst Richard Bove said in a note "it does not
appear that American banks have any major direct impact from this
event."
Bank of America <BAC.N> fell 2.2 percent to $15.60, while
Citigroup <C.N> tumbled 2.2 pct to $4.08. The two stocks were the
most heavily traded on the New York Stock Exchange.
Commodity-linked stocks sold off sharply but stabilized after the
U.S. dollar pared gains and helped lift commodity prices off their
lows.
Even so, Dow component Alcoa Inc <AA.N> fell 2.2 percent to
$12.71, while gold miner Newmont Mining Corp <NEM.N> lost 2.3 percent
to $53.66.
The U.S. dollar rose 0.3 percent against a basket of currencies
<.DXY>, after earlier climbing around 1 percent. U.S. crude futures
for January <CLc1> dropped $3.06, or nearly 4 percent, to $74.90 a
barrel. Dow component Exxon Mobil Corp <XOM.N> shares fell 2 percent
to $74.96 on the New York Stock Exchange.
On Thursday, U.S. financial markets were closed for the
Thanksgiving holiday in the United States.
But financial markets around the world shuddered, reflecting
fears about the impact of a potential Dubai debt default.
Friday's U.S. stock trading session is abbreviated, with the
market close set at 1 p.m. (1800 GMT).
(Reporting by Edward Krudy; Editing by Jan Paschal)
((edward.krudy@thomsonreuters.com; Tel: +1 646-223-6314;
Reuters Messaging: edward.krudy@reuters.com@reuters.net))
