NEW YORK (Reuters) - Wall Street had its worst day since the 1987 stock market crash on Wednesday, as bleak economic data fed worries that all the efforts to unlock credit markets may not stave off a severe recession.

Federal Reserve Chairman Ben Bernanke added to those concerns when he said the economy faced a “significant threat” from paralyzed credit markets.

Dismal monthly U.S. retail sales set the tone for the session, dropping the most in more than three years, while a measure of New York state manufacturing hit its lowest level since the index started in 2001.

The Nasdaq has now wiped out all of its gains from Monday’s 11 percent rally, while the benchmark S&P 500 is up only about 1 percent from Friday’s close.

Wednesday’s data intensified recession fears, as did the Federal Reserve’s Beige Book report, which showed economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.

Shares of companies considered economic bellwethers, such as industrial conglomerate Caterpillar Inc, fell sharply. Caterpillar’s shares slid over 11 percent.

Fears of recession knocked commodities lower, with Exxon Mobil tumbling 14 percent as the price of oil fell.

“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 Dow and the benchmark S&P 500 suffered their worst one-day percentage drops since 1987.

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The Dow Jones industrial average slid 733.08 points, or 7.87 percent, to 8,577.91, while the Standard & Poor’s 500 Index tumbled 90.17 points, or 9.03 percent, to 907.84.

The Nasdaq Composite Index sank 150.68 points, or 8.47 percent, to 1,628.33.

The broad Dow Jones Wilshire 5000 closed down 905 points, or 8.99 percent, at 9,160.43, representing a paper loss for the day of approximately $1.1 trillion.

LATE SLIDE FOR eBAY

The negative news continued after the closing bell, with online auctioneer eBay Inc warning that its full-year revenues would fall below its previous forecast. Shares of eBay dropped about 4 percent after the closing bell.

During the regular session, shares of retailers skidded, with Wal-Mart falling 8.1 percent to $50.05 and Home Depot dropping 5.9 percent to $19.83. Analysts said the weak retail sales data underscored the severity of the squeeze on consumers faced with sliding home values, a tumbling stock market and tight credit.

Caterpillar’s shares fell 11.4 percent to $42.06.

In the energy sector, Exxon Mobil fell 14 percent to $62.35, while Chevron lost 12.5 percent to $59.98. U.S. crude futures slid to a new 13-month low below $75 a barrel as fears of demand falling in a recession and slumping equities further pressured the oil markets. U.S. crude for November delivery fell $4.09 to settle at $74.54 a barrel.

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Other commodity-related companies were also slammed as materials tumbled. Miner Freeport McMoran slid 19 percent to $33.17.

FOR BANKS, NO QUICK FIX

Financial shares fell after Meredith Whitney, an influential bank analyst at Oppenheimer & Co, said government’s plan to stabilize key U.S. banks by injecting $250 billion is not a “panacea solution.” The S&P’s financial sub-index dropped 9.1 percent.

Shares of State Street Corp, one of the world’s biggest institutional asset managers, plummeted 17.4 percent to $46.83. The company reported rising unrealized losses in its commercial paper program and investment portfolio, sparking concerns among investors.

Strong results from Coca-Cola, the world’s largest soft-drink maker, helped it buck the trend after it posted quarterly profit that beat Wall Street’s expectations. Coke’s stock shot up 1.1 percent to $44.21 -- the only one of the 30 Dow industrials that finished higher.

Trading was low on the New York Stock Exchange, with about 1.68 billion shares changing hands, below last year’s estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.54 billion shares traded, above last year’s daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by 9 to 1 on the NYSE and by 8 to 1 on the Nasdaq.