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Wall St dips, Citigroup shares tumble

Thursday, March 27 15:08:28

U.S. stocks fell today as a report showing modest economic growth in the fourth quarter was not viewed as positive enough to offset lingering geopolitical uncertainties, with the S and P 500 near record levels.

Markets were also pressured by a steep decline in Citigroup Inc shares, which suffered their biggest daily drop since November 2012 after the Federal Reserve rejected the bank's capital plan.

Gross domestic product expanded at a 2.6 percent annual rate in the fourth quarter, the Commerce Department said, up from the 2.4 percent pace it estimated last month but slightly under the 2.7 percent analyst forecast. Jobless claims unexpectedly fell in the latest week, dropping to near a four-month low, the latest indicator to support a theory that weak data earlier this year was related to bad weather rather than worsening fundamentals.

"We need surprisingly good news to jar the market out of its trading range, and today's data, while respectable, isn't that," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The U.S. and the European Union on Wednesday agreed to prepare possibly tougher economic sanctions in response to Russia's annexation of Ukraine's Crimea territory.

While Western leaders earlier said they would hold off on new sanctions unless Moscow takes further destabilizing actions in the region - which Russian President Vladimir Putin last week said he wasn't interested in doing - investors are concerned about the potential fallout of a prolonged conflict.

"Bigger sanctions would inflict damage on Russia, and there could be a spillover on Europe's economy, especially in the energy space, which would have a broader impact," said Luschini, who helps oversee about $63 billion in assets. "This is an element of concern in a market where we don't have overwhelmingly good news to trump it."

Citigroup slumped 5.9 percent to $47.18 a day after the Fed rejected the bank's plan to buy back $6.4 billion of shares and boost dividends, saying it wasn't sufficiently prepared to handle a potential financial crisis. A source close to the matter told Reuters that Citi officials had not expected the rejection. Shares of Zions Bancorp, which also had its plan rejected, fell 1.5 percent to $29.76.

The Dow Jones industrial average was down 43.03 points, or 0.26 percent, at 16,225.96. The Standard and Poor's 500 Index was down 4.85 points, or 0.26 percent, at 1,847.71. The Nasdaq Composite Index was down 15.17 points, or 0.36 percent, at 4,158.41.