Investors are writing-off office supply retailers -- and the sector was led down on Wednesday by

Office Depot

(ODP) - Get Report

, which was downgraded by Moody's Investor Services.

The investor services firm cited concerns about the tough economy and Office Depot's weakening credit, sending shares tumbling 16% to $3.

While Office Depot's first-quarter results beat expectations, results were still significantly below results in the year prior, Moody's noted.

Moody's said the negative outlook reflects the possible further deterioration in Office Depot's credit metrics, which it said are already considered weak for the current rating that could occur during 2009.

Analyst Charlie O'Shea said that a recovery in this segment may not occur until late 2009 or early 2010.

Shares of rival

Staples

(SPLS)

dipped 4% to $19.31, while

Office Max

(OMX)

sank 12% to $6.67 in afternoon trading.

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