Stocks tumble on recovery worries

By Herbert Lash

NEW YORK (Reuters) - The U.S. dollar fell across the board on Tuesday, pressured by Russian angling for a new global reserve currency, while stocks fell on renewed worries whether the ailing world economy was on the path to recovery.

Oil gave back early gains as the dollar strengthened while U.S. Treasury bond prices rose after the Federal Reserve bought a surprisingly large $6.5 billion (3.9 billion pounds) in government debt.

Concerns that the pace of economic recovery may be more tepid than initially thought forced a retreat in a broad equity advance in Europe and the United States.

While U.S. housing starts in May rebounded and producer prices rose less than expected, suggesting inflation pressures were muted, another report showed industrial production logged a steeper-than-expected slide last month.

A Federal Reserve report also said the capacity utilization rate in May for total industry, a measure of slack in the U.S. economy, slumped to its lowest on records dating back to 1967.

Other markets also flipped around midday as the perceived outlook for the U.S. economy turned darker.

"The market's at the turning point," said John Canally, economist at LPL Financial in Boston.

"It needs to see more evidence that the economy is firmly in recovery mode and that corporate earnings are going to be guided higher over the second half," Canally said.