Wall Street tumbles on bank fears and consumer gloom

NEW YORK (Reuters) - Stocks plummeted on Wednesday as fears of more credit losses in the banking sector and signs of further contraction in consumer spending compounded worries about the toll of the worsening recession.

By Ellis Mnyandu

Bank stocks were top drags, with Citigroup sliding 13 percent, while shares of JPMorgan and Bank of America fell 4 percent and 3 percent respectively.

The fall in shares of Citigroup, a Dow component, came a day after the embattled bank agreed to sell a controlling stake in its crown jewel unit, the Smith Barney retail brokerage, to Morgan Stanley for $2.7 billion.

Analysts have said the Smith Barney sale was a precursor to the break-up of Citigroup and suggested the bank must be urgently seeking to replenish capital due to mounting losses.

The Dow Jones industrial average <.DJI> fell 169.17 points, or 2.00 percent, to 8,279.39. The Standard & Poor's 500 Index <.SPX> declined 21.03 points, or 2.41 percent, to 850.76. The Nasdaq Composite Index <.IXIC> shed 32.48 points, or 2.10 percent, to 1,513.98.

The S&P financial index <.GSPF> fell nearly 5 percent.

Sales at U.S. retailers fell 2.7 percent in December, government data showed on Wednesday, as a deteriorating economic climate forced consumers to cut back on spending during the key holiday period.

(Editing by James Dalgleish)