U.S. consumer sentiment fell sharply in early June as tumbling stock markets, criminal indictments of corporate chieftains and fears of further attacks on the U.S. weighed on Americans' spirits.

The University of Michigan's preliminary June consumer sentiment index fell to 90.8 -- its lowest level since February -- from 96.9 in May, market sources said Friday. Forecasts had been for the index to slip only slightly to 96.8. The data are released directly to market subscribers only and were obtained by Reuters.

"If the stock market turns around, consumer sentiment could improve. But it's very disconcerting. Consumer attitudes are caving in in response to the stock market," said Anthony Karydakis, senior financial economist at Banc One Capital Markets.

The sharp fall in sentiment, coming a day after the government released data showing May retail sales fell three times what economists had forecast -- 0.9 percent as against 0.3 percent, compounded worries that Americans may pull back on spending, undermining the economy's modest recovery.

Some economists played down the decline's importance for the overall growth outlook, saying that the consumer sentiment levels were still consistent with healthy spending.

"This is not a disaster ... but it is certainly not good and can only play badly in the markets," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

In a sign that Americans' confidence in the future is waning, the expectations index, which measures attitudes about the 12 months ahead, fell to its lowest level since last December at 86.2, down from 92.7 in May.

According to Greenwich Capital Markets, the report said that consumers' assessment of personal finances fell to the worst level in nine years -- which may bode ill for consumer spending that has so far underpinned the recovery.

U.S. stocks have been battered this month by worries about the strength of the U.S. economic recovery and the corporate profit outlook, revelations of corporate wrongdoing and geopolitical tensions from the Middle East to Kashmir.

U.S. stocks extended steep early losses on the data, with the broad Standard & Poor's 500 index falling below 1000 to its lowest level since last September, while U.S. Treasury bonds soared to drive benchmark yields, which move opposite price, near their lowest level this year.

The current conditions index, which tracks consumers' views about their present financial situation, fell in June to 97.9 from 103.5 in May.

The University of Michigan's preliminary consumer sentiment survey is based on telephone interviews with roughly 250 Americans across the country on personal finances and business and buying conditions.