Dark clouds gather over Wall Street

Recession Watch 2008

• Consumer confidence at 5-year low
• Musical chairs at the mall
• U.S. ready to act to calm markets - Paulson
• Bush tax cuts center stage in Congress
• Slower growth, but no recession - forecast

Slippery dollars

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NEW YORK (CNNMoney.com) -- Stocks looked set for another selloff Thursday as nagging fears about credit and the threat of a deep recession troubled investors and sent the dollar plunging.

Less than an hour before the open, Dow futures were sharply lower, pointing to a negative start for blue-chip stocks.

"There are a lot of things weighing on the market," said Edgar Peters, chief investment officer at PanAgora Asset Management in Boston.

Among those fears was a weak monthly retail sales report Thursday, showing a surprising drop of 0.6% last month as American households continued to keep their wallets closed amid higher energy and food prices and a weakening jobs market. (Full Story)

Another factor driving down futures was further dollar weakness. The greenback sank to a 12-year low versus the yen and another record low against the euro, helping to send both gold and oil prices higher. (Full Story)

Also, the U.S. Labor Department reported early Thursday that initial unemployment claims were unchanged from last week's 353,000, a bit better than analysts' forecasts. But jobless benefit applications remain high amid a weak labor market.

The Department of Labor also reported import prices rose 0.2% in February, after a 1.6% jump in January. Excluding volatile petroleum costs, import prices rose 0.6%, much closer to January's 0.7% using that measure.

Global stocks dived on worries about a U.S. recession. Asian markets tanked and European shares tumbled in midday trading.

Credit worries, which have stalked markets lately, were fanned by Carlyle Capital Corp. - a fund affiliated with the Washington, D.C.-based private-equity firm Carlyle Group. The fund said late Wednesday it expects its remaining assets to be seized after it missed margin calls from banks on its portfolio of mortgage-backed bonds.

"It does appear that Carlyle Capital is the biggest event," said Peters. "Investors are worried there are more of those [funds] sitting out there."

Treasury Secretary Henry Paulson is expected to address the credit crisis in a speech Thursday. He is expected to outline a plan that would revamp mortgage rules, The Wall Street Journal reported. Paulson is due to deliver his remarks at 10 a.m. ET.

In other major corporate news, Electronic Arts Inc.'s (ERTS) bid for Take-Two Interactive Software Inc. (TTWO) turned hostile after the video game publisher started a tender offer to acquire all of rival outstanding shares for $26 each. Last month the company rejected Electronic Arts offer.

Other companies to watch include, CME Group Inc. (CME), the parent company of the Chicago Mercantile Exchange. The company could announce plans to buy the commodities exchange Nymex Holdings Inc. (NMX) as early as next week, The Wall Street Journal reported.

And AOL said Thursday it will buy Internet social network site Bebo for $850 million in cash to compete with Facebook and MySpace. AOL is the Internet arm of Time Warner Inc. (TWX, Fortune 500), CNNMoney.com's parent company.

The decline in the dollar helped send commodity prices higher.

Gold prices passed the key psychological mark of $1,000 an ounce Thursday. COMEX gold for April gained $19.50 an ounce. (Full Story)

Oil prices remained near record highs as light, sweet crude for April rose 25 cents to $110.17 in electronic trading.