US STOCKS-Market falls on credit, economic concerns

(Updates to late afternoon)

By Kristina Cooke

NEW YORK, Nov 21 (Reuters) - U.S. stocks fell on Wednesday, with the benchmark S&P 500 index briefly dipping into negative territory for the year, on persistent fears that fallout from the credit crisis and the housing slump will hurt economic growth.

Financial services companies, including Goldman Sachs Group Inc. (GS.N), led the sell-off, while bellwether General Electric (GE.N) dropped on concerns about the economy.

U.S. Treasury Secretary Henry Paulson said the number of potential U.S. home-loan defaults will be significantly bigger in 2008 than in 2007. His comments in an interview with The Wall Street Journal helped set the market's negative tone. For details, see [ID:nN21171623].

Shares of mortgage lenders, including Countrywide Financial Corp CFC.N, also tumbled. American International Group Inc (AIG.N), the world's biggest insurer by market value, was the top drag on both the Dow and the S&P 500, dropping as much as 6 percent.

"We just can't seem to break free of the financial concerns that are out there. The unwinding of the real estate and the mortgage market continues to weigh on investor concerns," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama. "There is also more of a focus now on balance sheets of financials rather than their earnings -and that's never a good sign."

The Dow Jones industrial average .DJI was down 66.08 points, or 0.51 percent, at 12,944.06. The Standard & Poor's 500 Index .SPX was down 6.58 points, or 0.46 percent, at 1,433.04. The Nasdaq Composite Index .IXIC was down 5.24 points, or 0.20 percent, at 2,591.57.

For the year the S&P 500 was up 1 percent, after earlier dipping into the red.