US STOCKS-Wall St flat as AIG drags, tech shares rise

(Updates to midday, changes byline)

By Jennifer Coogan

NEW YORK, Feb 11 (Reuters) - U.S. stocks were little changed on Monday as financial sector shares were hurt by worries about the impact of the credit crisis on insurer American International Group Inc (AIG.N: Quote, Profile, Research), offsetting bargain hunting and takeover talk in the technology sector.

Shares of AIG, the world's largest insurer, plunged more than 11 percent after AIG received a rebuke from its auditors for how it valued some credit derivatives. It was the worst one-day percentage drop for AIG shares since the 1987 stock market crash.

That dragged on financial sector stocks, with the S&P financials index down 1.7 percent.

The disclosure cast doubt on AIG's past contention that it didn't face major problems stemming from the credit crisis that has slammed other financial institutions.

AIG's "a reminder that the financial situation doesn't just turn around. There can still be more issues ahead that will continue to weigh on investor's minds," said Richard Sichel, chief investment officer of Philadelphia Trust Co. "But stocks are not overpriced."

The Dow Jones industrial average .DJI was down 13.98 points, or 0.11 percent, at 12,168.15. The Standard & Poor's 500 Index .SPX was up 1.40 points, or 0.11 percent, at 1,332.69. The Nasdaq Composite Index .IXIC was up 5.37 points, or 0.23 percent, at 2,310.22.

The Nasdaq's gains were led by Apple Inc (AAPL.O: Quote, Profile, Research) shares after Citigroup added the iPod maker to its top picks list.