US STOCKS-Futures drop on Citi, weak retail data

(Adds Merrill shares falling)

NEW YORK, Jan 15 (Reuters) - U.S. stock index futures tumbled on Tuesday, signaling a lower market opening, after weaker-than-expected retail sales data underscored worries about a recession and Citigroup Inc's (C.N) loss hurt financial shares.

Citigroup, the largest U.S. bank, reported a larger-than-expected fourth-quarter loss of $9.83 billion. Citi also announced a steep cut to its dividend and plans to raise $14.5 billion from outside investors. For details, see [ID:nN15468107].

The Commerce Department said retail sales unexpectedly fell in December, implying costlier energy and slumping housing prices were taking a toll on consumers.

The latest store chain with disappointing news was home goods retailer Williams-Sonoma (WSM.N), which cut its outlook on Tuesday after a weak holiday sales season. [ID:nN15475711].

"Retail sales were worse than expected. Frankly they are not going to provide much encouragement for the market," said Michael Metz, chief investment strategist at Oppenheimer & Co in New York. "Retail demand is obviously weakening, and there are not signs it's going to strengthen here."

S&P 500 futures SPc1 were down 16.5 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures DJc1 lost 113 points, and Nasdaq 100 NDc1 futures dropped 18.5 points.

Citigroup shares were down 2.6 percent at $28.30. Shares of Merrill Lynch & Co MER.N, which also announced a plan on Tuesday to raise capital, were down 2.3 percent at $54.70.

The Labor Department's Producer Price Index, a measure of wholesale inflation, showed an unexpected decline in producer prices, but excluding food and energy, the index rose in line with economists' forecasts.

Williams-Sonoma shares were down 14.4 percent at $19 in trading before the opening. (Editing by Kenneth Barry)