Futures turn negative on banks, tech

* Banks fall after analyst starts coverage; * Sun Micro, IBM talks break down; * Goldman Sachs downgrades Cisco; * Futures: Dow off 35, S&P 500 off 6, Nasdaq down 6.25 pct; * For up-to-the-minute market news click [STXNEWS/US]

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks futures pointed to a lower open 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 erased early gains after veteran banking analyst Mike Mayo of CLSA started coverage on several large banks, citing increased problem loans and the government's ability to resolve them, according to FlyOnTheWall.com.

"Michael Mayo is at a new firm now and he downgraded all the bank stocks this morning -- that's certainly not a good thing," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The Select Sector SPDR Financial ETF XLF.P fell 1.7 percent to $9.53 while Citigroup (C.N) slid 2.1 percent to $2.79 and Bank of America (BAC.N) was down 2.9 percent to $7.38 in premarket trade.

S&P 500 futures SPc1 fell 6 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 slid 35 points, and Nasdaq 100 NDc1 futures shed 6.25 points.

U.S. stocks capped off a 4-week winning streak on Friday, with the Dow marking its best performance on a percentage basis over that period since 1933.

Cisco shares slid 2.2 percent to $17.76 in premarket trade after Goldman Sachs cut the stock to a "neutral" rating and removed it from the firm's "Conviction Buy" list.

"We're kind of long in the tooth in this rally and it's not going to take much to get tech going back down the other way at this point, it's certainly overbought too far too fast."

Shares of Sun Microsystems Inc. (JAVA.O) tumbled more than 21 percent to $6.68 in premarket trade after a source with knowledge of the matter told Reuters that talks with IBM (IBM.N) to acquire its smaller rival broke down. For more, see [ID:nL6578542] IBM slid 1.1 percent to $101.07.

(Additional reporting by Edward Krudy) (Editing by Theodore d'Afflisio)