By Lynn Thomasson Oct. 15 (Bloomberg) -- U.S. stocks slumped for a second day, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out the nation's banks will keep the economy out of a recession. Chevron Corp., Caterpillar Inc. and American Express Co. retreated more than 5 percent. Goldman Sachs Group Inc. and Citigroup Inc. lost more than 6 percent after Oppenheimer & Co. analyst Meredith Whitney said she is still ``cautious'' on bank stocks even after the government's plan to spend $250 billion on stakes in financial firms. Benchmark indexes in Europe and Asia fell for the first time in three days. The Standard & Poor's 500 Index declined 33.22 points, or 3.3 percent, to 964.79 at 9:50 a.m. in New York. The Dow Jones Industrial Average retreated 249.86, or 2.7 percent, to 9,061.13. The Nasdaq Composite Index lost 35.75, or 2 percent, to 1,743.26. About 13 stocks fell for every two that rose on the New York Stock Exchange. ``The state of the economy is weighing heavily on investors' minds,'' said Lawrence Creatura, a fund manager at Clover Capital Management in Rochester, New York, which oversees $2.7 billion. ``This has so far been largely a Wall Street problem, but it's starting to cross over to Main Street and the data today supports that.'' Rally Pared The retreat over the past two days has erased more than a third of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Today's declines came as the Commerce Department said retail sales fell 1.2 percent in September, almost twice economists' estimates, and the Federal Reserve's index of New York manufacturing slumped to minus 24.6. The S&P 500 has lost 34 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $640 billion. The S&P 500 is valued at 11.8 times estimated 2008 profit for its companies. When that price- to-earnings ratio sank to 10.9 on Oct. 10, it was the cheapest compared with the multiple using trailing profit since June 1985. Exxon Mobil Corp., Chevron Corp. and ConocoPhillips each lost more than 4 percent as crude oil fell as much as $3.66 to $74.97 a barrel in New York. The S&P 500 Energy Index retreated 5.3 percent today and is down 43 percent from its peak in May. Citigroup declined $1.25 to $17.37 and Goldman Sachs slid $7.95 to $114.95 after Oppenheimer's Whitney said the capital infusions from the Treasury are ``one large step in the right direction,'' though not a ``panacea.'' ``We remain cautious on the banks and believe we are at least several quarters away from stabilizing fundamentals,'' Whitney wrote in a note dated yesterday. ``We believe credit costs will continue to surprise on the upside and revenues will begin to surprise on the downside as companies will be forced to make money off of lower asset bases.'' To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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