Scary U.S. retail sales and economy; global markets sank

As shoppers cut back, U.S. retail sales fell 1.2 percent in September, the Commerce Department reported Wednesday. The 1.2 percent decline was the biggest in three years since August 2005 and was the first time sales had fallen three months in a row since early 1991.

Retail sales were down 1 percent compared with a year earlier, the first time sales had been down year-over-year since 2002. Sales were weak in almost all kinds of stores. Excluding the 3.8 percent drop in auto sales, retail sales fell 0.6 percent.

Retail sales represent about a third of final sales in the economy and about half of consumer spending. U.S. consumer spending had been the engine of U.S. and global growth for most of the decade, but high debt loads, falling home prices, rising energy prices, flat income growth and poor job prospects have taken their toll on the American consumer.

Federal Reserve snapshot showed Americans are spending less and manufacturing is slowing around the country. Fed Chairman Ben Bernanke, speaking in New York, warned that the economy was facing a "significant threat" from credit-market turmoil and said a recovery would not be swift even if aggressive government measures stabilized markets.


Global Market Sank

Scary retail sales report, worries about the economy, and Bernanke's downbeat economic assessment spooked equities markets, sending the Dow Jones industrials down a staggering 733 points Wednesday. The Dow ended the day down nearly 8 percent, its steepest drop since one week after Black Monday in 1987. The Dow has wiped out all but about 127 points of its record-shattering 936-point gain on Monday of this week.

The broad Standard and Poor's 500 Index plunged 9 percent, its worst one-day drop since the 1987 stock market crash.

The selling spree carried over to Asia, where stocks fell sharply Thursday. Japan's key stock index plummeted more than 11 percent, South Korean shares shed 9.25 percent, and Hong Kong's Hang Seng Index was down 4.8 percent.

Following Asia's lead, benchmarks in Britain, Germany and France slipped about 3 percent. Russia's RTS also fell.

Earlier this week, after governments around the world announced plans to use trillions of dollars to prop up banks, including a U.S. plan to buy about $250 billion in bank stocks. The market appeared to be turning around after the news, sending the Dow to its greatest daily point jump ever and its biggest one-day rally since 1933.