Wall Street Wednesday: Stocks tumble on disappointing retail sales

4:15 p.m.

By SARA LEPRO and TIM PARADIS
AP Business Writers

NEW YORK (AP) - Volatility is clearly reasserting itself in the stock market.
A darkening outlook for companies from banks to retailers to energy producers pummeled Wall Street Wednesday. Government figures have show retail sales declined more than expected in December and concerns about troubled balance sheets are weighing on banks.
The Dow Jones industrial average is down 248, or 2.94 percent, at 8,200 after being down more than 300 points earlier in the session. Broader indexes are down more than 3 percent.
The Dow has now fallen for six straight sessions.

NEW YORK (AP) - The market's losing streak picked up some momentum today.
The Dow fell 248 points to 8,200.
The S&P 500 was down 29 points at 842.
And the Nasdaq composite shed nearly 57 points to 1,489.
Declining issues outnumbered advancers by a 8 to 1 margin on the New York Stock Exchange.
Volume on the NYSE came to 5.2 billion shares. Nasdaq stock market volume was 1.9 billion shares.

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12:18 p.m.

By CARLO PIOVANO
AP Business Writer

LONDON (AP) - European and U.S. stock markets plummeted Wednesday in reaction to dismal U.S. retail sales data and renewed concerns over the financial well-being of the banking system.
Shares on Wall Street fell upon opening, pushing European indexes to close deep in the red, after a report showed U.S. retail sales fell 2.8 percent in December from the previous month, more than twice the 1.2 percent decline expected by analysts.
Even though around a half of the decline was due to the impact of falling gasoline prices on gas station sales, the markets were spooked by the extent to which American consumers, who account for some 20 percent of the world economy, reined in spending over the crucial Christmas trading period despite heavy discounting by businesses.
The FTSE 100 index of leading British shares closed down 5.1 percent at 4,175.45, while Germany's DAX fell 4.6 percent at 4,422.35. France's CAC-40 closed down 4.6 percent at 3,052.00.
On Wall Street, the Dow Jones industrial average slid 255.75 points, or 3.0 percent, to 8,192.81, while the broader Standard & Poor's 500 index fell 28.18, or 3.2 percent, to 843.61.
"The rally (in the markets) before Christmas and over the Christmas period was predicated on there being a recovery in the second half of the year, but I think you can write this year off in terms of an economic recovery," said Neil Mackinnon, chief economist at ECU Group in London.
The economic and corporate news across the world has been dire in the early days of 2009, with trade on the slide and businesses slashing jobs.
The financial health of the world's banks resurfaced as a major concern in markets Tuesday with the confirmation that Citigroup Inc. is to merge its Smith Barney brokerage into a joint venture with Morgan Stanley, relinquishing control in exchange for $2.7 billion in badly needed cash.
Royal Bank of Scotland PLC, which is now majority-owned by the British government, also said it was raising around 1.7 billion pounds ($2.5 billion) by selling its 4.3 percent stake in Bank of China.
In addition, analysts at Morgan Stanley said HSBC PLC, Britain's biggest bank by market capitalization, may have to raise $20-30 billion and halve its dividend to plug a capital shortfall as earnings deteriorate by more than anticipated.
"While HSBC is winning market share, we do not think this will be enough to offset the negative cyclical and structural trends," Morgan Stanley's analysts said in a statement.
HSBC's shares fell 8.0 percent, while Barclays PLC slumped a massive 14.4 percent after it confirmed that it was cutting 2,100 employees from its retail and commercial banking arm. Royal Bank of Scotland fared even worse, down 18.4 percent, despite its modest fundraising.
Meanwhile, Deutsche Bank AG, Germany's biggest bank, reported a euro4.8 billion ($6.4 billion) loss for the fourth quarter as "exceptional market conditions" severely impacted its sales and trading arms. Its shares fell by more than 6.1 percent.
The renewed funding concerns have fueled speculation that governments around the world will have to recapitalize banks further. Late last year, many provided funding to the banks in return for equity stakes in order to prevent a collapse of their banking systems.
Ben Bernanke, the chairman of the U.S. Federal Reserve, hinted Tuesday that the U.S. government may have to pump more money into the banks to maintain their financial well-being and to get the cash-starved institutions lending money again.
Earlier, Asian markets rose modestly, with Tokyo's Nikkei 225 stock average, which fell nearly 5 percent on Tuesday, up 24.54 points, or 0.3 percent, to 8,438.45. Hong Kong's Hang Seng Index was 36.56 points, or 0.3 percent, higher at 13,704.61 after a six-day losing streak, but finished well off its highs.
Elsewhere, Shanghai's main index climbed 3.5 percent, India's Sensex added 3.1 percent and South Korea's Kospi rose 1.3 percent. Markets in Singapore and Australia advanced as well.
In the oil market, light, sweet crude for February delivery fell $1.6 to $36.21 a barrel in electronic trading on the New York Mercantile Exchange.
The dollar fell 0.1 percent to 89.27 yen, while the euro dropped 0.5 percent to $1.3171.
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AP Business Writers Pan Pylas in London and Jeremiah Marquez in Hong Kong contributed to this report.

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7:45 a.m.

(AP) - Wall Street headed toward a lower open Wednesday as investors questioned whether banks would need more help from the government. The market also awaited a slate of economic reports.
Investors' concerns about the financial industry are heightened after Citigroup Inc. as expected announced Tuesday it would give control of its brokerage, Smith Barney, to Morgan Stanley, and receive about $2.7 billion in much-needed cash.
The market is worried that Citi is still suffering and may need to take further steps to streamline its business. Analysts speculate that Citigroup, which had prided itself for years on its one-stop shop business model, could be headed for a larger-scale dismantling by the federal government. Citigroup has already received $45 billion in government aid, much more than other major banks.
While other financial firms don't appear to be in as dire straights as Citigroup - which is expected to post its fifth straight quarterly loss next week - the industry's troubles are far from over.
Analysts are fearful that banks' credit problems, which up until now had been largely concentrated in mortgages, are spreading to other portfolios, like credit cards and auto loans, setting up 2009 to be another year of multibillion dollar losses.
Wall Street will get its first taste of how the financial sector is faring on Thursday, when JPMorgan Chase & Co. reports earnings nearly a week ahead of schedule.
Investors are also awaiting a number of economic reports Wednesday. The Commerce Department will release its retail sales report for December at 8:30 a.m. Eastern time, followed by a report on business inventories at 10 a.m.
Analysts expect a record sixth straight month of declines in retail sales, and so far the outlook for this year remains gloomy at best.
The Federal Reserve's beige book, its assessment of the economy by region, is perhaps the most anticipated economic report this week. The report, which will be released later Wednesday, provides details about the strengths and weaknesses in each part of the country.
Dow Jones industrial average futures fell 66, or 0.78 percent, to 8,342. Standard & Poor's 500 index futures fell 9.30, or 1.07 percent, to 859.30, while Nasdaq 100 index futures dropped 13.50, or 1.12 percent, to 1,190.50.
Worries about earnings sent the Dow down 25 points on Tuesday, while broader indexes advanced. The Dow has fallen for five straight sessions as investors have begun to question whether they got ahead of themselves in late December on hopes that the economy could be turning around.
Analysts expect investors to refrain from buying until they have a better picture of companies' business expectations for 2009.
Bond prices were mixed early Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.32 percent from 2.30 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, fell slightly to 0.11 percent from 0.12 percent late Tuesday.
The dollar fell against other major currencies, while gold prices rose.
Light, sweet crude rose 84 cents to $38.62 a barrel in electronic premarket trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average rose 0.29 percent and Hong Kong's Hang Seng index rose 0.27 percent. In late morning trading, Britain's FTSE 100 was down 1.65 percent, Germany's DAX index was down 1.36 percent, and France's CAC-40 was down 0.91 percent.