GLOBAL MARKETS-U.S. stocks, oil slide on global recession fears

* U.S. stocks slip after rescue plan euphoria fades

* Euro rises as global rescue plans boost risk appetite

* Crude oil pares gains as fears of global recession bite (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Oct 14 (Reuters) - Oil fell and U.S. stocks retreated on Tuesday as fears of recession snuffed initial euphoria over Washington's move to invest in banks and defuse a global financial crisis, following similar efforts in Europe.

Worries about the depth of a U.S. slowdown pulled the dollar lower and rekindled safe-haven buying of short-term U.S. government debt, a day after Wall Street posted its best day ever.

Traders pared their bond holdings as worries about increased U.S. government borrowing to finance the massive bank rescue package dragged longer-dated U.S. Treasury prices down.

The fade-out of an initial rally in U.S. stocks, which had driven up the Dow by as much as about 400 points, took some of the fire out of a rally in European stocks, which halved their gains.

Technology and consumer shares led the U.S. stock market decline, after disappointing quarterly results at Domino's Pizza Inc and poor profits and outlook at soft drink company PepsiCo ignited new fears about consumer spending.

Initial euphoria over the U.S. government's plan to spend $250 billion to bolster the ailing financial system lifted stock and oil prices early in the session, but concerns about the economic outlook soon darkened that optimism.

"People are worried about the economy right now, they are worried that demand is going to be down," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.

The Dow Jones industrial average <.DJI> closed down 76.62 points, or 0.82 percent, at 9,310.99. The Standard & Poor's 500 Index <.SPX> fell 5.37 points, or 0.54 percent, at 997.98. The Nasdaq Composite Index <.IXIC> shed 65.24 points, or 3.54 percent, at 1,779.01.

Shares of Intel were among the top drags on Nasdaq as investors worried about the chipmaker's quarterly results, due after the closing bell. Intel lost 6.2 percent to $15.93, while a semiconducter index <.SOXX> slid 5.0 percent.

Energy companies also fell as the price of oil slid on growing worries that a recession would curb the demand for oil. Shares of Exxon Mobil dropped 0.9 percent to $72.46.

"While a lot of news has been focused on financials, there is a slow-motion tsunami coming our way as far as the economy is concerned," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

Shares of software maker Microsoft Corp declined 5.5 percent to $24.10. Computer maker Dell slid 7.4 percent to $14.08.

European shares rallied for a second day, led by banks and oil stocks, after posting their biggest daily percentage rise on record.

The pan-European FTSEurofirst 300 index <.FTEU3> ended up 3.1 percent at 966.12 points, after earlier surging as much as 6.5 percent.

Shares in oil companies rose, with BP up 6.8 percent and Total adding 7.3 percent.

Among banking shares, Barclays surged 14.3 percent, UBS added 12 percent and Standard Chartered jumped 10.5 percent.

However, shares of Dexia ,the multinational bank that received support from the French, Belgian and Luxembourg states earlier this month, ended 15.5 percent lower as it denied rumors it was on the verge of nationalization.

Even with the overall gains, there was a sense of unease.

"There's a bit of bottom fishing, but it all feels a bit technical," said Roger Cursley, a strategist at Investec. Cursley.

"We need a period of lower volatility. Nobody can live with 10 percent gyrations, one way or the other. It's hard to put a valuation on anything. Nobody wants to take a chunky position as you can be so wrong, so fast."

The concerted government efforts to ease clogged money markets had some effect. The interbank cost of borrowing dollar, euro and sterling funds from overnight to a year fell.

Commodity prices jumped and investors unwound panic trades made last week when fears swept financial markets that the world was heading into a prolonged global recession.

Copper prices jumped almost 10 on technical reasons.

The benchmark 10-year U.S. Treasury note

The dollar fell against major currencies, with the U.S. Dollar Index <.DXY> off 0.20 percent at 81.367. Against the yen, the dollar

The euro

U.S crude settled down $2.56 at $78.63 a barrel after hitting $84.83 earlier. London Brent crude traded down $2.01 at $7545 at 4 p.m.

December gold futures settled down $3.00 at $839.50 an ounce in New York.

Japan's Nikkei stock index <.N225> gained more than 14 percent on Tuesday. Japanese markets were closed on Monday for a national holiday. MSCI's main world stock index <.MIWD00000PUS> was up 3.8 percent after plunging 20 percent last week. (Reporting by Ellis Mnyandu, Ellen Freilich and John Parry in New York and Joe Brock and Jan Harvey in London; Writing by Herbert Lash; Editing by Leslie Adler)