The Dow Jones Industrial Average is on another spiral downwards, testing 12,500.

In early trading the DJIA fell over 200 points taking the average to 12,574 after weak economic news and a disappointing quarterly report from Citigroup stirred renewed concerns of recession. The Commerce Department report sent another bad signal on the economy, registering a 0.4 percent drop while the November figure was revised lower.

Federal Reserve Chairman Ben Bernanke has dropped strong hints that a rate reduction is on the way. The Fed's monetary policy committee's next meeting is Jan. 29-30. The worrisome fall in retail sales, which also puts pressure on the dollar, builds a case for the argument that the cut will be at least 0.50 percentage point.

Concerns about a weakening economy also were highlighted in the latest earnings results. Embattled bank Citigroup announced a hefty $18.1 billion write-down for bad mortgage assets early Tuesday and slashed its dividend.

The news of Citigroup's drastic efforts to shore up its balance sheet had been widely expected, but it still was a forceful reminder of the serious problems that bad lending practices have created for financial services firms. The stock was volatile in preopening trade and last was down 53 cents, or 1.75 percent, at $28.55.

Citigroup, which lost $9.83 billion in the fourth quarter, also announced a massive $12.5 billion capital injection. Hope that struggling financial firms will bolster their finances also was stirred by news that Merrill Lynch & Co. Inc. agreed that three foreign investment funds will invest $6.6 billion in the Wall Street firm.

Since the start of the year, an indecisive stock market has vacillated between rallies and selloffs, as market players try to discern whether the economy has begun to shrink or is just slightly slowed by troubles in the credit and housing markets.