US STOCKS-Wall St tumbles as recession fears mount

(Updates to early morning)

By Ellis Mnyandu

NEW YORK, Feb 5 (Reuters) - U.S. stocks tumbled on Tuesday, led by a sell-off among shares of financial companies, as a report showing a contraction in the vast services sector of the economy in January heightened recession fears.

The data from the Institute for Supply Management underscored concerns that the fallout from the housing slump is spreading to the broader economy. In an effort to revive growth, the Federal Reserve has repeatedly cut short-term interest rates.

The S&P 500 index at one point fell more than 2 percent.

Shares of investment bank Goldman Sachs & Co (GS.N: Quote, Profile, Research) declined more than 3 percent, while Bank of America Corp (BAC.N: Quote, Profile, Research), the No. 1 U.S. bank by market value, dropped nearly 3 percent.

Investors also sold technology shares, which are seen as particularly vulnerable to a downturn in business and consumer spending. Business software maker Oracle Corp (ORCL.O: Quote, Profile, Research) led Nasdaq's losers with a drop of nearly 5 percent.

The ISM number "does bring in a heightened concern about the economy, and it adds further pressures to stock prices," said Steve Goldman, market strategist, Weeden & Co., in Greenwich, Connecticut.

The Dow Jones industrial average .DJI was down 184.28 points, or 1.46 percent, at 12,450.88. The Standard & Poor's 500 Index .SPX was down 22.15 points, or 1.60 percent, at 1,358.67. The Nasdaq Composite Index .IXIC was down 33.63 points, or 1.41 percent, at 2,349.22.