North American stock markets traded lower Wednesday, as weak retail sales data in the United States reminded investors that the world's biggest economies could be headed into recession despite massive government intervention intended to solve the ongoing credit crisis.

“Any euphoria over the notion that government actions are finally attacking the root problems of the crisis is rapidly dissipating as economic data turns south,” UBS wrote in a morning note to clients. “Systemic problems require systemic solutions which do not lend themselves to rapid resolution.”

The Dow Jones industrial average was 2.90 per cent lower, or 270.25 points, to 9,040.74 while the broader S&P 500 was down 3.04 per cent, or 30.38 points, to 967.63. The S&P/TSX was down 2.71 per cent, or 270.15 points, to 9,685.51, after gaining 9.8 per cent Tuesday.

September retail sales in the United States posted their biggest monthly drop in more than three years, down 1.2 per cent, compared to the 0.7 per cent decline economists had predicted. Consumer spending accounts for two-thirds of economic activity in the United States.

“This is hideous, and the only mitigating factor we can think of is Hurricane Ike, which surely decreased sales in Houston and other affected areas,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “There can be no doubt now that the economy is in recession. It will be there a while.”

Toronto was under pressure to hold onto yesterday's gains, with oil falling $3.01 (U.S.) to $75.62 on expectations of weaker demand as the economy slows. Oil is trading at its lowest level since September, 2007.

Consumer staples and technology were the only sectors posting gains in Toronto, up 1.72 per cent and 0.5 per cent respectively. George Weston Ltd. was up 3.85 per cent, Loblaw Companies gained 2.81 and Shoppers Drug Mart gained 2.22 per cent.

The energy sector was off 6.4 per cent, with EnCana Corp. down 7 per cent on news it would put off plans to split into two companies because of tight credit markets.

London's FTSE 100 down 4.3 per cent and Germany's DAX off 3.8 per cent. China's Hang Seng closed down 4.9 per cent, while Japan's Nikkei was up 1.06 per cent.

“After a bumper start to the week, the inevitable reversal for equity markets does seem to be under way but there's certainly no real belief so far that this will mark the end of the rally at least in the short term,” commented Matt Buckland, a dealer at CMC Markets in London.

“Instead, we're seeing some profit taking and a reassessment of positions after the upswing, although there is an element of concern as to the longer term economic outlook creeping in here.”

It didn't take too long for the markets to realize that the bailouts are not going to change the economic outlook for the Global Markets.

Commodity prices will fall further, but this should also be as signal that gold is the haven once again. Normally we could expect a rise in the POG to start soon, or should i say, already have started. But the gold market is being restrained as we all know too well.

Sooner of later gold will take off and we should see some trickle down investing come our way.

AK