Wall St sinks as banks slash jobs outlook

* Jobs, manufacturing data miss estimates

* Wall St firms cut forecasts ahead of Fri payrolls report

* Bank stocks weigh

* Indexes off: Dow 1.4 pct, S&P 1.4 pct, Nasdaq 1.2 pct

By Edward Krudy

NEW YORK (Reuters) – U.S. stocks skidded Wednesday as more weak economic data cemented fears the U.S. recovery was running out of steam and prompted Wall Street firms to slash forecasts ahead of the closely watched payrolls report on Friday.

Goldman Sachs and several other big financial institutions cut estimates for non-farm payrolls growth in May after ADP Employer Services reported much lower-than-expected growth in private payrolls last month.

“If we have a payrolls number with revisions that is anything like the ADP on Friday, then we are going to struggle over the next couple of months,” said Jim Paulsen, chief investment officer at Wells Capital Management.

Traders are now talking about a “whisper number” of 100,000 jobs added in May, down sharply from the consensus of 180,000 going into Wednesday, according to David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.

The Dow Jones industrial average dropped 180.20 points, or 1.43 percent, to 12,389.59. The Standard & Poor’s 500 Index fell 18.68 points, or 1.39 percent, to 1,326.52. The Nasdaq Composite Index lost 35.20 points, or 1.24 percent, to 2,800.10.

The fall of about 1 percent for the major indexes came after four days of gains as stocks crept back toward recent highs at the start of May. That had some investors pointing to resilience in the market, but Wednesday’s fall for the S&P 500 back below its down trend line from its May highs is likely to reignite concerns about market weakness.

Bank stocks were among the worst performers as investors feared the impact of a slowing recovery, including a double dip in housing, on their balance sheets. JPMorgan Chase & Co fell 2.6 percent to $42.11. The KBW bank index dropped 3.2 percent.

U.S. private employers added a scant 38,000 jobs in May, the lowest since September 2010, according to ADP.

Goldman Sachs cut its estimate for the Friday payrolls report, saying overall employers added 100,000 jobs in May versus its original estimate of 150,000. Citigroup cuts its forecast to 100,000 from 170,000.

Manufacturing activity declined sharply in May, according to the Institute for Supply Management’s index of national factory activity, falling to its worst since September 2009.

General Motors Co and Ford Motor Co reported slightly lower U.S. vehicles sales in May as broader economic weakness and high prices prompted consumers to delay purchases.

GM fell 2.4 percent to $31.03, and Ford lost 3.4 percent to $14.42.

Macy’s Inc dipped 0.7 percent to $28.69 after the department store operator posted a 7.4 percent increase in May same-store stores, beating expectations.

Sealed Air Corp lost 3.1 percent to $24.76 after the bubble wrap maker agreed to buy private cleaning products maker Diversey Holdings for $2.9 billion in cash and stock.

Marathon Oil Corp dropped 1.8 percent to $53.19 after the integrated oil company made a deal to acquire oil and gas properties in Texas’ Eagle Ford shale field from private equity firm KKR and Hilcorp Resources Holdings LP for $3.5 billion.