US STOCKS-Wall St dragged by bank anxiety, retail sales

                                
 * Financials lead slide on outlook concerns
                                
 * December U.S. retail sales fall 2.7 percent
                                
 * Dow off 2.9 pct, S&P off 3.4 pct, Nasdaq off 3.7 pct
                                
 * For up-to-the-minute market news, click [STXNEWS/US]
 (Updates to close)
                                
 By Leah Schnurr
                                
 NEW YORK, Jan 14 (Reuters) - U.S. stocks fell to six-week
lows on Wednesday on worries about steeper losses at banks
worldwide and as U.S. retail sales data pointed to a deepening
recession.
                                
 The S&P 500 and Nasdaq tumbled more than 3 percent, and all
30 Dow stocks were in the red, including Citigroup <C.N>. The
bank shed more than 23 percent as investors and analysts
worried whether the bank can be profitable as it unravels its
business model. It is expected to post a multibillion-dollar
loss this week.
                                
 Fears about the banking sector were exacerbated after
Morgan Stanley analysts forecast HSBC <HSBA.L><HBC.N>, Europe's
biggest bank, is likely to halve its dividend and may need to
raise up to $30 billion of capital, while Germany's Deutsche
Bank <DBKGn.DE> <DB.N> said it lost more than $6 billion last
quarter. For more see [ID:nLE245760] and [ID:nLE660728].
                                
 "There is an awful lot of uncertainty out there about how
severe the economic downturn will be and whether there will be
a second round of asset write-downs," said Lincoln Anderson,
managing director and chief investment officer at LPL Financial
in Boston.
                                
 Sales at U.S. retailers fell 2.7 percent in December as the
economic slowdown made consumers cut back on spending during
retailers' crucial holiday selling period. [ID:nN14448423]
                                
 Consumer spending accounts for about two-thirds of U.S.
economic activity, making it a key pillar of corporate
profits.
                                
 The Dow Jones industrial average <.DJI> fell 248.42 points,
or 2.94 percent, to 8,200.14. The Standard & Poor's 500 Index
<.SPX> gave up 29.17 points, or 3.35 percent, at 842.62. The
Nasdaq Composite Index <.IXIC> lost 56.82 points, or 3.67
percent, to 1,489.64.
                                
 The day's declines put another wrench in the market's
attempt to recover from the November bear market low. The broad
S&P 500 had gained more than 20 percent from that level, but is
now up only close to 14 percent. It was the sixth straight day
of declines for the Dow, racking up losses of 815 points, or 9
percent.
                                
 The S&P financial index <.GSPF> was down 5.7 percent. Since
the start of the year, the index has managed only two up days.
Citigroup was down 23.2 percent at $4.53 after a deal by the
embattled bank to sell a controlling stake in its crown jewel,
the Smith Barney retail brokerage unit, to Morgan Stanley
<MS.N> for $2.7 billion. [ID:nN13422148].
                                
 Analysts speculate the Smith Barney sale is a precursor to
a break-up of Citigroup and that the bank must be urgently
seeking to replenish capital due to mounting losses.
                                
 Citigroup is due to report its results on Friday, after
moving up the reporting date, a day after JPMorgan Chase & Co
<JPM.N> is due to post its results, after also after moving up
its date. JPMorgan fell 1.7 percent to $25.91.
                                
 The S&P retail index <.RLX> fell 3.6 percent on worries
cash-strapped consumers spooked by the recession will remain
unwilling to buy.
                                
 Energy shares also tumbled, taking oil's lead as U.S. crude
<CLc1> fell 50 cents to $37.28 a barrel on rising inventories
and weakening demand from the United States, the world's
biggest energy consumer. Exxon Mobil <XOM.N> and Chevron
<CVX.N> were among the Dow's biggest drags, falling 3.6 percent
to $75.10 and 3 percent to $69.69, respectively.
                                
 The Federal Reserve's anecdotal Beige Book report on the
economy added to the sour picture, showing the economy weakened
further into the opening days of the new year.[ID:nN14384704].
                                
 Tax and domestic help troubles surrounding Treasury
secretary-nominee Timothy Geithner further dampened investor
sentiment, but President-elect Barack Obama said he expects
Geithner to be confirmed. Geithner would be Obama's point man
on efforts to combat the financial crisis. [ID:nN13418528]
                                
 Trading was moderate on the New York Stock Exchange, with
about 1.42 billion shares changing hands, below last year's
estimated daily average of roughly 1.9 billion, while on Nasdaq
about 1.94 billion shares traded, below last year's daily
average of 2.17 billion.
                                
 Declining stocks outnumbered advancing ones on the NYSE by
2,793 to 318 while decliners beat advancers on the Nasdaq by
about 2,263 to 477.
 (Additional reporting by Rodrigo Campos; Editing by Leslie
Adler)