Weak economic data pushes down market

NEW YORK » A growing conviction that the U.S. is headed toward recession sent Wall Street plunging yesterday, with weak retail sales figures and a disappointing quarterly report from Citigroup Inc. exacerbating investors' pessimistic mood.

The Dow Jones industrials fell nearly 280 points.

Investors backed away from stocks amid growing concerns that consumer spending will wane this year and contribute to an economic downturn.

The latest evidence that consumers are retrenching came from the U.S. Commerce Department, which said retail sales fell in December and which also revised its November figures lower.

Spending by consumers, which accounts for more than two-thirds of U.S. economic activity, has been key to staving off economic slowdowns in recent years.

There is also a growing fear that the Federal Reserve hasn't done enough to keep the economy going -- especially as investors continue to see the fallout from the summer's subprime mortgage crisis.

Citigroup, the nation's biggest bank, announced yesterday a hefty $18.1 billion write-down for bad mortgage assets and slashed its dividend.

Brian Gendreau, investment strategist for ING Investment Management, said the market is now seeing "a decisive shift" toward a recession.

"The sectors that are outperforming are defensive plays, like consumer staples," he said. "People don't buy them unless you're worried about sustained weakness."

Investors have sold stocks lower so far this year on increasing worries about the economy.

The Dow fell 277.04, or 2.17 percent, to 12,501.11.

The Standard & Poor's 500 index dropped 35.30, or 2.49 percent, to 1,380.95, and the Nasdaq composite index lost 60.71, or 2.45 percent, closing at 2,417.59.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.

The Russell 2000 index of smaller companies fell 15.05, or 2.11 percent, to 697.43.

Bond price rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent, close to its lowest point since March 2004 and down from 3.77 percent late Monday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell $2.30 to settle at $91.90 per barrel on the New York Mercantile Exchange.

In just the 10 trading days of 2008, the Dow has fallen 5.76 percent, while the S&P 500 is down 5.95 percent and the Nasdaq has lost 8.85 percent.

Citigroup, which lost $9.83 billion in the fourth quarter, also announced a massive $12.5 billion capital injection.

Hope that struggling financial firms will bolster their finances also was stirred by news that Merrill Lynch & Co. Inc. agreed that three foreign investment funds will invest $6.6 billion in the Wall Street firm.

Citi fell $2.21, or 7.6 percent, to $26.85. Merrill -- which reports results on Thursday -- fell $2.96, or 5.3 percent, to $53.01.