(Recasts; adds analysts comment, background)

MEXICO CITY, Feb 10 (Reuters) - Mexico's peso weakened sharply on Tuesday and stocks slipped as investors worried that a U.S. government plan to shore up the American banking system might not be enough to counter the ongoing financial crisis.

The peso (MXN: Quote, Profile, Research) MEX01 weakened 1 percent to 14.34 per dollar. The currency has posted gains in four consecutive sessions since Mexico's central bank surprised investors last week by intervening in the foreign exchange market with direct sales of dollars to banks.

The IPC stock index .MXX slid 2.38 percent to 20,048 points, dragged down by sharp losses on Wall Street at top retailer Wal-Mart de Mexico (WALMEXV.MX: Quote, Profile, Research).

The U.S. Treasury Department on Tuesday unveiled a revamped financial rescue plan to cleanse up to $500 billion in toxic assets from banks' books and support $1 trillion in new lending through an expanded Federal Reserve program.

The central bank on Tuesday reported it had spent a little more than $1 billion defending the peso last week, in line with expectations.

Fitch Ratings said on Monday it is carefully monitoring Mexico's currency interventions, the magnitude of the country's economic contraction, and the impact of the downturn on its fiscal and current accounts to decide on whether to downgrade the its debt ratings.

The peso hit a record low last week amid concern the country is being dragged into recession by the downturn in the United States, Mexico's top trading partner. (Reporting by Michael O'Boyle; editing by Gary Crosse)