* Global stocks slide as fears of worldwide slowdown mount
* S&P dives 9 percent, Dow falls 7.9 percent
* Gold, bonds, yen all rise as risk aversion returns
* Oil prices slip to 13-month lows on recession worries
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 15 (Reuters) - The broad U.S. stock market
plunged 9 percent on Wednesday, outpacing steep drops in
Europe, and crude oil dropped to 13-month lows after dismal
U.S. retail sales and manufacturing data rattled investors who
bid up safe-havens on the growing signs of a deepening
slowdown.
Shorter-term U.S. government debt rose, gold prices jumped
more than 1 percent and the less-risky yen gained after the
data intensified fears the American economy already is mired in
a recession that will be deeper and longer than first thought.
Federal Reserve Chairman Ben Bernanke said the U.S. economy
faces major headwinds, helping push U.S. shares, as measured by
the broad S&P 500, down 9 percent and erasing most of Monday's
strong gains. Earlier, major European stock indexes fell almost
7 percent.
Bernanke said credit market turmoil poses a "significant
threat" to the economy. He also said it will take some time to
restore normal credit flows and he pledged the U.S. central
bank would continue to act aggressively to fight the crisis.
"Bernanke's comments earlier have inspired another round of
risk aversion," said Mark Frey, head of FX trading at Custom
House in Victoria, British Columbia.
The euro fell to session lows against the U.S. dollar and
yen on risk aversion.
Crude oil futures slid more than 5 percent to drop below
$75 a barrel for the first time since September 2007, spurred
by fears of falling demand in a recession.
The Organization of the Petroleum Exporting Countries cut
its forecasts for world demand for crude next year in its
latest monthly report. []
"Even if governments are successful in calming equity
markets and unfreezing credit markets in the near future, the
fallout on the real economy from financial market headwinds is
expected to be considerable," OPEC said.
U.S. crude <CLc1> fell $4.09 to settle at $74.54 a barrel.
Crude prices are down almost 50 percent from a record peak of
$147 hit in July.
London Brent crude <LCOc1> fell $3.73, or 5 percent, to
settle at $70.80 a barrel.
Stocks extended their slump further after the Federal
Reserve said in its Beige Book report that economic activity
weakened across the United States in September as businesses
revised capital investments and consumers curtailed spending.
"I think that retail sales spooked investors this morning
and has increased the near-term risk of a broad-based
recession," said Tom Sowanick, chief investment officer at
Clearbrook Financial LLC in Princeton, New Jersey.
The Fed's Beige Book report "was horrible except for the
housing sector, which appears to be stabilizing in some
districts ... Otherwise, the Beige Book is no longer beige,
but a darker shade of brown."
The S&P and Dow have closed lower every session so far in
October with the exception of the record rally on Monday, with
volatility picking up. In five of the past eight sessions, the
Dow has seen wild swings of almost 370 points or more.
The Dow Jones industrial average <> closed down 733.08
points, or 7.87 percent, at 8,577.91. The Standard & Poor's 500
Index <.SPX> plunged 90.18 points, or 9.04 percent, at 907.83.
The Nasdaq Composite Index <> tumbled 150.68 points, or
8.47 percent, at 1,628.33.
U.S. economic data released before Bernanke spoke confirmed
his outlook and the fears of investors.
U.S. retailers posted their biggest monthly sales decline
in more than three years in September, while a gauge of New
York manufacturing fell in October to the lowest level since
its inception in 2001.
Shares of big U.S. retailers were bruised by the data, with
Dow components Wal-Mart Stores <WMT.N>, the world's largest
retailer, down 8.1 percent, and Home Depot <HD.N> slipping 5.9
percent.
The Dow is now only up about 1.4 percent on the week,
having given up the bulk of Monday's 11 percent rally.
Exxon Mobil <XOM.N> was among the biggest drags on the Dow,
falling 14 percent as crude prices fell more than $4 a barrel.
Economic bellwether Caterpillar Inc <CAT.N> gave up 11.4
percent.
The FTSEurofirst 300 <> index of top European shares
closed 6.5 percent lower at 903.67 points.
Britain's FTSE 100 <> fell 7.2 percent, Germany's DAX
<> slipped 6.5 percent and France's CAC 40 <> shed
6.8 percent.
Investors dumped mining shares, tracking a sharp sell-off
in commodity prices on recession concerns. Rio Tinto <RIO.L>
tumbled 17 percent and Anglo American <AAL.L> sank 20 percent.
"It's the beginning of the end of the financial crisis, but
beyond that a global recession is looming," said Emmanuel
Morano, head of equity management at La Francaise des
Placements, in Paris.
"Fears over a global recession are justified, and these
fears have been priced in very quickly. Valuations in the basic
resources sector are apocalyptic. This sell-off really has the
violence of the crash of 1987."
In the Treasury bond market, most U.S. government debt
prices rose on a renewed safety bid, but longer maturity bond
prices fell as investors worried anew about the huge slug of
debt issuance that looms to pay for the U.S. government's
measures to rescue the financial system.
The benchmark 10-year U.S. Treasury note <US10YT=RR> gained
26/32 in price to yield 3.98 percent, while the 2-year U.S.
Treasury note <US2YT=RR> rose 14/32 points to yield 1.59
percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.69 percent at 82.141. Against the yen,
the dollar <JPY=> fell 1.92 percent at 100.22.
The euro <EUR=> fell 0.98 percent at $1.3489.
Spot gold prices <XAU=> rose $9.65 to $844.90 an ounce.
The gloomy economic news and rise in risk aversion came
despite trillions of dollars pledged worldwide to recapitalize
banks and stem the worst financial crisis since the 1930s.
There were glimpses the concerted government efforts
already were taking effect. The rate banks charge each other
for dollar, euro and sterling loans fell for the second
straight day as recent bold steps from authorities around the
world continued to thaw out frozen money markets.
"Following the release of national 'bailout' plans from UK,
Germany, France, U.S. and others, there are early signs that
the severe money-market tension of the last month may be
easing," said Meyrick Chapman, a strategist at UBS.
"We think the easing will continue," Chapman said.
(Reporting by Ellis Mnyandu, Ellen Freilich, Steven C. Johnson
in New York and Jamie McGeever, Ikuko Kao and Jan Harvey in
London and Tyler Sitte in Frankfurt, Writing by Herbert Lash;
Editing by Leslie Adler)
