North American stocks fell sharply Wednesday as optimism over government moves to stabilize the financial system was elbowed aside by the prospect of a global recession.

Markets, which had opened lower, plunged after U.S. Federal Reserve Chairman Ben Bernanke said the U.S. economy won’t bounce back quickly even if confidence in the financial system returns and jittery markets finally calm down.

Toronto’s S&P/TSX composite index, coming off a one-day record gain of 890 points, tumbled 631.83 points, or 6.35%, to end at 9,323.85.

Royal Bank of Canada fell 4.3%, Barrick Gold Corp. fell 4.2%, Canadian Oil Sands Trust fell 20.7% and Potash Corp. of Saskatchewan Inc. fell 17.5%.

Recession fears also trimmed crude oil prices after a group of key oil producers cut their oil-demand forecast for next year.

Crude for November delivery fell US$4.09, or 5.2%, to close at US$74.54 a barrel on the New York Mercantile Exchange.

Meanwhile, gold prices held steady as investors pondered the health of the global economy. Gold for December delivery closed down 50¢ at US$839 an ounce on the Comex division of the Nymex.

The junior S&P/TSX Venture composite index fell 63.49 points, or 6.02%, to end at 991.21.

The Canadian dollar resumed its slide after posting gains Tuesday. The loonie fell 1.91¢ to US84.18¢.

In New York, the major indices all fell more that 7% as investors dumped stocks, with the Dow once again closing below the 9,000 mark.

The Dow Jones industrial average fell 733.08 points, or 7.87%, to finish at 8,577.91. The S&P 500 lost 90.17 points, or 9.03%, to end at 907.84, and the tech-heavy Nasdaq fell 150.68 points, or 8.84%, to 1,628.33.

Adding to investor concerns, a U.S. government report showed that American retail sales declined by 1.2% in September, the biggest decline in three years.