US STOCKS-Wall St sinks on recovery fears, financials

* Investors fret about the economic recovery

* Financials lead sell-off; expert sees Citi write-down

* Dow and Nasdaq each lose 2.5 pct; S&P 500 off 2.8 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to close)

By Ellis Mnyandu

NEW YORK, Oct 30 (Reuters) - The Dow industrials suffered its worst slide since July on Friday on concerns that the economic recovery won’t be robust enough to sustain the seven-month stock rally, while financials sank on renewed worries about Citigroup’s balance sheet.

Investors unloaded shares across the board on the day that marked the end of the fiscal year for many mutual funds, putting the S&P 500 on the brink of a correction.

Wall Street's favorite measure of investor fear, the CBOE Volatility Index .VIX, soared 24 percent -- its biggest one-day percentage gain since October 2008 -- and the Dow had its worst day since July.

Analysts said there were doubts that the recovery would be strong enough to justify higher stock prices a day after government data showed the economy returned to growth in the third quarter.

“There’s still some systemic risk to the environment,” said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York, in New York.

“You need growth, you need a healthy financial system to have a healthy economy. There are questions out there about how things go from here. Right now the government is fueling the system with cash. That can’t last forever.”

The Dow Jones industrial average .DJI slid 249.85 points, or 2.51 percent, to end at 9,712.73. The Standard & Poor's 500 Index .SPX tumbled 29.92 points, or 2.81 percent, to 1,036.19. The Nasdaq Composite Index .IXIC dropped 52.44 points, or 2.50 percent, to close at 2,045.11.

Both the S&P 500 and the Nasdaq snapped seven straight months of gains.

For the week, the Dow fell 2.6 percent, the S&P 500 lost 4 percent and the Nasdaq declined 5.1 percent.

For the month, the Dow was unchanged, the S&P 500 shed 2 percent and the Nasdaq slid 3.6 percent.

Citigroup C.N fell 5.1 percent to $4.09 after accounting expert Robert Willens, an independent consultant, said the bank was likely to have a $10 billion fourth-quarter charge on its deferred tax assets.

The KBW bank index .BKX fell 5 percent, while the S&P financial index .GSPF lost 4.8 percent. Other sectors taking a beating were technology, industrials and materials, which had all led the market's run-up since March.

All 30 Dow stocks finished in the red, with JPMorgan JPM.N the top drag with a drop of 5.8 percent to $41.77, followed by Exxon Mobil Corp XOM.N, off 3.1 percent at $71.67.

On Nasdaq, Apple Inc AAPL.O, the iPhone maker, lost 4 percent to $188.50, while Google Inc GOOG.O, the Web search leader, declined 2.7 percent to $536.12.

The market’s slide, coinciding with technical glitches on the New York Stock Exchange, wiped out Thursday’s gains, which represented the best one-day rally for stocks in three months.

A 10.7 percent slide in the Dow Jones Transportation Average .DJT from its post-March peak, which was reached on Oct. 20, underscored some of the pessimism. Technically, the DJT has crossed a threshold that chartists regard as signifying the onset of a correction.

A huge influx of orders prevented the New York Stock Exchange from disseminating quotes shortly after the start of trading on Friday.

NYSE Euronext NYX.NNYX.PA, the parent of the New York Stock Exchange, said the delays followed "an inordinate influx" of erroneous orders received as Friday's session got under way. Later in the session, the company had to temporarily transfer quote processing to a backup system.

The interruption on the NYSE and in the NYSE Amex cash equities trading was later resolved. [ID:nN30425427]

The benchmark S&P 500 is up 53.2 percent from the 12-year closing low of March 9. It has shed 5.6 percent from its post-March peak it reached on Oct. 19. (Editing by Jan Paschal)