The markets opened sharply lower as a disappointing quarterly report from Citigroup rekindled fears of a recession. The Dow tumbled 135 points to 12,642 while Nasdaq plunged 42 points to 2435.

On the upside

Airline stocks edged up as merger talks began. Shares of UAL (Nasdaq: UAUA), which operates United Airlines, rose.

Analysts raised their opinion on Tenet Healthcare (NYSE: THC) citing an expected profit rebound due to cost-cutting and new contracts.

Lifecore Biomedical (Nasdaq: LCBM) received a $229.5 million buyout offer from affiliates of private equity firm Warburg Pincus. Shares of the medical materials and device maker soared.

On the downside

Citigroup (NYSE: C) recorded its biggest loss ever writing down $18.1 billion from its portfolio and setting aside another $4.1 billion in reserves for potential future losses. The nation's largest bank also cut its dividend and sought financing from overseas investment funds.

Merrill Lynch & Company (NYSE: MER) received a cash infusion of $6.6 billion from three foreign investment funds.

Shares of Schering-Plough (NYSE: SGP) continued to lose ground after the drug developer and its partner Merck (NYSE: MRK) reported disappointing results from their cholesterol drug Vytorin.

In the broad market, declining issues outpaced advancers by a margin of more than 4 to 1 on the NYSE and by more than 3 to 1 on Nasdaq. The Russell 2000 which tracks small cap stocks lost 11 points to 700.