Wall Street tumbles on Libya unrest

NEW YORK (Reuters) - Stocks fell on Tuesday as a revolt in Libya prompted investors to move away from riskier assets, providing a pause after the market's six-month rally.

Global oil prices hit a 2-1/2 year high on concerns the unrest could disrupt supplies from the oil exporting region. Libyan leader Muammar Gaddafi used tanks, helicopters and warplanes to quell a growing revolt and scoffed at reports he was fleeing after four decades in power.

The CBOE Volatility Index , Wall Street's so-called fear gauge, surged 14 percent to 18.73.

"The market certainly needed a breather and this sure is a good reason," said Jack De Gan, chief investment officer at Harbor Advisory in Portsmouth, New Hampshire.

"But I don't see this as a significant correction as long as the unrest doesn't spill over to a much bigger oil producing country. The strength of the rally is still there."

The Dow Jones industrial average was down 54.15 points, or 0.44 percent, at 12,337.10. The Standard & Poor's 500 Index was down 9.92 points, or 0.74 percent, at 1,333.09. The Nasdaq Composite Index was down 33.19 points, or 1.17 percent, at 2,800.76.

Stocks cut losses slightly after a private sector report showed consumer confidence rose in February to a three-year high.

Shares of Wal-Mart Stores Inc fell 3.7 percent to $53.33 after the world's largest retailer posted its seventh straight drop in U.S. sales.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)