GLOBAL MARKETS-Stocks slide on global service sector weakness

By Daniel Bases

NEW YORK, Feb 5 (Reuters) - Stock prices fell across the globe on Tuesday, driven by a sharp retrenchment in the U.S. services sector last month that raised fears of a recession in the world's largest economy.

Concerns the U.S. credit crisis is spreading beyond mortgages to consumer credit compounded fears of weaker global growth. Bank stocks and financial services companies were hit particularly hard, as well as telecommunications and energy companies.

Benchmark U.S. stock indexes skidded. The Dow Jones industrial average .DJI was down 245.33 points, or 1.94 percent, at 12,389.83. The Standard & Poor's 500 Index .SPX fell 27.93 points, or 2.02 percent, at 1,352.89. The Nasdaq Composite Index .IXIC lost 40.78 points, or 1.71 percent, at 2,342.07.

"The decline today reflects a market that's completely driven by fear," said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc.

Earlier in the global trading day, European service sector surveys also reflected weakness, driving stocks down and bonds higher.

The steep drop in the U.S. Institute for Supply Management's index of non-manufacturing industry to levels not seen since the 2001 recession boosted U.S. and European government debt prices.

"It's another recession marker on the radar screen," said Cary Leahy, economist at Decision Economics in New York.

The dour outlook on the U.S. economy comes despite interest rate cuts totaling 2.25 percentage points in the Federal Reserve's benchmark fed funds rate since September to spur economic growth.