Stocks tumble on recession fears

Stocks swooned Thursday, as weak reports on retail sales and jobless claims added to fears of a prolonged recession.

The Dow Jones industrial average (INDU) lost 210 points, or 2.3%, over an hour into the session, after having fallen as much as 221 points earlier.

The Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) both declined by around 2.5%.

Stocks fell sharply Wednesday, with the Dow losing close to 500 points and all three major gauges off at least 5% as President-elect Barack Obama's historic victory gave way to worries about the economy he in inherits.

Additionally, stocks, as represented by the S&P 500, had shot up 18% in the seven trading sessions through Election Day. After such a run, Wall Street was vulnerable to a pullback.

October retail sales from the nation's chain stores were mostly abysmal, with some discounters like Wal-Mart Stores escaping the fray. The housing market collapse, credit crunch and strained labor market have all taken their toll on consumers' wallets. Even the recent retreat in oil and gas prices has not had much of a positive impact on consumer spending.

Retail sales: With the exception of discount chain Wal-Mart (WMT, Fortune 500), most retailers saw October sales in line with the bruised economy. Thomson Reuters estimates the monthly sales could be the worst in 8 years. (Full story)

Gap (GPS, Fortune 500) reported a 16% drop in sales at stores open a year or more, a retail industry metric known as same-store sales. Macy's (M, Fortune 500) same-store sales fell 6.3% and the company warned November sales would weaken.

AnnTaylor Stores (ANN) said same-store sales fell 19% from a year ago. The women's clothing retailer also said it was expanding its restructuring program and warned that third-quarter results won't meet forecasts. Shares fell 24%.

Signs of the recession were evident in economic reports released earlier this week. They included dour readings on manufacturing, factory orders and the services sector and the worst monthly auto sales in 25 years.

Jobs: The number of Americans filing new claims for unemployment last week topped forecasts.

The weekly number followed a pair of monthly reports Wednesday that showed the labor market continued to get hammered in October.

The reports were especially worrisome ahead of Friday's big government report. That report is expected to show that employers cut 200,000 jobs from their payrolls in October. Meanwhile, the unemployment rate, which is generated by a separate survey, is expected to rise to 6.3% from 6.1% the previous month.

Other markets: In global trade, Asian markets tumbled on recession fears. European markets were lower in afternoon trading, after European and British central banks announced interest rate cuts.

The dollar gained against the euro and the yen.

COMEX gold for December delivery rose $14.60 to $757 an ounce.

U.S. light crude oil for December delivery fell $3.70 to $61.60 a barrel on the New York Mercantile Exchange.

Gasoline prices fell another 2.5 cents to a national average of $2.34 a gallon, according to a survey of credit-card activity released Thursday by motorist group AAA. The decline marks the 50th consecutive day that prices have decreased. During that same time period, prices dropped by $1.51 a gallon, or 39.2%.

Lending rates: The credit market continued to improve. The 3-month Libor fell to 2.39% from 2.51% Wednesday, a nearly four-year low, according to Bloomberg.com. Overnight Libor rose slightly to 0.33%, bouncing off an all-time low of 0.32% the previous day. Libor is a key interbank lending rate.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.36% from 0.39% Wednesday, with investors preferring to take a small return on their money than risk the stock market. Last month, the 3-month yield reached a 68-year low around 0% as investor panic peaked.

Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.72% from 3.70% Wednesday. Treasury prices and yields move in opposite directions.