New York - Wall Street took another tumble on Wednesday, with the Dow Jones Industrial Average spiralling down by more than 700 points amid renewed worries the United States is already in the grip of a recession. US Federal Reserve chief Ben Bernanke warned that the emergency action taken by the Bush administration in response to the financial crisis is unlikely to produce a swift economic recovery.
"Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away," Bernanke said to the Economic Club of New York.
The Dow fell by 733.08 points, or 7.87 per cent, to 8,577.91, nearly erasing a massive rally on Monday in what had been a brief glimmer of hope following the rush by governments to stave off wider economic fallout caused by the financial crisis.
The broad-based Standard & Poor's 500 Index lost the largest share, plunging by 9.03 per cent, or 90.17 points, to 907.84 when trading concluded. The Nasdaq Composite declined by 150.68 points, or 8.47 per cent, to 1628.33.
Meanwhile, the economic forecast worsened as the Federal Reserve reported that activity weakened across the United States in September as consumers and businesses grew more pessimistic.
The report known as the Beige Book, which is published eight times a year on conditions in the central bank's 12 regions, showed consumer spending and manufacturing had decreased in most areas.
The US government late Tuesday reported a record deficit of 455 billion dollars for 2007-08 budget year that ended on September 30. The deficit represents 3.2 per cent of the gross domestic product (GDP) of the 14-trillion-dollar US economy, nearly triple the 2006-07 deficit of 161.5 billion dollars and 1.2 per cent of the GDP.
The president of the San Francisco branch of the Federal Reserve, Janet Yellen, said she believed the United States had already fallen into recession.
The dark cloud over the US stock exchange has spread around the world. Europe's blue-chip Stoxx50 closed down 5 per cent on Wednesday.
The announcement Tuesday that the US government would follow Europe's example and use 250 billion dollars of a finance rescue package to buy up bank shares failed to stop stocks from sliding on Tuesday, and the decline took a sharp turn for the worse on Wednesday.
The US Commerce Department reported Wednesday that retail sales fell by 1.2 per cent in September, almost twice economists' estimates, while the three largest US oil companies, Exxon Mobil, Chevron and ConocoPhillips, said they lost more than 5 per cent as crude fell below 75 dollars a barrel for the first time since September 2007.
Two finance giants - JPMorgan Chase and Wells Fargo - reported large declines in profits, but still remained in the black.
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, while American Airlines, the nation's largest, lost 360 million dollars on ongoing operations in the third quarter, parent company AMR said.
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.
On the currency markets, the dollar dropped against the Japanese yen to 99.93 yen from 101.88 yen on Tuesday, but climbed slightly against the euro to 74.10 from 73.36 euro cents on Tuesday.
