Wall Street Falls At The Start On Disappointing Retail Sales

NEW YORK (MarketWatch) - U.S. stocks dropped Friday after news of weak August retail numbers and of a U.K. lender tapping the Bank of England for emergency funds rekindled economic and financial worries, while a downgrade of Intel Corp. pressured the tech sector.

Already trading lower, stock futures extended their losses after the Commerce Department reported a 0.3% rise in retail sales in August, with all of the gains coming from cars and trucks. Excluding vehicle sales, the figure fell 0.4%. .

"The only good news there is the prior month's numbers were revised upward, but it's still negative news, and will add to growing concerns that the 'R' word is a greater possibility," said Al Goldman, chief market strategist at AG Edwards.

The Dow Jones Industrial Average fell 36.2 points to 13,388.7, with 20 of its 30 components trading lower, with American Express Co. leading the Dow's decline, its stock off 2.4%.

The S&P 500 dropped 5.19 points to 1,478.76 and the Nasdaq Composite declined 8.44 points to 2,592.62.

"A confluence of negatives this morning has brought out sellers -- a bailout by the Bank of England of the fourth-largest mortgage lender, another hike in the BOC [Bank of China] lending rate, and weaker than expected retail sales," said Elliot Spar, market strategist at Stifel Nicolaus & Co.

The Commerce Department reported the U.S. current account deficit narrowed to $190.8 billion in the second quarter, or 5.5% of gross domestic product.

In a separate report, the department said inventories at U.S. businesses tightened in July ahead of the August financial crunch. .

Also head of the opening bell, the Federal Reserve reported an August rise in output at U.S. factories, mines and utilities, with industrial production up 0.2%. .

British bailout

Overseas, British stocks declined after U.K. lender Northern Rock turned to the Bank of England for emergency funds, saying the global credit crunch has it struggling to raise financing.

Asian stocks, however, tallied solid gains, with Hong Kong's Hang Seng Index rising 1.5% to end at a record high. .

China lifted its benchmark interest rates as its central bank moved to cool the nation's economic growth and inflationary pressures.

On Wall Street, stocks likely to be active include KKR Financial after the Kohlberg Kravis Roberts affiliate agreed to sell seven private-equity investments for $191 million.

Dow component Intel Corp. fell 1.5% after its downgrade to neutral from buy by Merrill Lynch, which cited the valuation of the world's biggest chipmaker.

Genentech Inc. come under pressure, falling 0.6%, after a Food and Drug Administration advisory panel said it would review an application for its Avastin breast cancer drug.

And Liz Clairborne fell 1.3% its move to sell four brands to Li & Fung USA for an undisclosed sum.

Gold gains

At the New York Mercantile Exchange, gold futures climbed sharply, with gold for December delivery gaining $7.00 to $724.90 an ounce.

Crude-oil futures fell 57 cents to $79.52 a barrel. .

The dollar came under pressure against the yen and the euro, with the greenback sliding 0.1% against the euro and 0.2% against the yen. .

Treasurys rose, with the benchmark 10-year note up 10/32 at 102 17/32, its yield falling to 4.43%. .

By Kate Gibson