NEW YORK - Stocks tumbled on Tuesday, pulling the benchmark S&P 500 index to its lowest in three months, after a regional manufacturing report fell to a record low and financial shares slid further on signs of more trouble for European banks.

Dismal economic data from Japan added to the gloom and made oil prices sink. Energy shares were the biggest drag on the Dow and S&P stock indexes, with Exxon Mobil Corp down 3.8 percent.

Adding to the negative sentiment, Moody's Investors Service said various eastern Europe banks faced downgrades and that recession in emerging Europe will be more severe than elsewhere due to large imbalances. Investors fled some western banks seen having a crucial role in keeping the former Communist bloc afloat after financing growth in recent years.

U.S. banks, already battered by the failure so far of action to save the financial system to kick in, fell further, with shares of JPMorgan down 9 percent to $22.46. Wells Fargo dropped 8.7 percent to $14.39, as the KBW Banks index <.BKX> tumbled more than 8 percent.

The market overall continues to suffer from concerns left over from last week regarding the stability of the financial stocks, said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. More negativity from Europe certainly didn't help. You're seeing a basic flight to safety out of equities into fixed income and gold.

The Dow Jones industrial average <.DJI> tumbled 272.80 points, or 3.47 percent, to 7,577.61. The Standard & Poor's 500 Index <.SPX> slid 33.97 points, or 4.11 percent, to 792.87. The Nasdaq Composite Index <.IXIC> fell 58.91 points, or 3.84 percent, to 1,475.45.

Wall Street's slide pulled the S&P 500 below 800 for the first time since the intraday bear market low of November 21.

A report showing that manufacturing production in New York state fell to a record low in February stirred worries about the deepening recession among investors, adding to fears that a new U.S. economic stimulus package won't be a quick fix.

The low reading in manufacturing and data from Japan that showed the world's second-biggest economy had sunk deeper into recession helped push gold to a fresh seven-month high, as investors moved to bullion as a safe haven. Crude oil futures sank 7.3 percent to $34.78 per barrel on an expected decline in demand.

Concerns about overseas demand in the near term continue to weigh on the price of oil and that's hurting all oil stocks, Wedbush Morgan's James added.

Energy shares slid, with Exxon Mobil down 4.1 percent to $71.54 and Chevron down 4.9 percent to $66.29. The S&P energy index <.GSPE> slid nearly 5.7 percent.

General Motors Corp shares slid 15 percent to $2.12 as the automaker prepared to submit a survival plan under the terms of its $13.4 billion government bailout.

Discouraged investors also had to deal with news that the Securities and Exchange Commission had charged Houston-based Stanford Financial Group with alleged fraud involving a multibillion-dollar investment scheme.

Wal-Mart was the only positive stock in the Dow industrial average, after the retailer posted a quarterly profit that beat Wall Street's forecasts. It was up 3.1 percent at $47.98.

U.S. President Barack Obama is due to sign a $787 billion economic stimulus bill into law on Tuesday, but investors are fearful that the measure will not help soften the impact of the 14-month-old recession soon enough. The White House hopes the package will save or create 3.5 million jobs.

(Editing by James Dalgleish)