Concerns about the government's inability to unload its stake in Citigroup Inc. drove financial stocks down Thursday.

The KBW Bank Index had its worst day in more than a month, falling 1.53%.

Citi, which accounts for 6.51% of the 24-bank index, dragged the financial sector down.

Citi shares fell a quarter, to $3.25, a day after the government said it would delay selling its 34% stake in the company. Citi priced a $20.5 billion securities offering at a disappointing $3.15 a share, prompting the delay.

"We had some negative news in the morning. The Citigroup deal set everything up," said Joe Saluzzi, co-manager of trading at Themis Trading LLC. "The financials were very weak today. People were watching Citi."

He said the stock took a beating on heavy trading volume, with more than 3.7 billion Citi shares trading hands by the late afternoon. Citi's average daily trading volume is 543.2 billion, according to Reuters.

Most of the big and midsize banks had a rough day.

Bank of America Corp. fell 2.75% a day after announcing that Brian T. Moynihan would succeed Kenneth D. Lewis as chief executive.

JPMorgan Chase & Co. fell 2.64%, U.S. Bancorp fell 1.4%, SunTrust Banks Inc. fell 1.29% and Capital One Financial Corp. fell 4.1%.

Economic news hurt the overall markets.

Initial unemployment claims rose more than expected, by 7,000 claims, to 480,000. Economists polled by Bloomberg News had expected a decline. The U.S. dollar also surged to its highest level in three months against the other major currencies, as low interest rates prompted investors to use the cheap currency to make their positions. A surging dollar tends to have a negative impact on stocks.

The Dow Jones industrial average fell 1.27% and the Standard & Poor's 500 fell 1.18%.

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