U.S. STOCKS - Wall St sells off as consumers snap wallets shut

By Kristina Cooke

NEW YORK (Reuters) - U.S. stocks fell on Friday after a record drop in retail sales last month heightened fears that American consumers' reluctance to spend will push the economy into an even deeper downturn than currently expected.

An attempt at a rally in the last hour of trading fell apart, leaving the market unable to build on Thursday's dramatic rebound as more negative economic and corporate data painted a bleak picture.

It was another harrowing week for Wall Street, with sizable declines in four out of five sessions, even as world leaders headed to Washington to address the worst financial crisis in 80 years. For the week, the benchmark S&P 500 lost 6.16 percent.

Retail sales dropped 2.8 percent in October as consumers cut back amid recession fears, a government report showed. Consumer spending is a key driver for U.S. economic growth and corporate profits.

Adding to the grim mood, J.C. Penney, the department store operator, and Abercrombie & Fitch, a clothing retailer for teens and young adults, gave disappointing outlooks and said shoppers look like they will be reining in spending this holiday season.

The retail sales number "was abysmal, and guidance from retailers like J.C. Penney and Abercrombie was pretty bleak," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"Without the participation from the retail sector, you're not going to be able to get much sustainability to any rally," he added.

The Dow Jones industrial average dropped 337.94 points, or 3.82 percent, to 8,497.31, while the Standard & Poor's 500 Index slid 38.00 points, or 4.17 percent, to 873.29. The Nasdaq Composite Index fell 79.85 points, or 5.00 percent, to end at 1,516.85.