Stocks: A Barrage of Bad News

Indexes tumbled Tuesday after word of massive losses at Citi and a slump in retail sales. Intel's earnings miss could pressure the market Wednesday

Some days, it seems the bad news never ends: Your car needs a new muffler, your dog bit the mail carrier, Grandma's cutting you out of the will. Wall Street had one of those days Tuesday.

It started with Citi. After weeks of speculation about the depth of its subprime mortgage losses, Citigroup (C) reported a record fourth quarter loss Tuesday morning.

Then it was the economy. Investors received a reports showing weaker than expected U.S. retail sales in December. The news exacerbated the Street’s recession fears.

And that was all before the opening bell.

Add to those developments some unfavorable news later in the session regarding marquee names like Apple (AAPL) and Boeing (BA), and investors decided to head for the exits, driving major stock indexes sharply lower Tuesday. Retail, oil, and financial stocks were hit particularly hard.

On Tuesday, the Dow Jones industrial average tumbled 277.04 points, or 2.17%, to 12,501.11. The broader S&P 500 index dropped 35.30 points, or 2.49%, to 1,380.95. The tech-heavy Nasdaq composite index fell 60.71 points, or 2.45%, to 2,417.59.

Activity in the broader market was markedly negative. On the New York Stock Exchange, 23 issues declined in price for every eight that advanced. Nasdaq breadth was 23-7 negative.

Wednesday’s session may be equally unpleasant, given a big earnings miss reported after the closing bell Tuesday by semiconductor giant Intel (INTC).

On Wednesday, investors will have to contend with reports on consumer-level inflation, industrial production, capacity utilization for December, the NAHB Housing Price index for January, and the Federal Reserve’s Beige Book report on economic conditions. These reports are likely to reinforce the weak economic scenario, according to S&P MarketScope. And they will no doubt be addressed when Fed chairman Ben Bernanke testifies on the economy before a Congressional panel on Thursday.

Wednesday also brings another batch of fourth-quarter earnings reports, including one from JP Morgan Chase (JPM), a mega-bank that has so far managed to sidestep the ill effects of the subprime crisis.

Boeing shares fell 4.7% on a WSJ.com report that the company, already six months behind schedule on its new 787 Dreamliner jet program, is close to announcing additional delays that could hurt its ability to deliver as many airplanes as promised during the initial year of production.

Apple shares dropped 5.5% on investors’ perception of an “underwhelming” MacWorld, the company’s annual product showcase/technology love-in, according to S&P MarketScope. Apple introduced the MacBook Air, and unveiled new software for Apple TV that allows viewers to rent movies on its iTunes Store directly from their widescreen TV via its AppleTV product. The company says it has sold 4 million iPhones.

But it was Citi that took center stage Tuesday. The financial giant posted a net loss of $9.83 billion, or $1.99 a share, compared with a profit of $5.13 billion, or $1.03, one year earlier, on a 70% revenue drop. Citi recorded $18.1 billion in pre-tax write-downs and credit costs on subprime related direct exposures in fixed income markets, and a $4.1 billion increase in credit costs in its U.S. consumer business, mainly because of higher current and estimated losses on consumer loans.

Citi's loss of $1.99 per share was almost twice what analysts were expecting. The mean estimates of analysts polled by Reuters called for a net loss of $1.03 a share on revenue of $10.3 billion. Many analysts said predicting Citi's results was especially difficult due to the fallout of the credit crisis.

The bank was expected to report up to $20 billion in mortgage-related losses. The company had warned it might have to write down up to $11 billion.