(Updates to early afternoon, changes byline)
By Jennifer Coogan
NEW YORK, Feb 5 (Reuters) - U.S. stocks tumbled on Tuesday
after data showed the vast services sector contracted in
January, the latest sign pointing to a U.S. recession.
Major indexes tumbled 2 percent in a broad-based decline.
But banks and other financial services stocks lost heavily on
worry the service-sector slowdown portrayed in the Institute
for Supply Management data would crimp demand for loans and
capital investment.
In addition, telecommunications shares like Verizon
Communications Inc <VZ.N>, whose products make up the backbone
of the services industry, tumbled.
Insurer American International Group Inc <AIG.N> led the
decline among the Dow industrials, falling 4 percent on fears
about credit exposure. Investment bank Goldman Sachs & Co
<GS.N> slid more than 3 percent after a broker downgrade.
"Much of the move today is based on the weak ISM numbers,"
said Matt Kaufler, portfolio manager at Clover Capital
Management in Rochester, New York. "There is also a growing
realization that the credit problems aren't going away."
The Dow Jones industrial average <> was down 252.00
points, or 1.99 percent, at 12,383.16. The Standard & Poor's
500 Index <.SPX> was down 28.51 points, or 2.06 percent, at
1,352.31. The Nasdaq Composite Index <> was down 41.19
points, or 1.73 percent, at 2,341.66.
A slide in the shares of energy companies such as Exxon
Mobil Corp <XOM.N> was another headwind, with oil prices down
on concerns an economic downturn will slow energy demand.
Exxon was down 2.2 percent at $83.59, making it the
top-weighted drag on the S&P.
AIG shares fell 4.1 percent to $53.13, while Goldman Sachs
declined 4.5 percent to $191.74. Citigroup Inc <C.N> shares
fell 6 percent to $27.43.
Technology shares, seen as particularly vulnerable to a
downturn in both business and consumer spending, contributed to
the market's drop.
Shares of business software maker Oracle Corp <ORCL.O>
falling nearly 3.9 percent to $19.41, while BlackBerry device
maker Research In Motion Ltd's stock <RIM.TO><RIMM.O> fell 3..9
percent to $89.51.
Verizon shares fell 4.2 percent to $37.01 while rival AT&T
Inc <T.N> stock dropped 2.8 percent to $37.11 on the NYSE.
The U.S. services sector data followed figures showing
services growth in the euro zone decelerated sharply in
January, raising fears of a spillover from the United States.
The ISM index posted the largest monthly drop since the
index began in 1997 and hit the lowest level since October 2001
during the previous recession.
(Additional reporting by Kristina Cooke; Editing by Kenneth
Barry)
