Stocks fell sharply today, led lower by the financial sector, with the Dow Jones industrial average declining more than 200 points and closing below 13,000. It was the Dow’s lowest close since the depth of the markets’ plunge in August.

The retreat started after Citigroup was downgraded to “sell” by a Goldman Sachs analyst, who warned that the company’s write-downs of assets tied to complex debt instruments could reach $15 billion by the end of next year’s first quarter. Citi has already announced $8 billion to $11 billion in fourth-quarter write-downs.

The analyst’s report hit a raw nerve among investors, reigniting fears of a credit squeeze as financial giants struggle to dig out from poor bets on securities tied to subprime home loans. Shares of all the top brokerage firms were down, keeping pace with a 17.6 percent plunge for financial companies for the year. Citi’s stock dipped 5.9 percent, to $32, near a four-year low.

Staggering financials dragged down the Standard & Poor’s 500-stock index, which dipped 1.8 percent to 1,433.27. The Dow closed down 218.35, or 1.7 percent, at 12,958.44.