U.S. market sinks over 4 percent

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks tumbled more than 4 percent on Tuesday as investors pummelled bank shares on concerns a reworked plan to shore up the financial sector may not be enough to thaw credit markets and alleviate the deepening recession.

The Dow industrials posted their biggest one-day loss since December 1. Losses accelerated after the Treasury Department rolled out an intensely awaited financial rescue plan, saying it would spend up to $2 trillion (1 trillion pounds) to mop up bad bank assets and revive consumer lending.

But investors were sharply disappointed by the lack of detail on how the government will cleanse toxic assets burdening the financial system, triggering a nearly 14 percent slide in the KBW Bank Index .BKX.

"This is not a clear-cut plan. It is reminiscent of previous plans where there was convoluted callisthenics to try to fix this thing. That's not what investors are looking for," said Bucky Hellwig, an analyst with Morgan Asset Management in Birmingham, Alabama.

All 30 Dow stocks ended deep in the red for the first time since January 20, revealing misgivings about the plan's ability to jump-start the economy.

The Dow Jones industrial average .DJI was down 381.99 points, or 4.62 percent, at 7,888.88. The Standard & Poor's 500 Index .SPX was down 42.73 points, or 4.91 percent, at 827.16. The Nasdaq Composite Index .IXIC was down 66.83 points, or 4.20 percent, at 1,524.73.

Although the Dow posted its lowest close since Dec 1, it is still up 5.9 percent from the November 21 low. The blue chip index is down 1.4 percent for the month and 10.1 percent year-to-date.

The S&P financial index .GSPF slid 10.9 percent.

Federal Reserve Chairman Ben Bernanke offered the market little comfort in testimony to Congress on Tuesday after he said the central bank's liquidity expansion was no "panacea."

A government report showing a record plunge in U.S. wholesale inventories in December underscored the economy's fragile state, suggesting that the economy contracted more in the fourth quarter than the government initially estimated.

Shares of Bank of America (BAC.N) slid more than 19 percent to $5.56, while JPMorgan (JPM.N) shed 9.8 percent to $24.62 and shares of Citigroup were down 15.2 percent at $3.35.

Insurers, which like the banks are burdened by money-losing assets on their books, were another hard-hit sector. Shares of U.S. property and life insurer Hartford Financial Services Group (HIG.N) slid 13.2 percent to $13.05 after its credit ratings were cut. Rival MetLife (MET.N), the No. 1 U.S. life insurer, was down 12 percent to $27.53.

Principal Financial (PFG.N), another insurer, tumbled 29.6 percent to $11.99.

The KBW Insurance ETF (KIE.P) fell 9.5 percent.

Boeing (BA.N) was among the top drags on the Dow as it reiterated the delay in the delivery of its latest jetliner, sending its stock down 6.1 percent to $40.21.