U.S. stocks slid more than 1 percent on Tuesday after an unexpectedly large drop in inventories at wholesalers raised doubts about an economic recovery and bank shares skidded after a prominent analyst warned that fundamentals for the industry have not improved.

The sharp drop in inventories in June, which was nearly double expectations, suggests that businesses remained skeptical about a return in demand.

There has been a lot of discussion that we are building a base for inventory rebuild but (today's number) suggests that we are a bit off on the recovery that some people had been anticipating, said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Jankovskis said the market also was definitely seeing a pullback after the recent rally that sent the broader S&P index to a 10-month high last week and up nearly 50 percent from a closing-low set on March 9.

Financial stocks were major underperformers, tumbling after Rochdale Securities analyst Richard Bove painted a gloomy outlook for the banking industry. He said bank stocks are trading on fumes, and he expects a short-term pull-back in the stock prices after a recent rise.

The Dow Jones industrial average <.DJI> was down 103.99 points, or 1.11 percent, at 9,233.96. The Standard & Poor's 500 Index <.SPX> was down 13.34 points, or 1.32 percent, at 993.76. The Nasdaq Composite Index <.IXIC> was down 27.67 points, or 1.39 percent, at 1,964.57.

Among banking stocks, Bank of America was down 4.14 percent to $15.99 and JP MorganChase was down 3.54 percent to $41.19.

The S&P Regional Banks sub-index <.GSPBNKS> was off 5.09 percent, while the KBW Bank Index <.BKX> was down 4.83 percent.

Also hurting financials, Miller Tabak cut its price targets on Zions Bancorp and Regions Financial Corp . Shares of Zions dropped more than 10 percent to $16.10, while Regions dropped 5.43 percent to $4.70.

CIT Group Inc added to losses for the financial sector, plunging 22 percent to $1.15 after the 101-year-old lender said it would file for bankruptcy protection if it failed to complete its debt tender or arrange other financing.

The negative news offset better-than-expected data on U.S. non-farm productivity in the second quarter, which showed worker productivity rose at the fastest pace in six years as hours worked fell much more steeply than output.

Investors are closely eyeing the two-day monetary policy meeting by the U.S. Federal Reserve that kicks off on Tuesday. While interest rates are likely to remain at current levels, the focus will be on signs of an exit strategy from the Fed's quantitative easing policy. (Additional reporting by Chuck Mikolajczak; Editing by Leslie Adler)

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