LIBOR falls, stocks plunge

LIBOR continued to ease yesterday. Bloomberg reports:

The London interbank offered rate, or Libor, that banks charge each other for three-month dollar loans dropped for a third day, its longest sequence of declines in seven weeks, according to the British Bankers' Association. It slid 9 basis points to 4.55 percent today. The comparable euro rate declined to 5.18 percent. Asian rates also decreased.

But stock markets went back into turmoil. From Bloomberg:

U.S. stocks plunged the most since the crash of 1987, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the economic slump from deepening...

The Standard & Poor's 500 Index sank 90.17 points, or 9 percent, to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever. The Nasdaq Composite Index lost 150.68, or 8.5 percent, to 1,628.33. About 37 stocks fell for each that rose on the New York Stock Exchange.

And it wasn't just US markets.

Stocks in Europe and Asia fell for the first time in three days, helping push the MSCI World Index, a benchmark for 23 developed countries, to a 7.3 percent decline. Brazilian stock trading was briefly halted after the Bovespa index plunged 10 percent. The index closed down 13 percent after trading resumed.

For the first time in a while, the real economy moved back into focus. Reuters reports Wednesday's US economic data.

Retail sales fell 1.2 percent in September, the Commerce Department said on Wednesday. The decline, the third consecutive monthly drop, was the sharpest since August 2005 and far greater than the 0.7 percent dip economists had expected...

The Labor Department said the producer price index, a gauge of prices received by farms, factories and refineries, dropped 0.4 percent in September, as a further fall in energy costs eased price pressures...

A separate report from the Commerce Department showed business inventories rose a modest 0.3 percent in August as retailers trimmed inventory to cope with consumers cutting back on all but the essentials...

Separately, the New York Fed's "Empire State" index of general business conditions tumbled in October to the lowest since its inception in 2001, hitting minus 24.62, This was below September's minus 7.41 and well under economists' median expectation of minus 10.0.

Meanwhile, the Fed's Beige Book reports that "economic activity weakened in September across all twelve Federal Reserve Districts" while Fed officials speaking on Wednesday all sounded gloomy to varying degrees.