Sector Wrap: Financial services stocks fall

Financial services stocks turned lower Wednesday afternoon after Treasury Secretary Henry Paulson said large portions of the credit markets are still not functioning in a normal way.

In an interview with the Associated Press, Paulson said he believed that the steep turmoil that began last August in the credit markets has calmed somewhat since the forced sale of Bear Stearns Cos., the nation's fifth largest investment bank, to JP Morgan Chase & Co. in mid-March.

Even so, Paulson said large portions of the credit markets _ ranging from mortgages to student loans to loans that banks make to each other _ are still not functioning properly, and he wouldn't be surprised to see "more bumps in the road."

Paulson also said that the escalating price of oil may negate the intended effects of the $168 billion economic stimulus package. Oil surged past $123 per barrel for the first time on Wednesday.

JPMorgan shares dropped $1.63, or 3.4 percent, to $46.57. Goldman Sachs Group Inc. tumbled $7.85, or 4 percent, to $189.76. Merrill Lynch & Co. lost $2.87, or 5.6 percent, to $48.48.

Citigroup Inc. fell $1.39, or 5.4 percent, to $24.48. SunTrust Banks Inc. declined $2.99, or 5.1 percent, to $55.67.

Janus Capital Group Inc. shed $2.08, or 6.7 percent, to $28.89.

American International Group Inc. lost $3.32, or 6.9 percent, to $45.08. Discover Financial Services declined 99 cents, or 5.2 percent, to $18.24.

Student Loan Corp. fell $4, or 3.1 percent, to $126.