Wall Street plunges as weak economic, earnings figures stir more concerns about recession

NEW YORK — A growing conviction that the U.S. is headed toward recession sent Wall Street plunging Tuesday, 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 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 on Tuesday 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. According to preliminary calculations, the Dow fell 277.04, or 2.17 percent, to 12,501.11.

Broader stock indicators also lost ground. The Standard & Poor's 500 index dropped 35.30, or 2.49 percent, to 1,380.95, and the Nasadaq 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.

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.