The snapshot of the service sector appeared to quell some investor concerns that the troubles in the financial sector would prove onerous enough to spill over into other areas of the economy. The Institute for Supply Management said the service sector grew at a faster-than-expected pace in October amid strength in new orders.

Despite the upbeat reading, the scope of Citi's expected losses -- it sees another $8 billion to $11 billion in additional write-offs -- led to renewed concerns among investors worldwide over credit. The expected losses came on top of the $6.5 billion in asset markdowns and other credit-related losses the company recorded in the third quarter.

The re-emergence of credit concerns -- like those that roiled Wall Street this summer -- comes as the market is also contending with concerns about the health of consumer spending and with rising expectations that the Federal Reserve is leaning away from cutting interest rates when it meets next month.

Some of the uncertainty about debt centers on who might be holding more bad debt, including some that is kept at arm's length in off-book investment vehicles but that nonetheless could require some banks to take a hit should the investments falter.

In midmorning trading, the Dow Jones industrial average fell 66.09, or 0.49 percent, to 13,529.01. The Dow had been down more than 100 points in the opening minutes.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.74, or 0.51 percent, to 1,501.01, and the Nasdaq composite index fell 15.59, or 0.55 percent, to 2,794.79.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.31 percent from 4.32 percent late Friday.

The ISM's index gauging the health of non-manufacturing industries rose to 55.8 from 54.8 in September. A reading above 50 signifies economic expansion.

The decline in stocks and the unease over Citi's debt follows the widely expected decision by Charles Prince to resign as the company's chairman and chief executive at an emergency meeting of its board Sunday. Citi fell $1.45, or 3.8 percent, to $36.28 and was the steepest decliner among the 30 stocks that make up the Dow industrials.

Prince's resignation came less than a week after Stan O'Neal stepped down as CEO at Merrill Lynch & Co. Both Citi and Merrill have struggled with securities they hold that are tied to subprime loans, those made to borrowers with poor credit. A faltering housing market has made it difficult for those struggling with mortgage payments to refinance and pay off debts. Now, foreclosure rates are spiking and many banks are left holding loans worth far less than they had once been.

As it had Friday, Merrill fell amid concerns it would have to make an announcement of further write-downs. Last month, Merrill said it would write off $8.4 billion in losses. Merrill fell 67 cents to $23.55 after falling nearly 8 percent Friday.

In other corporate news, the Dow got some help from a rise in shares of American International Group Inc. A shareholder group said it was considering alternatives for the world's largest insurer. The stock rose $1.43, or 2.4 percent, to $60.55.

Beyond concerns about debt, political uncertainty over a weekend decision by Pakistan President Gen. Pervez Musharraf to suspended the constitution helped shore up some support for the U.S. dollar as investors sought safety. The dollar rose against most other major currencies, while gold prices fell.

Light, sweet crude fell to $1.79 to $94.14 per barrel on the New York Mercantile Exchange.

As Wall Street grapples with concerns about credit, it is also digesting economic data. The Institute for Supply Management survey showed that growth in the service sector slowed last month.

Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 212.9 million shares.

The Russell 2000 index of smaller companies fell 10.14, or 1.27 percent, to 787.64.

The concerns about credit weighed on stock markets overseas. In Europe, Britain's FTSE 100 fell 1.24 percent, Germany's DAX index shed 0.53, and France's CAC-40 declined 0.91 percent. In Asia, Japan's Nikkei stock average fell 1.50 percent, while Hong Kong's Hang Seng index fell 5.01 percent. The decline in Hong Kong also reflects concern over a possible delay of a government plan to list shares of mainland Chinese companies there.

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