Stocks in chilly open
Wall Street retreats as Deutsche Bank's warning and Citi-Morgan Stanley venture highlight financial services woes; retail sales plunge in December.
NEW YORK (CNNMoney.com) -- Stocks slumped Wednesday morning as a dismal retail sales report and ongoing worries about the financial services sector underscored fears about the depth of the recession.
The Dow Jones industrial average (INDU) lost 1.7% in the early going. The Standard & Poor's 500 (SPX) index lost 2.1%. The Nasdaq composite (COMP) lost 2.2%.
"The fear gauge on Wall Street seems to be rising," said Ryan Larson, senior equity trader at Voyager Asset Management. "The fact remains that nobody knows how long [the recession] is going to last, and how deep it's going to be."
On Wednesday morning, the Commerce Department reported a 2.7% plunge in retail sales - much worse than expected. However, stocks had already been braced for a sellfof on the heels of a Tuesday announcement from Citigroup (C, Fortune 500) that the bank agreed to sell 51% of Smith Barney to Morgan Stanley (MS, Fortune 500).
Dave Rovelli, managing director at Canaccord Adams, said the markets are also reacting to Deutsche Bank's (DB) warning that it expects a loss of about $6.3 billion for the fourth quarter, and analyst reports that HSBC (HBC) in Hong Kong needs to raise $30 billion.
"We were supposed to be getting toward the end of this, and obviously we're not," said Rovelli. "Until the financials have any light at the end of the tunnel, you're not going to be seeing a significant rally."
This follows a mixed day of trading on Tuesday, when the markets weighed the future of Citigroup against the bitter corporate losses of aluminum giant Alcoa (AA, Fortune 500) and a speech from Federal Reserve chairman Ben Bernanke.
Economy: A reading on business inventories in November follows at 10 a.m. ET, and the Federal Reserve's Beige Book on economic conditions is due out at 2 p.m. ET.
Companies: Stocks to watch include Yahoo, which said Tuesday it had hired veteran technology executive Carol Bartz as its new CEO. Separately, Yahoo (YHOO, Fortune 500) said President Sue Decker will resign after a transitional period.
World markets: The news out of Deutsche Bank took a toll on European shares. In morning trading, shares in London, Paris and Frankfurt were all in negative territory. Asian markets finished moderately higher.
Oil and money: Oil prices rose for a second day amid talk of deeper production cuts. Traders are also keeping an eye on the U.S. fuel inventory report, due out at 10:30 a.m. ET.
U.S. light crude for February fell 21 cents to $37.51 a barrel on the New York Mercantile Exchange.
The dollar fell against the British pound and the yen, but it rose versus the euro. 
