Wall Street's recession fears
Stocks slip as investors await Bernanke speech, mull JPMorgan's cautious outlook.
NEW YORK (CNNMoney.com) -- Stocks slipped Wednesday morning as a weak retail sales report refocused investors on the threat of recession, despite any relief about the government's $700 billion bank bailout plan.
The Dow Jones industrial average (INDU) lost more than 200 points, and the Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) were significantly lower in the early going.
On Tuesday, an early rally lost steam in the afternoon as investors remained cautious about the economy and the extent of the financial crisis despite the government's latest move to shore up banks.
The pullback also came a day after record point gains for the Dow Jones industrial average and the S&P 500.
Investor anxiety about the state of the economy and its prospects for a speedy recovery has a basis.
San Francisco Federal Reserve President Janet Yellen said in a speech late Tuesday what has been widely accepted among economists but rarely said by any Fed officials, that "the U.S. economy appears to be in a recession."
Also late Tuesday, the government reported that the federal budget deficit soared to $455 billion at the end of the fiscal year that ended Sept. 30, largely due to the housing collapse and ensuing financial crisis. The deficit was nearly triple the previous year's figures and was significantly higher than the Bush administration's previous estimates.
Eyes on economy. The Census Bureau reported much weaker-than-expected retail sales figures for September - the biggest drop in the overall sales in three years. Even excluding the impact of extremely weak auto sales in the period, the drop was much sharper than forecasts.
Meanwhile, the Producer Price Index, the reading on inflation on the wholesale level, fell in line with forecasts due to lower energy prices. But the so-called core PPI, which excludes volatile oil and energy prices, rose more than expected.
At 12:15 p.m. ET, Fed Chairman Ben Bernanke is set to give a widely anticipated speech on economic outlook and the state of financial markets to the Economic Club of New York. At 2 p.m., the Fed releases its so-called beige book, a look at the state of the economy compiled by each of the Fed's district banks across the nation.
Company news. Investors will also be tuning in to quarterly results form JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500). Both saw their shares fall despite reporting better than expected results.
JPMorgan reported net income of 11 cents a share, sharply lower than the 97 cents a share it earned a year earlier. But that was far better than the forecast of a 21-cent-a-share loss forecast by analysts surveyed by Thomson Reuters. The company did warn that it is reasonable to expect reduced earnings over the next few quarters, though.
Wells Fargo, which just recently won a battle with Citigroup (C, Fortune 500) to move forward with its takeover of Wachovia, also beat forecasts even as it also reported lower earnings.
Citigroup is expected to report its quarterly results Thursday.
State Street (STT, Fortune 500), another of the major banks that will get an the infusion of capital from the Treasury under the plans announced Tuesday, reported early Tuesday that earnings rose more than expected.
Oil and dollar. Oil prices continue to be pressured lower amid heightened anxiety over a global slowdown in demand. Prices fell below $80 a barrel Wednesday, trading down $2.51 to $76.12 a barrel. Prices have lost nearly $70, or more than 47%, since peaking at $147.27 a barrel on July 11.
The Energy Information Administration's weekly reading on crude and gasoline inventories will be delayed a day this week due to the federal holiday Monday. According to Platts, the energy research arm of McGraw Hill Cos., oil supplies are expected to show an increase of 3.1 million barrels, while gasoline inventories are forecast to be up 3.1 million barrels.
Meanwhile, the dollar has been on a volatile ride of late, reacting to U.S. and overseas government interventions aimed at propping up global and domestic economies. Early Wednesday, the greenback was higher against the euro, but remained lower versus the British pound and the Japanese yen. 
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