* U.S. stocks fall as weak economic data sparks retreat
* Bonds gain on record drop in October U.S. retail sales
* Oil falls about 3 percent
* Euro zone falls into recession
(Recasts with U.S. markets, adds byline; dateline previously
LONDON)
By Herbert Lash
NEW YORK, Nov 14 (Reuters) - U.S. stocks fell more than 3
percent on Friday, shedding more than half the prior day's
steep gains, and oil fell as data showed the 15-nation euro
zone was in recession and U.S. retail sales posted a record
drop in October.
Investors took cover in less-risky fixed-income products,
driving the price of U.S. and euro zone government debt higher.
European shares managed to close higher, but pared gains as the
report of a whopping 2.8 percent drop in U.S. retail sales in
October spooked investors.
The U.S. dollar and the yen rose against the euro as fresh
evidence of a gloomy economic outlook around the world raised
investor demand for safe-haven assets.
"We started the day in an equity rally but the driving
force remains risk-aversion and deleveraging," said Cyril
Beuzit, head of interest rate strategy at BNP Paribas in
London. Bonds will perform well through year-end, he said.
Oil dropped more than 3 percent to below $57 a barrel after
the U.S. stock market opened lower and the economic data and
corporate results again underscored the weak state of the
global economy.
Investors took their cue from equities as data showed the
euro zone has entered its first recession, boosting
expectations that the European Central Bank will cut interest
rates again in December as inflation slows quickly.
[]
"We are moving up and down with the stock market because it
is our barometer of economic confidence," said Harry
Tchilinguirian, senior oil market analyst at BNP Paribas.
Sales at U.S. retailers suffered a record decline last
month as fears of recession sapped spending, but part of the
drop reflected a 12.7 percent decline in sales at gas stations
as gasoline prices tumbled, which helped buoy the confidence of
America consumers in November. []
Two key U.S. retailers, department store operator J.C.
Penney <JCP.N> and teen apparel seller Abercrombie & Fitch Co
<ANF.N>, warned of worsening results ahead as shoppers rein in
spending. They both reported lower quarterly profits and said
soft conditions would extend into next year.
Wal-Mart Stores Inc <WMT.N> fell more than 2 percent.
Investors also sold big manufacturers, with Caterpillar Inc
<CAT.N> off 5 percent, and Boeing <BA.N> down about 4 percent
following news of a delay of its new 747 jumbo.
All three major U.S. stock index fell more than 3 percent
after notching gains of more than 6 percent on Thursday.
"People realize yesterday's euphoric bounce was overdone
and it feels like the appropriate measure is to take profits in
the names that got ahead of themselves yesterday," said Justin
Wiggs, a trader at Stifel Nicolaus Capital Markets in
Baltimore.
Before 1 p.m., the Dow Jones industrial average <> was
down 236.07 points, or 2.67 percent, at 8,599.18. The Standard
& Poor's 500 Index <.SPX> was down 28.63 points, or 3.14
percent, at 882.66. The Nasdaq Composite Index <> was down
54.18 points, or 3.39 percent, at 1,542.52.
European stocks closed higher, but the day's rally lost
some steam in late trade as poor economic data drove Wall
Street lower.
The pan-European FTSEurofirst 300 index <> ended 0.8
percent higher at 859.58 points, off a day's high of 879.19.
Oil shares led the advance, with BP <BP.L>, Royal Dutch
Shell <RDSa.L> and Total <TOTF.PA> up between 3.2 percent and
3.6 percent.
Economic worries were compounded by renewed concerns about
the credit market, two days after U.S. Treasury Secretary Henry
Paulson proposed changes to the government's $700 billion bank
bailout. The interbank lending rates for dollars rose for a
second day, raising doubts about the Treasury's effectiveness
to ease credit conditions and the overall economy.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
30/32 in price to yield 3.74 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 1/32 in price to yield 1.22 percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.26 percent at 86.673. Against
the yen, the dollar <JPY=> fell 0.96 percent at 96.64.
The euro <EUR=> fell 0.79 percent at $1.2727.
U.S. light sweet crude oil <CLc1> fell $1.90 to $56.34 a
barrel.
Spot gold prices <XAU=> rose $8.90 to $745.45 an ounce.
Stock markets rose overnight in Asia, although they pared
sharp gains by half. Japan's Nikkei <> was among the
region's leaders, with a 2.7 percent advance, after earlier
rising as much as 5.5 percent.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 1.6 percent, after earlier rising as
much as 3.2 percent.
(Reporting by Ellis Mnyandu, Richard Leong, Wanfeng Zhou in
New York and Christopher Johnson, Nicholas Vinocur and Rebekah
Curtis in London; writing by Herbert Lash; Editing by Leslie
Adler)
