US STOCKS-Credit, economic worries weigh on Wall Street

(Updates to early morning)

By Kristina Cooke

NEW YORK, Feb 15 (Reuters) - U.S. stocks fell on Friday, extending the previous session's losses, on worries about the outlook for the economy and more credit losses at banks.

A profit warning from electronics retailer Best Buy (BBY.N: Quote, Profile, Research) added to concerns about the health of the consumer. Best Buy shares fell 4.4 percent.

Economic data that showed a jump in import prices and a record monthly drop in a measure of manufacturing activity in New York state raised fears of rising inflation and slowing growth, or "stagflation."

Adding to worries about the financial sector, Citigroup Inc (C.N: Quote, Profile, Research) has barred investors in one of its hedge funds from withdrawing their money, and a new leveraged fund lost 52 percent in its first three months, the Wall Street Journal reported. For details, see [ID:nN15541588]. Citigroup shares fell 1.2 percent to $25.42.

The Dow Jones industrial average .DJI was down 59.01 points, or 0.48 percent, at 12,317.97. The Standard & Poor's 500 Index .SPX was down 6.45 points, or 0.48 percent, at 1,342.41. The Nasdaq Composite Index .IXIC was down 11.97 points, or 0.51 percent, at 2,320.57.

Morgan Stanley's (MS.N: Quote, Profile, Research) shares fell 0.8 percent to $42.25 and Goldman Sachs' (GS.N: Quote, Profile, Research) shares fell 0.9 percent to $174.95 after brokerage Fox-Pitt cut its profit estimates on the two banks. Fox-Pitt cited challenges in the credit markets and said it sees more write-downs.

In the latest development with struggling bond insurers, FGIC Corp, whose main unit has lost its top credit ratings from all three agencies, told New York regulators it wants to be split into two companies, New York Insurance Superintendent Eric Dinallo said on Friday.