The New York stock market fell as investors digested heavy Wall Street job cuts, fears over the survival of America's car industry and new data showing the astonishing speed at which the world's largest economy is diving headlong into a severe recession.

Stocks zigzagged throughout the session before finishing sharply lower.The Dow Jones industrial average was down 223.73 points at 8,273.58.

Dealers were anxious after fresh economic data showed industrial production in America to be sliding at an "awful" rate as one economist — James Knightley, chief US economist at ING — said that the numbers pointed to "an even worse manufacturing downturn than the early 1980s recession".

Traders also became nervous when Citigroup, the world's largest bank, confirmed that it is to sack 52,000 staff in an attempt to cut costs.

They also awaited the outcome of a Senate debate in Washington over whether to bail out America's three biggest car companies — General Motors, Ford and Chrysler. General Motors gave warning this month that is on course to run out of money by Christmas.

While industrial production in October rose 1.3 per cent, well above Wall Street expectations of 0.2 per cent, stripping out the exceptional impact of the recovery from Hurricane Ike, underlying production dropped by 0.7 per cent in both September and October.

The data triggered new downgrades from economists who predicted that corporate spending on technology is now plunging at its fastest rate for six years.

Gloomy projections of a sharp slowdown in computer and network expenditure comes as no surprise to companies such as Microsoft, Hewlett Packard and Intel.

Earlier this month, Intel wiped $1 billion off its quarterly sales expectations amid the latest sign that the speed of the US recession has taken corporate America by surprise.

Circuit City, America's second largest electronics retailer, filed for Chapter 11 bankruptcy protection this month and admitted that its management had been "upended" by the rate of the slowdown.

It also said that electronics manufacturers have become so anxious about the state of the US market, they have effectively pulled the plug on credit lines to retailers, forcing them to pay upfront for new supplies.

Ian Shepherdson, chief US economist at High Frequency Economics, said: "The trend is clearly awful. We are very disturbed to see no recovery at all in the dollar value of capital goods production, which fell 7.8 per cent in September and a further 2.5 per cent in October.

"We now tentatively estimate that fourth-quarter capital spending on equipment and software will drop at a 10 per cent rate, the worst since the first quarter 2002."

Stoking fears that the US recession may last several quarters, two big American retailers admitted to sharp declines in profitabilty during the third quarter of the year. Lowe's and Target both said profits had fallen 24 per cent over the period.

Their performance bodes ill for the US retail sector, which is days away from Thanksgiving, the American bank holiday that traditionally marks the beginning of the shopping boom across the country.

As a severe recession sweeps corporate America, the US Federal Reserve is under increasing pressure to cut interest rates again by at least half a percentage point when it is next scheduled to meet on December 16.

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