NEW YORK (AP) ¿ Coal stocks fell across the board Wednesday after a pileup of bleak economic news sent investors scurrying, worried that a reversal of the market's rally will translate to more pullback in demand for basic materials.

The Commerce Department on Wednesday said retail sales fell 0.4 percent last month, while economists had expected sales to be flat.

Investors watch these numbers closely because consumer spending accounts for about two-thirds of U.S. economic activity. This news signals a prolonged economic slowdown.

Investors received more glum news on the housing sector, another key focus of investor attention. A new report showed the number of U.S. households facing foreclosure jumped 32 percent in April, according to RealtyTrac Inc.

Argus Research analyst Bill Selesky cited the combination of these reports, along with an anticipated "market correction," as the potent cocktail that sent coal stocks tumbling.

The recent upswing in the market went "a little too far, too fast," Selesky said in a phone interview. As the market retreats, "a recovery will be postponed for farther out and I think that worries investors in the basic materials companies" because it means demand for their products will decline.

Shares of Peabody Energy Corp. fell $2.46, or 7.7 percent, to $29.41 in afternoon trading. James River Coal Co. shares dropped $1.49, or 7 percent, to $19.79. Massey Energy shares slid $2.16, or 10.3 percent, to $18.94. Shares of Alpha Natural Resources Inc. tumbled $1.65, or 6.1 percent, to $25.41. Foundation Coal shares declined $1.56, or 5.6 percent, to $26.50.

This sector slide comes one day after coal stocks reacted positively to news that Alpha Natural Resources plans to buy rival Foundation Coal for about $1.4 billion in an all-stock deal, creating the nation's third-largest coal producer.

"More consolidation is a good thing," said Selesky when asked about the deal's impact on the sector. "There are a lot of smaller players. To get earnings growth, these guys have to combine. Some people said (the buyout) was a barometer of more good things to come. I agree."

But Wednesday's dismal economic news erased Tuesday's gains from the Alpha Natural Resources deal.

Selesky said he expects performance in the coal sector and broader economy to "flatline" until the end of summer and then pick up in the back half of the year.

Elsewhere in the sector, Walter Energy Shares dropped $2.94, or 9.4 percent, to $28.21. Arch Coal shares slipped $1.62, or 8.8 percent, to $16.72.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.