AMERICAN stocks retreated as a report on durable-goods orders heightened expectations that an interest-rate cut by the Federal Reserve will not be enough to rescue the economy.

Home Depot Inc, Intel Corp and Citigroup Inc lost more than 2 percent to help lead declines in the Dow Jones Industrial Average a day after its second-best point gain. Schlumberger Ltd, the world's largest oilfield-services company, and Exxon Mobil Corp increased on prospects that lower borrowing costs will stoke demand for energy.

The Standard & Poor's 500 Index decreased 8.78 points, or 0.9 percent, to 931.73 at 9:55am in New York. The Dow slipped 42.61 points, or 0.5 percent, to 9,022.51 a day after jumping 889 points. The Nasdaq Composite Index lost 15.17, or 0.9 percent, to 1,634.3.

"There are still significant downside risks to equity markets and credit markets," New York University professor Nouriel Roubini said in an interview with Bloomberg News. "We are at the beginning of a very severe US recession. It's going to be much more painful."

Roubini, who predicted the current financial crisis in 2006, said the S&P 500 may fall as much as 30 percent more as the economy slows during a two-year contraction.

Stocks gained in Europe and Asia for a second day as falling credit costs spurred a rally in financial shares, while higher commodity prices pushed oil and metals.

US stock-index futures reversed earlier gains before the open of US exchanges after the Commerce Department said orders for US durable goods excluding transportation equipment fell in September for a second month.

The 1.1-percent drop in bookings of goods meant to last followed a 4.1-percent decrease in August that was larger than expected.