Recession fear shakes stocks down across world as Dow plunges
— -- Just when investors started feeling better about the financial system, rising fears about the economy sent stocks tumbling again Wednesday.
The Dow Jones industrials dropped more than 700 points — losing much of their 936-point advance from Monday — and all the major indexes fell at least 7%.
Investors were skittish after two disheartening reports convinced Wall Street that a recession, if not already here, is inevitable.
The Dow fell 733.08, or 7.87%, to 8,577.91. The Dow's massive decline Wednesday marks its 20th triple-digit move in 23 sessions.
Broader stock indicators also skidded. The Standard & Poor's 500 index fell 90.17, or 9.03%, to 907.84, and the Nasdaq composite index fell 150.68, or 8.4%, to 1,628.33.
The government's report that retail sales plunged in September 1.2% — almost double the 0.7% drop analysts expected — made it clear that consumers are reluctant to spend amid a shaky economy and a punishing stock market.
The Commerce Department report was sobering because consumer spending accounts for more than two-thirds of U.S. economic activity. The reading came as Wall Street was refocusing its attention on the faltering economy following stepped up government efforts to revive the stagnant credit markets.
The release of the beige book, the assessment of business conditions from the Federal Reserve, added to investors' angst. The report found that the economy continued to slow in the early fall as financial and credit problems took a turn for the worse. The central bank's report supported the market's belief that difficulties in obtaining loans have choked growth in wide swaths of the economy.
"Even though the banking sector may be returning to normal, the economy still isn't. The economy continues to face a host of other problems," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "We're in for a tough ride."
Fed Chairman Ben Bernanke offered a similar opinion, warning in a speech Wednesday that patching up the credit markets won't provide an instantaneous jolt to the economy.
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