Russell plunges 6%, as recession fears grip small caps

Small caps have plunged this afternoon, as recession fears have gripped stocks. Already concerned about still frozen credit piping, a slew of lackluster economic data and a sobering speech by Fed Chairman Ben Bernanki only served to push the market lower. At 2:36 p.m. ET, the Russell 2000 (NYSE:IWM) was down 34.81, or 6.28%, to 519.99.

A ghastly retail sales report, hit equity markets hard this morning, causing traders to keep their fingers on the sell button. September retail sales plunged 1.2%, which was nearly double the forecast for a slide of 0.6%. This marked the largest one-month decline since August 2005. Even worse, this was the third consecutive month retail sales have fallen, which hasn’t happened in more than 17 years. With two-thirds of the U.S. economy driven by consumer spending, the plunge in retail sales signals to the reality of a consumer led recession.

Adding to the grim economic picture, factory activity in New York slumped in October, with the NY Manufacturing Survey down 24.6% to the lowest reading in some seven years.

Also, on the economic docket today, the producer price index, a measure of wholesale inflation, wasn’t nearly as dismal. The headline figure for PPI met the forecast at minus 0.4%. “Although the core component is a little worrisome, lower commodity prices and the firmer tone the USD is taking should restrain costs in the year ahead,” BMO Capital Markets economist, Jennifer Lee wrote today.

Ahead of the opening this morning, the MBA Mortgage Application Survey rose 5.1% as mortgage rates slipped; however, purchase activity remained near seven-year lows. ...

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