(Updates to midafternoon trading, adds analyst comments)

*

Indexes down: Dow 1.32%, S&P 500 0.77%, Nasdaq 1.21%

*

Financials fall on worries over lending standards

*

Block surges on plan to cut 4,000 jobs on AI bet

*

Netflix ( NFLX ) climbs after ending Warner Bros Discovery ( WBD ) pursuit

By Stephen Culp and Ragini Mathur

NEW YORK, Feb 27 (Reuters) - Wall Street extended its

selloff on Friday, as weakness in tech and financial shares

helped put the S&P 500 and the Nasdaq on track for their largest

monthly percentage losses since March 2025, capping a February

marked by worries over costs and disruption related to

artificial intelligence, revived tariff uncertainties and

simmering geopolitical tensions.

All three major indexes were decisively lower, and poised to

show steep weekly declines, with the blue-chip Dow on the verge

of logging its biggest weekly drop since November.

"February was a terrible month for the Nasdaq, and we saw a

rotation into old-economy stocks," said Peter Cardillo, chief

market economist at Spartan Capital Securities in New York.

"That rotation helped the broader market a little bit."

Financial stocks slid after worries of contagion in the

sector after reports that Barclays, Jefferies, Wells

Fargo ( WFC ) and other banks face potential losses related to

the collapse of UK mortgage provider Market Financial Solutions

Ltd, amid broader concerns about lending standards. Wells Fargo ( WFC ),

Jefferies and U.S.-listed shares of Barclays dropped

between 4.2% and 10.8%.

Tech shares also continued to weigh on the indexes

as lingering fears related to AI dragged chips and

software down 2.0% and 1.9%, respectively.

Defensive sectors such as consumer staples,

healthcare and utilities were the session's

clear outperformers.

"Credit fears are weighing on the banking sector today,"

Cardillo added. "And of course this continuing AI selloff and

the PPI report, which was very ugly. So today we're seeing a

flight to safety."

On the economics front, a hotter-than-expected Producer Price

Index reading fortified expectations that the U.S. Federal

Reserve is unlikely to cut its key interest rate in the near

term.

Financial markets are currently pricing in a 96.1%

probability that the central bank will leave the Fed funds

target rate in the 3.50% to 3.75% range at its upcoming monetary

policy meeting in March, according to CME's FedWatch tool.

The Dow Jones Industrial Average fell 654.72 points,

or 1.32%, to 48,844.48, the S&P 500 lost 53.45 points, or

0.77%, to 6,855.41 and the Nasdaq Composite lost 277.68

points, or 1.21%, to 22,600.70.

Of the 11 major sectors in the S&P 500, energy led the

gainers with a boost from rising crude prices, while

financial and technology stocks suffered the steepest percentage

losses.

Nvidia ( NVDA ) slid 3.4%, extending the previous session's 5.5%

drop despite solid earnings, a sign that risk sentiment for all

things AI remained shaky.

Zscaler ( ZS ) plunged 12.6% after the cloud security firm

reported a wider net loss in the second quarter.

Netflix ( NFLX ) jumped 13.0% as investors cheered its decision

to exit the fight for Warner Bros Discovery ( WBD ), which

dropped 2.0%. Paramount Skydance ( PSKY ), WBD's likely buyer,

soared by 23.2%.

Block surged 14.5% after the payments firm said it would

axe nearly half its workforce, as part of its effort to embed AI

across operations.

Dell shot up 21.8% after the PC maker said it expects

revenue from its key AI-optimized servers business to double in

fiscal year 2027 and promised to return more cash to

shareholders.

Declining issues outnumbered advancers by a 1.56-to-1 ratio

on the NYSE. There were 450 new highs and 92 new lows on the

NYSE.

On the Nasdaq, 1,434 stocks rose and 3,226 fell as declining

issues outnumbered advancers by a 2.25-to-1 ratio.

The S&P 500 posted 45 new 52-week highs and 2 new lows while

the Nasdaq Composite recorded 65 new highs and 104 new lows.