Stocks hurt by Pakistani turmoil

NEW YORK (CNNMoney.com) -- Stocks continued to decline Thursday as events in Pakistan stoked geopolitical concerns and mixed economic reports highlighted worries about the domestic economy.

The Dow Jones industrial average (INDU) was down 1 percent with 2-1/2 hours into the session. The broader S&P 500 (SPX.X) index shed 0.8 percent. The tech-laden Nasdaq (COMPX) was down nearly 1 percent.

Former Pakistani Prime Minister Benazir Bhutto was assassinated Thursday in a suicide attack in Rawalpindi, Pakistan. Investors worry that Bhutto's assassination could cause further political turmoil in Pakistan, a country with nuclear capabilities, and upset world markets, particularly the oil trade.

"The news from Pakistan is having a negative effect on the market," said Ron Kiddoo, chief investment officer at Cozad Asset Management.

There was not much moving the market before news of the assassination broke, Kiddoo added. "Political events tend to have short-term effect on the market, but they do have an effect," he said.

On the economic front, consumer confidence in December was slightly higher than expected, despite concerns about economic instability, according to the Conference Board's Consumer Confidence Index.

Meanwhile, the government's weekly oil inventory report showed a larger-than-expected drop in domestic crude supplies last week.

Also, the U.S. Commerce Department said factory orders for November came in lower than expected.

From the financial sector, Sallie Mae (SLM, Fortune 500) said Thursday that it needs to sell $205 billion worth stock to buy out certain contracts that have hindered the student lender's performance. The company also said it faces a class-action lawsuit alleging that the company steered minority students into more expensive loans, an allegation the company denied. Shares of Sallie Mae plunged nearly 7 percent by mid-day.

In more bad news for Wall Street banks, Goldman Sachs analysts wrote Thursday that Citigroup (C, Fortune 500) could writedown as much as $18.7 billion in the fourth quarter and cut its dividend by 40 percent as the company struggles to overcome problems related to the credit crisis. Citibank stock was trading down more than 2 percent in mid-day trading.

The Goldman analysts also said that Merrill Lynch (MER, Fortune 500) and JPMorgan (JPM, Fortune 500) could see more writedowns.

Treasury prices rose, with the yield on the 10-year note falling to 4.22, down from 4.28 on Wednesday. Bond prices and yields move in opposite directions.

U.S. light crude oil for January delivery rose $1.30 to $97.27 on the New York Mercantile Exchange.

In currency trading, the dollar fell versus the euro and the yen.

COMEX gold for February delivery rose $6.50 to $832.50 an ounce.