Stocks opened lower on Monday, as bank shares fell after an analyst initiated coverage on several large banks with an underperform or sell rating, sapping recent investor optimism on the financial sector.

* Banks shares stumbled after veteran banking analyst Mike Mayo of Calyon Securities started coverage on several large banks, citing the ongoing consequences of risk taking by banks in several different areas. The Select Sector SPDR Financial ETF fell 3.6 percent to $9.32.

* Tech shares lost ground after a broker downgrade of Cisco Systems and a potential merger between IBM Corp and Sun Microsystems collapsed.

* The Dow Jones industrial average <.DJI> dropped 67.70 points, or 0.84 percent, to 7,949.89. The Standard & Poor's 500 Index <.SPX> slid 9.90 points, or 1.18 percent, to 832.60. The Nasdaq Composite Index <.IXIC> fell 21.92 points, or 1.35 percent, to 1,599.95.

(Editing by Theodore d'Afflisio)

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