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US stocks fall on disappointing retail sales

US stocks fall on disappointing retail sales

A dismal reading on retail sales and worries about the banking industry pounded stocks early Wednesday. Major stock indexes lost more than 2 percent, including the Dow Jones industrial average, which fell nearly 200 points.
Although investors already knew that retailers suffered a terrible holiday season, a government report on December sales was a surprise. The Commerce Department said retail sales dropped 2.7 percent, more than double the 1.2 percent decline analysts expected.
The pullback marked a record sixth straight month of declines and was the latest sign of the troubles facing consumers. A steep drop in home prices, rising unemployment and difficulty accessing credit have given many consumers no choice but to pare their spending.
The weakness in consumer spending has been a major factor in the economy's deterioration and analysts say they don't see that improving soon. That's troubling for investors because consumer spending accounts for more than two-thirds of U.S. economic activity. Many predict the recession, already the longest in a quarter-century, will persist at least until late this year.
Investors are also more concerned about the financial industry after Citigroup Inc., as expected, announced Tuesday it would give control of its Smith Barney brokerage business to Morgan Stanley and receive about $2.7 billion in much-needed cash.
The market is worried that Citi is still suffering and will need to further cut costs to boost cash.
In the first half-hour of trading, the Dow fell 194.42, or 2.30 percent, to 8,254.14.
Broader indexes also declined. The Standard & Poor's 500 index fell 22.22, or 2.55 percent, to 849.57, and the Nasdaq composite index fell 34.92, or 2.26 percent, to 1,511.54.
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