US stocks finished with losses on Tuesday as investors were spooked by worse than expected retail sales data. A sharp slide in financial stocks also dampened sentiment.

The Dow Jones Industrial Average dropped 104.18 points or 1.29% to finish at 7,953.63. The S&P 500 decreased 11.44 points or 1.33% to end at 847.29. The Nasdaq Composite fell 20.08 points or 1.21% to 1,633.23.

According to Department of Commerce, retail sales declined 1.1% in March. Economists had forecast a drop of 0.3%.

A release by US Labor Department on Tuesday showed that producer price index fell 1.2% in March. The report also showed that core PPI was unchanged in the month. Economists expected the March PPI to rise 0.4%, and the core PPI to remain unchanged.

The Commerce Department said that business inventories dropped 1.3 percent in February, close to the 1.2% fall that economists had expected.

President Barack Obama said on Tuesday that though his policies have brought 'glimmers of hope', there will be "more job loss, more foreclosures and more pain' before the recession ends."

Meanwhile Federal Reserve Chairman Ben S. Bernanke said on Tuesday there are signs that the “sharp decline” in the U.S. economy may be slowing.

Financials suffered a crushing blow in Tuesday's session. JP Morgan Chase (NYSE: JPM) plunged $3 or 8.90% to $30.70. Bank of America (NYSE: BAC) plummeted 93 cents or 8.44% to $10.09.American Express (NYSE: AXP) tumbled $2.03 or 9.92% to $18.43. Goldman Sachs (NYSE: GS) slid $15.04 or 11.56% to $115.11. After the closing bell on Monday, Goldman Sachs reported a first quarter profit of $1.8 billion, or $3.39 a share, compared to $1.5 billion, or $3.23 a share in the year ago quarter. The bank said that it plans to repay the $10 billion of federal loans as soon as the government approves.

Citigroup (NYSE: C) on the other hand, bucked the trend and rose 21 cents or 5.53% to close at $4.01.   

Shares of diversified US firm General Electric (NYSE: GE) slipped 62 cents or 5.11% to $11.51.

Oil giant Chevron Corp. (NYSE: CVX) retreated $1.40 or 2.06% to $66.58.

Shares of embattled US automaker General Motors Corp. (NYSE: GM) rose 7 cents or 4.09% to close at $1.78.

Early on Tuesday, Johnson & Johnson (NYSE: JNJ) reported that first-quarter net income fell slightly to 3.5 billion, or $1.26 a share, from $3.6 billion, or $1.26 a share, prior year quarter. Revenue decreased 7% to $15 billion from $16 billion. Shares of the drugmaker finished at $51.37, up 22 cents or 0.43%.

Retail stocks were hit hard. Shares of Best Buy Inc. (NYSE: BBY) decreased $2.81 or 6.87% to $38.10. Macy's Inc. (NYSE: M) lost 94 cents or 7.27% to end at $11.99.

Grainger Inc (NYSE: GWW) said Tuesday that its first quarter profit declined to $96.4 million, or $1.25 a share, from $114.2 million, or $1.41 a share, in the comparable quarter a year ago.  
Quarterly revenue declined to $1.47 billion from $1.66 billion last year. Grainger added $2.72 or 3.52% to end at $79.96.

European stocks settled mostly higher. The U.K. FTSE rose 5.28 points or 0.13% to 3,988.99. The German DAX and French CAC increased 1.47% and 0.88% respectively.

Asian stocks finished mixed. The Nikkei 225 fell 81.75 points or 0.92% to 8,842.68. The Hang Seng index of Hong Kong rose 678.75 points or 4.55% to 15,580.16.

NYMEX crude oil for May delivery declined 68 cents or 1.4% to settle at $49.37 a barrel.

Disclosure: Author does not own any of the stocks discussed here.