Shares on Wall Street fell in early trading today as fears about the health of the American retail sector eclipsed hopes that the Government might move to support the country's struggling carmakers.

Best Buy, the country's leading electrical retailer, warned that weak consumer spending in the run-up to Christmas had forced it to cut it profits forecast for 2009.

Investors, who have already taken heavy losses on Best Buy's rival, Circuit City, sent the Dow Jones industrial average down 300.75 points to 8,393.21. Earlier this week, Circuit City announced that it had filed for Chapter 11 bankruptcy protection after suppliers squeezed the company's credit.

Shares in Best Buy fell 12.9 per cent in trading before the markets opened, after it cut its earnings per share forecast for the full year from $3.25 to $3.40 to about $2.30 to $2.90 per share.

Brian Dunn, president and chief operating officer of Best Buy, said: “In 42 years of retailing, we’ve never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we’re not immune from those forces.”

Best Buy said store sales fell about 7.6 per cent last month, following a 1.3 per cent drop in September. Comparable store sales between November 2008 and February 2009 could drop to 15 per cent. It has revised an earlier annual revenue forecast of $47 billion down to between $43.7 billion and $45.5 billion.

In May this year, Best Buy paid £1.1 billion for half the retail business of Carphone Warehouse, as part of a joint venture with the UK mobile phone company to build around 100 megastores across the UK and Europe.

On Monday, the Dow Jones opened over 200 higher on news of China's four trillion yuan (£375 billion) economic stimulus plan and the promise of extended rescue packages from the US Government.

It was hoped that the existing $700 billion bailout package, announced by the Government in September, would be extended to support the car industry which has been badly hit by the economic downturn.

Barack Obama, the President-elect, is believed to support such a measure. While leaked reports suggested he discussed the matter on Monday in his first meeting with George Bush since his election, the Bush Administration is reluctant to give carmakers access to the fund.

General Motors, the biggest US car manufacturer, reported a $2.5 billion net loss for the third quarter last week, and Ford posted a $129 million quarterly loss. The privately-owned Chrysler is also thought to be struggling.

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