NEW YORK (Reuters) - Stocks slid on Wednesday as investors worried that efforts to untangle credit markets would not prevent recession and Federal Reserve Chairman Ben Bernanke acknowledged that the economy faced a significant threat.

The broad Standard & Poor's 500 stock index dropped more than 6 percent.

A bleak September retail sales report set the tone early, underscoring the severity of the squeeze on consumers faced with sliding home values, a rocky stock market and tight credit.

Shares of retailers were bruised by the data, including Dow components Wal-Mart Stores and Home Depot. Wal-Mart fell 4.4 percent to $52.06, while Home Depot was down 3.8 percent at $20.27.

Caterpillar Inc gave up 9.2 percent at $43.11. Exxon Mobil was among the biggest drags on the Dow, falling more than 8 percent as the price of U.S. crude for November delivery fell 5 percent to $74.71 a barrel.

"It looks like everything that's economically sensitive is getting hit pretty good," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis, Minnesota.

"The thing is how much has the credit crunch already impacted the real economy?" added Vergin. "That's what everyone's really worried about."

The Dow Jones industrial average slumped 509.11 points, or 5.47 percent, to 8,801.88. The Standard & Poor's 500 Index shed 65.87 points, or 6.60 percent, to 932.14. The Nasdaq Composite Index lost 101.75 points, or 5.72 percent, to 1,677.26.

Speaking in New York, Bernanke said the economy faces a significant threat from the credit crisis, adding to investors' recession fears.

Strong results from Coca-Cola, the world's largest soft-drinks maker, helped it buck the trend after it posted quarterly profit that beat Wall Street's expectations. Shares of Coke were up 4.1 percent at $45.54.

Intel Corp also posted better-than-expected results after the closing bell on Tuesday. After pushing higher earlier, shares of the computer chip maker retreated 1.4 percent to $15.71.

The slide in oil prices helped airline stocks. The Amex Airline Index rose 0.5 percent. Delta Airlines was up 5.3 percent at $7.74. The company earlier reporting a wider-than-expected quarterly loss.

But oil's drop hurt Exxon, which fell 8.7 percent to $66.14, while Chevron shed 7.7 percent to $63.33.

Financial shares fell after an influential bank analyst at

Oppenheimer & Co, said U.S. banks were not out of the woods despite the government's plan to stabilize key players by investing $250 billion.

Shares of State Street Corp , one of the world's biggest institutional asset managers, tumbled more than 12 percent to $49.78. The company said it moved forward the release of its results and received some of the $250 billion the U.S. Treasury is investing.

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WASHINGTON (Reuters) - The turmoil in credit markets poses a "significant threat" to an already slowing U.S. economy, Federal Reserve Chairman Ben Bernanke said on Wednesday, suggesting an openness to further interest-rate cuts.

In remarks prepared for delivery to the Economic Club of New York, Bernanke said it will take some time to restore normal flows of credit and he pledged the U.S. central bank would continue to act aggressively to fight the crisis.

 "By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," Bernanke said.

"We will continue to use all the tools at our disposal to improve market functioning and liquidity, to reduce pressures in key credit and funding markets and to complement the steps the (U.S.) Treasury and foreign governments will be taking to strengthen the financial system," he said.

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(UPI) –The $700 billion U.S. bailout designed to put the financial market back on its feet isn't going to help the underlying economy, analysts said.