U.S. Stocks Drop as Retail Sales Slump Spurs Recession Concern

U.S. stocksslumped for a second day, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the nation out of a prolonged recession.

Exxon Mobil Corp. and Chevron Corp.tumbled more than 8 percent as commodity prices declined on concern the slowing economy will hurt demand. Wal-Mart Stores Inc.retreated 6 percent after the Commerce Department said purchases at chain stores decreased 1.2 percent last month. Morgan Stanley lost 15 percent after Oppenheimer & Co. analyst Meredith Whitney said the government's bank rescue is not a ``panacea'' solution.

The Standard & Poor's 500 Index plunged 60.09 points, or 6 percent, to 937.92 at 3:05 p.m. in New York. The Dow Jones Industrial Averageretreated 464.67, or 5 percent, to 8,846.32. The Nasdaq Composite Index lost 92.06, or 5.2 percent, to 1,686.95. About 25 stocks fell for each that rose on the New York Stock Exchange.

The retreat over the past two days erased more than half of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.

All 10 S&P 500 industries fell more than 4.5 percent today. The declines came after the drop in retail sales was almost twice economists' estimates, sending Office Depot Inc., Target Corp. and Best Buy Co. down more than 7 percent. The Federal Reserve's index of New York manufacturing slumped to minus-24.6, a record low. The data overshadowed a retreat in money-market rates and better-than-estimated earnings reports from JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp.

Stocks in Europe and Asia fell for the first time in three days, helping push the MSCI World Index, a benchmark for 23 developed countries, to a 5.5 percent decline. Brazilian stock trading was briefly halted after the Bovespaindex plunged 10 percent.

Energy Slump

Exxon Mobil, Chevron and ConocoPhillips, the three biggest U.S. oil companies, led energy companies to the biggest retreat among 10 S&P 500 industries as crude fell below $75 a barrel for the first time since September 2007. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast for a second month.

The S&P 500 Energy Index, once the year's best performing industry group, retreated 11 percent today and is down 47 percent from its peak in May.

sa Inc., MasterCard Inc. and American Express Co. had declines greater than 11 percent on concern consumers will charge less during the upcoming holiday season.

JPMorgan erased earlier gains and fell 2.2 percent to $39.69 even after the largest U.S. bank by market value reported quarterly earnings that beat analysts' estimates. The company will set aside more money to cover loan losses as the lender braces for the economic slump to get .

Dell Inc. dropped 5.1 percent to $13.36. The world's second- largest personal-computer maker was cut to ``neutral'' from overweight by JPMorgan analyst Mark Moskowitz. The company gets about 60 percent of revenue from personal computers, which is a ``hurdle to achieving consistent growth,'' the analyst said.

EBay Inc. retreated 11 percent to $15.71. The largest Internet auction company was cut to ``underperform'' at Merrill Lynch & Co., which said it doesn't expect ``positive'' third- quarter results or fourth-quarter forecast. EBay reports earnings after the official close of U.S. exchanges today.

Coke Rallies

Coca-Cola Co. climbed 2.5 percent to $44.84 for the only advance in the Dow average. The world's largest soft-drink maker posted third-quarter per-share profit that exceeded analysts' estimates by 8.1 percent on increased sales outside the U.S.

Genentech Inc. added 3.7 percent to $82.06. The largest U.S. maker of cancer drugs said third-quarter profit rose 6.7 percent as sales of tumor-fighting medicines beat analysts' estimates.

The S&P 500 fell yesterday as a worsening earnings outlook at PepsiCo Inc. and Microsoft Corp. overshadowed the $2 trillion global push to rescue the financial system. The U.S. is in a recession and the Fed's interest-rate stance is aimed at addressing the risks of a deeper slump, according to San Francisco Federal Reserve President Janet Yellen.

The economy deteriorated throughout the U.S. last month and pessimism about the outlook spread, the Federal Reserve said in its regional economic survey. Retailing, auto sales and tourism declined in ``most'' districts, while housing and construction ``weakened or remained low,'' according to the Beige Book report, published two weeks before officials meet to set interest rates.

Confidence in the global economy plunged in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed. The Bloomberg Professional Global Confidence Index fell to 4 from 11.3 in September, the lowest since the survey began in November.

The latest chapter in the credit crisis came when Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history on Sept. 15. The company's hedge-fund clients are now largely unable to access their Lehman accounts even as the value of the securities continues to fluctuate along with the markets.

The investors may be required to put up more collateral if the value of those securities drops, a process known as a margin call, according toSteven Pearson, the partner at PricewaterhouseCoopers responsible for unraveling Lehman's U.K. operations.

Goldman Sachs Group Inc.'s Hedge Fund VIP Basket, an index of stocks with the most hedge-fund ownership, slumped 10 percent today.

Dollar money-market rates fell after the European Central Bank, Bank of England and Swiss National Bank offered lenders unlimited U.S. currency for the first time in a coordinated effort to unlock credit markets. Three-month dollar Libor slid 0.09 point to 4.55 percent.

BHP Billiton Ltd., the world's largest mining company, and Xstrata Plc, the fourth-biggest copper producer, lost more than 14 percent as copper, lead, tin and nickel prices slid on the London Metals Exchange. Posco, Asia's third-largest steelmaker, retreated 8.5 percent.