CORRECTED - Wall Street hit as Deutsche Bank fine risk triggers bank rout

By Yashaswini Swamynathan

(Reuters) - (This version of the story corrects to clarify U.S. Department of Justice is demanding a $14 billion settlement in talks with Deutsche Bank, but has not yet levied a fine. Changes throughout)

U.S. stocks were lower Friday afternoon as the possibility of a $14 billion fine against Deutsche Bank weighed on financial stocks, especially on the big Wall Street banks.

The settlement proposal, made during negotiations between the U.S. Department of Justice and Deutsche Bank over claims that the German bank missold mortgage-backed securities, was larger than expected.

Deutsche Bank's U.S.-listed shares were down 9.4 percent. Dow components Goldman Sachs and JPMorgan fell 0.9 percent each.

 

The S&P 500 financial index <.SPSY> dropped 0.74 percent, dragging down the benchmark index the most. The KBW Bank index <.BKX> fell 0.90 percent, putting it on track for its second straight week of decline.

Traders have all but ruled out the possibility of the Federal Reserve raising interest rates at its meeting that starts next Tuesday. Investors will instead look for clues on when the central bank will eventually pull the trigger.

At 12:25 a.m. ET (1625 GMT), the Dow Jones Industrial Average <.DJI> was down 63.62 points, or 0.35 percent, at 18,148.86.

The S&P 500 <.SPX> was down 8.16 points, or 0.38 percent, at 2,139.1.

The Nasdaq Composite <.IXIC> was down 6.49 points, or 0.12 percent, at 5,243.20.

The technology index <.SPLRCT> dropped 0.52 percent, pulled down by Apple's a 0.8 percent decline and Oracle's 4.1 percent drop following a weak quarterly profit.

Helping limit losses was Intel's 2.5 percent gain after the chipmaker raised its third-quarter revenue forecast.

The CBOE Market Volatility index <.VIX>, Wall Street's "fear gauge", reversed course and was down 0.43 percent despite the expiry of futures and options on stocks and indexes, or quadruple witching.

Declining issues outnumbered advancing ones on the NYSE by 1,989 to 911. On the Nasdaq, 1,492 issues fell and 1,245 advanced.

The S&P 500 index showed five new 52-week highs and no new lows, while the Nasdaq recorded 55 new highs and 35 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D'Souza)