* Global stocks slide as fears of worldwide slowdown mount
* S&P dives 9 percent, Dow falls 7.9 percent
* Gold, bonds, yen all rise as risk aversion returns
* Oil prices slip to 13-month lows on recession worries (Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 15 (Reuters) - The broad U.S. stock market plunged 9 percent on Wednesday, outpacing steep drops in Europe, and crude oil dropped to 13-month lows after dismal U.S. retail sales and manufacturing data rattled investors who bid up safe-havens on the growing signs of a deepening slowdown.
Shorter-term U.S. government debt rose, gold prices jumped more than 1 percent and the less-risky yen gained after the data intensified fears the American economy already is mired in a recession that will be deeper and longer than first thought.
Federal Reserve Chairman Ben Bernanke said the U.S. economy faces major headwinds, helping push U.S. shares, as measured by the broad S&P 500, down 9 percent and erasing most of Monday's strong gains. Earlier, major European stock indexes fell almost 7 percent.
Bernanke said credit market turmoil poses a "significant threat" to the economy. He also said it will take some time to restore normal credit flows and he pledged the U.S. central bank would continue to act aggressively to fight the crisis.
"Bernanke's comments earlier have inspired another round of risk aversion," said Mark Frey, head of FX trading at Custom House in Victoria, British Columbia.
The euro fell to session lows against the U.S. dollar and yen on risk aversion.
Crude oil futures slid more than 5 percent to drop below $75 a barrel for the first time since September 2007, spurred by fears of falling demand in a recession.
The Organization of the Petroleum Exporting Countries cut its forecasts for world demand for crude next year in its latest monthly report. [nWLB2749]
"Even if governments are successful in calming equity markets and unfreezing credit markets in the near future, the fallout on the real economy from financial market headwinds is expected to be considerable," OPEC said.
U.S. crude
London Brent crude
Stocks extended their slump further after the Federal Reserve said in its Beige Book report that economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.
"I think that retail sales spooked investors this morning and has increased the near-term risk of a broad-based recession," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.
The Fed's Beige Book report "was horrible except for the housing sector, which appears to be stabilizing in some districts ... Otherwise, the Beige Book is no longer beige, but a darker shade of brown."
The S&P and Dow have closed lower every session so far in October with the exception of the record rally on Monday, with volatility picking up. In five of the past eight sessions, the Dow has seen wild swings of almost 370 points or more.
The Dow Jones industrial average <.DJI> closed down 733.08 points, or 7.87 percent, at 8,577.91. The Standard & Poor's 500 Index <.SPX> plunged 90.18 points, or 9.04 percent, at 907.83. The Nasdaq Composite Index <.IXIC> tumbled 150.68 points, or 8.47 percent, at 1,628.33.
U.S. economic data released before Bernanke spoke confirmed his outlook and the fears of investors.
U.S. retailers posted their biggest monthly sales decline in more than three years in September, while a gauge of New York manufacturing fell in October to the lowest level since its inception in 2001.
Shares of big U.S. retailers were bruised by the data, with
Dow components Wal-Mart Stores
The Dow is now only up about 1.4 percent on the week, having given up the bulk of Monday's 11 percent rally.
Exxon Mobil
The FTSEurofirst 300 <.FTEU3> index of top European shares closed 6.5 percent lower at 903.67 points.
Britain's FTSE 100 <.FTSE> fell 7.2 percent, Germany's DAX <.GDAXI> slipped 6.5 percent and France's CAC 40 <.FCHI> shed 6.8 percent.
Investors dumped mining shares, tracking a sharp sell-off
in commodity prices on recession concerns. Rio Tinto
"It's the beginning of the end of the financial crisis, but beyond that a global recession is looming," said Emmanuel Morano, head of equity management at La Francaise des Placements, in Paris.
"Fears over a global recession are justified, and these fears have been priced in very quickly. Valuations in the basic resources sector are apocalyptic. This sell-off really has the violence of the crash of 1987."
In the Treasury bond market, most U.S. government debt prices rose on a renewed safety bid, but longer maturity bond prices fell as investors worried anew about the huge slug of debt issuance that looms to pay for the U.S. government's measures to rescue the financial system.
The benchmark 10-year U.S. Treasury note
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.69 percent at 82.141. Against the yen,
the dollar
The euro
Spot gold prices
The gloomy economic news and rise in risk aversion came despite trillions of dollars pledged worldwide to recapitalize banks and stem the worst financial crisis since the 1930s.
There were glimpses the concerted government efforts already were taking effect. The rate banks charge each other for dollar, euro and sterling loans fell for the second straight day as recent bold steps from authorities around the world continued to thaw out frozen money markets.
"Following the release of national 'bailout' plans from UK, Germany, France, U.S. and others, there are early signs that the severe money-market tension of the last month may be easing," said Meyrick Chapman, a strategist at UBS.
"We think the easing will continue," Chapman said. (Reporting by Ellis Mnyandu, Ellen Freilich, Steven C. Johnson in New York and Jamie McGeever, Ikuko Kao and Jan Harvey in London and Tyler Sitte in Frankfurt, Writing by Herbert Lash; Editing by Leslie Adler)