Financial stocks took it on the chin on Friday morning, soon after trading began, as investors reacted to a gloomy report on the sector from UBS and an abysmal loss of $5.3-billion (U.S.) reported by American International Group Inc. on Thursday.

The Dow Jones industrial average fell 128 points, or 1 per cent, to 12,455. AIG shares led the way down, tumbling 6.9 per cent. As bad as AIG's quarterly loss was, UBS expects total writedowns associated with the global credit crunch among the world's financial institutions will top $600-billion.

JPMorgan Chase & Co. and Bank of America followed AIG's lead, with declines of 2.2 per cent and 1.6 per cent, respectively. Among the 30 stocks in the blue-chip index, only Walt Disney Co. was up.

In Canada, the S&P/TSX composite index fell 61 points, or 0.4 per cent, to 13,813. Again, bank stocks were the biggest drags given their huge weighting in the benchmark index.

All of the Big Six were down, ranging from Bank of Montreal's 1.7 per cent decline to Toronto-Dominion Bank's 0.6 per cent decline. Royal Bank of Canada, which reported its first quarter results before markets opened, fell 0.9 per cent, to $49.66. The bank missed analyst expectations, with quarterly profit that was 17 per cent below last year's first quarter.