US STOCKS-Wall St retreats on Fed outlook, banks sell off

* Fed cuts 2009 GDP view, long-run forecast unchanged

* Financials drag on profit-taking

* McDonald's, P&G rise after analyst comments

* Indexes off: Dow 0.6 pct, S&P 0.5 pct, Nasdaq 0.4 pct

For up-to-the-minute market news click [STXNEWS/US] (Updates with volume in final paragraph)

By Edward Krudy

NEW YORK, May 20 (Reuters) - U.S. stocks fell on Wednesday, led by financials in a late-stage sell-off, after the Federal Reserve gave a more pessimistic view on the economy, tempering hopes for a quick recovery.

The Fed cut its 2009 forecast for gross domestic product and raised its outlook for unemployment, undercutting recent optimism that the economy might be turning the corner.

Financial shares had led the market higher in morning trading after a successful share offering from Bank of America (BAC.N) boosted optimism about the sector, but they reversed course as investors booked profits. Shares of Goldman Sachs (GS.N) fell 3.3 percent to $136.44 and JPMorgan (JPM.N) lost 3.5 percent to $34.55. The KBW bank index .BKX lost 2.7 percent.

"It sounds as though they (the Fed) are a little less excited about the economy than they were originally or as we were led to believe," said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois. "It's certainly not encouraging of the green shoots that everybody else is talking about."

Technology shares were also a negative as Hewlett-Packard (HPQ.N), the world's biggest PC maker, gave a disappointing outlook for 2009. The stock fell 5.22 percent to $34.67 and was the biggest drag on the Dow.

The Dow Jones industrial average .DJI fell 52.57 points, or 0.62 percent, at 8,422.28. The Standard & Poor's 500 Index .SPX lost 4.64 points, or 0.51 percent, at 903.49. The Nasdaq Composite Index .IXIC was off 6.70 points, or 0.39 percent, at 1,727.84.

Energy stocks also lost ground even as crude oil surged. Shares of Exxon Mobil (XOM.N) fell 1.3 percent to $69.61 and was among the Dow's top drags.

But stocks considered to be defensive plays were among gainers, including consumer staples and healthcare.

McDonald's (MCD.N) rose 4.4 percent to $56.25 and was the biggest boost to the Dow after Deutsche Bank recommended a "buy" on the world's biggest fast-food chain. Procter & Gamble Co (PG.N), the maker of Tide laundry detergent and Pampers diapers, rose 2 percent to $54.02 after Barclays raised the stock to "overweight."

On the healthcare front, Merck & Co (MRK.N) rose 1.2 percent to $26.09, making it one of the standouts on the Dow.