US stocks extend decline on recession remark, retail sales drop

US stocks extend decline on recession remark, retail sales dropNew York  - US stocks continued their decline at opening bell Wednesday, hit by the largest drop of retail sales in three years and growing worry over a US recession.

The president of the Federal Reserve Bank of San Francisco, Janet Yellen, said late Tuesday that the US is already in a recession and that the job of the central bank is to "mitigate the dark scenario on the downside risk."

US Federal Reserve head Ben Bernanke, who was to deliver a speech in New York at 1615 GMT Wednesday, has not yet used the word "recession," but has been indicating for weeks that the financial crisis and credit freeze may take "a heavy toll" on the economy if left unchecked.

Also late Tuesday, the US government reported a record deficit of 455 billion dollars for the just-ended 2007-08 budget year. The deficit represents 3.2 per cent of the gross domestic product
(GDP) of the 14-trillion-dollar US economy. The 2006-07 deficit was 161.5 billion dollars, or about 1.2 per cent of the GDP.

The announcement Tuesday that the US government would use 250 billion dollars of the 700-billion-dollar finance rescue package to buy up bank shares failed to stop stocks from sliding, and the decline continued on Wednesday.

The broad-based Standard & Poor's 500 Index declined 42.97 points, or 4.31 per cent, to 955.04, at 1520 GMT in New York. The blue chip Dow Jones Industrial Average retreated 333.33, or 3.58 per cent, to 8,977.66. The Nasdaq high tech index shed 52.94, or 2.98 per cent, to 1,726.07.

The retreat over the past two days has erased more than a third of the gains in the S&P 500 and Dow on Monday, when stocks rose the most since the 1930s on the coordinated effort from Europe to stem bank losses and on hints at the US government's plan to buy up bank shares.

Retail sales fell 1.2 per cent in September, almost twice economists' estimates, the US Commerce Department reported Wednesday.

Exxon Mobil, Chevron and ConocoPhillips, the three biggest US oil companies, each lost more than 5 per cent as crude fell below 75 dollars a barrel for the first time since September 2007. The drop in oil prices reflects worry over the slowing economy and reduced demand by consumers who have cut down on driving.

Two finance giants - JPMorgan Chase and Wells Fargo - reported large declines in profits, but still remained in the black.

JPMorgan Chase reported net income of 527 million dollars in the third quarter of 2008, plunging 84 per cent year-on-year. Wells Fargo & Co, the bank in the limelight in the acquisition of Wachovia Corp, reported net income of 1.64 billion dollars in the third quarter, down 24 per cent year-on-year.

The third-largest US air carrier Delta Air Lines reported it lost 50 million dollars in the third quarter of 2008 amid rising fuel costs.

On the bright side, Coca-Cola Co, the world's largest soft drink manufacturer, reported a third-quarter profit increase of 14 per cent to 1.9 billion dollars despite the economic downturn. (dpa)

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