* Financial shares lead broad-based slide
* Surprise rise in retail sales, jobless claims inch down
* Moody's says U.S. 'AAA' rating is being "tested"
* Dow, S&P off more than 1 pct; Nasdaq down 0.6 pct
* For up-to-the-minute market news, click []
(Updates to midday, changes byline)
By Rodrigo Campos
NEW YORK, Feb 12 (Reuters) - U.S. stocks fell on Thursday
amid investor fears that government efforts may be insufficient
to revive a recession-hit economy and stabilize the banking
system.
Although Congress prepared to pass a $789 billion economic
stimulus package as early as Thursday, uncertainty about the
economy fueled a broad-based sell-off.
JPMorgan <JPM.N>, down 4.4 percent, was a top drag on the
Dow Jones industrials, while 3M <MMM.N> fell 3.2 percent during
a tough day for industrial shares.
"There is a growing sense that the passage of the stimulus
and the bank rescue, which people were eagerly awaiting, are
not enough to turn the sentiment," said Eric Kuby, chief
investment officer at North Star Investment Management Corp in
Chicago."
"The critical moment in market psychology was the Geithner
testimony (about the bank aid plan, on Tuesday). It was much
anticipated, but it was viewed as being disappointing, and now
everybody is feeling somewhat disappointed about the stimulus
package as to wether it will provide enough stimulus to get
things turned around," he said.
Nasdaq trimmed its earlier losses as hardware companies,
including iMac maker Apple Inc <AAPL.O> and Qualcomm Inc
<QCOM.O>, traded higher.
"The Nasdaq has been leading pretty much all day long. A
few of the bigger-cap names are holding their own," said Paul
Nolte, director of investments at Hinsdale Associates in
Hinsdale, Illinois. Technology "is an OK hiding place for a
while."
The Dow Jones industrial average <> slid 134.12 points,
or 1.69 percent, to 7,805.41. The Standard & Poor's 500 Index
<.SPX> was down 13.17 points, or 1.58 percent, at 820.57. The
Nasdaq Composite Index <> edged down 9.04 points, or 0.59
percent, to 1,521.46.
The decline in the S&P 500 pushed it to near three-month
lows earlier in the session, even though the index is still up
more than 10 percent from the bear-market intraday low set in
Nov. 21.
Adding to the dire sentiment, rating agency Moody's
Investors Service said top 'AAA' credit rating of the United
States was "being tested" as the current crisis continues to
pressure growth.
Financial shares dragged on the broader market, with the
KBW Bank index <.BKX> off more than 6 percent, due to
persistent worry about a lack of clarity over how the Obama
administration would cleanse toxic assets from the bank's
books.
U.S. front-month crude <CLc1> dropped 2 percent to $35.21 a
barrel due to signs that faltering economies would crimp energy
demand. Chevron <CVX.N> declined 1.43 percent to $69.60.
Standout decliners among banks included Citigroup <C.N>,
down 4.6 percent to $3.52; Wells Fargo <WFC.N>, off nearly 11
percent at $15.59, and Bank of America <BAC.N>, down 7.1
percent to $5.64.
The industrial sector also weighed on the S&P 500, with the
S&P industrials index <> down 2.7 percent. Shares of
building products maker Masco Corp <MAS.N> slid more than 11
percent to $6.62 after it posted a steep decline in sales.
Government data showing that the number of people staying
on unemployment benefits after drawing an initial week of aid
hit a record in the last week of January, which underscored the
toll of the 14-month-old recession on the labor market.
On the upside, Coca-Cola Co <KO.N>, up 6.23 percent at
$43.86, was the lead positive stock on the Dow after posting a
solid quarterly profit.
Apple <AAPL.O> ranked as the top gainer on Nasdaq, up 2.5
percent to $99.22.
(Editing by Gary Crosse)
