Wall Street slides on economic worries, Citi

By Leah Schnurr

NEW YORK (Reuters) - Stocks fell on Monday on concerns of an accelerating global slowdown after Japan's surprise news it had fallen into recession and Citigroup Inc, the No. 2 U.S. bank, said it would cut 52,000 jobs, far more than had been expected.

The drop, the fifth in the past six sessions, drove Nasdaq to its lowest closing level in five and a half years and put the Dow and S&P 500 barely above their lows for the year.

Markets found little to improve confidence from a weekend meeting of leaders of major industrial economies in Washington, which concluded without concrete plans for combating the ailing world economy.

That disappointment was compounded by data showing Japan, the world's second-largest economy and a key U.S. trading partner, unexpectedly slid into recession in the third quarter.

Financials led the way lower after Citigroup Inc said it would cut 15 percent of its workforce by early next year. The move was Chief Executive Vikram Pandit's most dramatic yet to restore profitability and bolster a sagging share price but underscored the scope of the industry's problems. Citigroup's shares fell more than 6 percent.

"The prevailing mentality is that it's the minimum required to begin to steady the ship from an expense stand point," said Matt Kaulfer, portfolio manager and equity analyst at Clover Capital Management in Rochester, New York.

"The industry is going to have to shrink in order to better stabilize itself before it can even have hopes of growing again."

Adding to worries over the depth of the global slowdown, a Philadelphia Federal Reserve Bank survey showed private-sector economists believe the U.S. economy fell into recession last spring and that the downturn would last for 14 months.

The Dow Jones industrial average fell 223.73 points, or 2.63 percent, at 8,273.58. The Standard & Poor's 500 Index lost 22.54 points, or 2.58 percent, to 850.75. The Nasdaq Composite Index gave up 34.80 points, or 2.29 percent, at 1,482.05.

The S&P 500 finished barely above the key 850-point level, and within reach of the year's closing low of 848.92 hit in late October, while the Nasdaq fell through the closing low set just last week.

The downward momentum suggests the market could again test lows. Last week, the S&P 500 and Nasdaq tumbled to five-year lows before reversing course to surge higher as bargain-hunters scooped up languishing shares.

"There's probably a bit better than a 50-50 chance that we'll actually break those lows," said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois.

"A lot of it is around concern in the marketplace that whatever the U.S. and world governments are doing is not enough to get us out of the malaise," adding that a sharp sell-off would likely cause bargain-hunters to emerge.

Stocks sold off late in the day after trying to rally throughout the session as investors were tempted to scoop up shares that remain at more than five-year lows.

General Motors Corp was a bright spot, rising 5.7 percent to $3.18, as Congress debated a bailout of the American auto industry.