Stocks get battered

NEW YORK (CNNMoney.com) -- Stocks slumped Thursday morning, as investors eyed record high oil and gold prices, the dollar at an all-time low versus the euro, weak retail sales and the potential collapse of mortgage bond fund Carlyle Capital.

Bonds rallied, sending the corresponding yields lower as investors sought safety in the comparatively safer haven of government debt.

The Dow Jones industrial average (INDU), the broader Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) all tumbled nearly an hour into the session.

Credit crunch fears remained front and center after Carlyle Capital, a fund run by Washington, D.C.-based private-equity firm Carlyle Group, said late Wednesday that it expects its creditors to seize all of the fund's remaining assets after negotiations to prevent its liquidation failed.

The company, which has seen the value of its home-loan assets plunge with the collapse of the housing market, said that it has defaulted on about $16.6 billion in loans as of Wednesday.

The news sparked worries that the Amsterdam-based fund's creditors will dump billions of dollars of weakened mortgage-backed securities on the market, weakening their value even more. This sent the dollar lower versus the yen and international markets lower.

Big U.S.-based financial stocks tumbled too, with Dow components AIG (AIG, Fortune 500), American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and JP Morgan (JPM, Fortune 500) all down at least 4% in the morning.

Stocks ended Wednesday's session lower on record oil and gas prices. That followed Tuesday's big rally that saw the Dow jump 417 points, in its best day in 5-1/2 years.

Oil, gas and gold all rise. Commodity prices continued to surge Thursday, with oil heading toward a record $111 a barrel, gas at an all-time high of 3.267 a gallon and gold prices surging past the $1,000 an ounce mark.

Helping fuel the run up in commodities was a further weakening of the dollar, which hit another all-time low versus the euro and a 12-year low against the yen.

Economic news. Retail sales tumbled 0.6% in February, surprising economists who were looking for sales to rise 0.2% on average, according to Briefing.com forecasts. Sales excluding autos fell 0.2%, missing forecasts for a rise of 0.2%.

January business inventories rose 0.8%, the government reported, after rising 0.6% in the previous month. Economists thought inventories would rise 0.5%.

And in Washington, Treasury Secretary Henry Paulson announced plans to overhaul the regulation of financial institutions.

Other markets. Global markets tumbled, with stocks in Asia ending lower and European equities down in the afternoon.

U.S. light crude oil for April delivery fell 17 cents to $109.75 a barrel on the New York Mercantile Exchange after hitting a record $110.70 in electronic trading.

COMEX gold for April delivery added $15.70 to $996.20 an ounce after touching an all-time high of $1000 an ounce earlier.

Treasury prices rallied for a second session, lowering the yield on the benchmark 10-year note to 3.41% from 3.47% late Wednesday. Bond prices and yields move in opposite directions.