Some £5billion was wiped off the share value of high street stores yesterday as a fall in pre-Christmas sales at Marks & Spencer sent jitters through the market.
The group reported a 2.2 per cent fall in the final quarter of the year, with clothing sales down 3.2 per cent and food down 1.5 per cent.
This was despite widely-acclaimed advertising for fashion, featuring models Laura Bailey, Erin O'Connor and Twiggy, and film star Antonio Banderas.
It was the first drop in sales for more than two years and dented the glowing reputation of recently-knighted chief executive Sir Stuart Rose, who has been praised for reviving one of the nation's best-known stores.
As the UK's biggest clothing retailer, M&S is seen as a bellwether for the high street and the reversal hammered home the changing mood in town centres and shopping malls.
After the news broke Next shares fell 76p to 1331p and Carphone Warehouse slipped 381/4p to 2993/4p. Kingfisher, which owns B&Q, was 10.9p lower at 115.3p and Debenhams 8p down at 633/4p.
The bonus for shoppers is that the trend signals an intensified battle for every pound spent, raising hopes of even lower prices.
Sir Stuart said retail conditions had turned more challenging in November and December.
He described it as the toughest market he had seen for a decade and warned the gloom could last until the spring of next year.
M&S shares plunged 19 per cent - 941/4p to 4091/4p - knocking £1.6billion off the company's market value. The slide left them a whisker above the
400p level of Sir Philip Green's aborted bid in 2004.
The dip in M&S fortunes came a day after the British Retail Consortium said retail sales in December had grown at their slowest pace in almost two years.
A survey from mortgage provider Nationwide yesterday showed that consumer confidence fell for the third straight month in December, reaching its lowest for almost a year.
There are mounting fears that the U.S. will slide into a recession this year and worries that the UK economy could slow sharply.
The strength of Britain's economy has been due in part to consumers' continuing appetite for shopping and running up credit card bills.
But this has been hit by the worldwide credit crunch and a slowing housing market.
Sir Stuart said customers were already finding life tougher.
"The cost of petrol has gone up, the cost of car insurance has gone up. . . everything has gone up except electronics and clothing," he said.
He called on the Bank of England to act decisively to cut interest rates and ease the burden on consumers.
He said: "A quarter-point cut will do nothing, we need at least a threequarter point reduction over the year."
Sir Stuart, 58, was parachuted into M&S in 2004 to fend off Sir Philip Green's advances.
The sudden reversal, after nine consecutive quarters of sales growth, raised questions about whether M&S would make the expected £1billion profit this year and when Sir Stuart will leave.
He refused to comment on that - but spent over £1million buying 250,000 M&S shares.
•The gloomy news from the High Street will increase pressure-on the Bank of England to cut interest rates today.
Experts say the decision is the most finely-balanced since the Bank was given the freedom to set borrowing costs by Gordon Brown in 1997.
Last week it was looking odds on that the Monetary Policy Committee would make no move until next month's quarterly inflation report.
But the dire Christmas trading figures are a sign that soaring energy and food costs and a massive pullback in lending by banks have decimated consumer confidence.
With house prices falling, the pressure is stacking up on the Bank to slash rates again to ward off a slide into recession.
But the Bank must be careful not stoke an inflationary fire. Sky-high oil prices and the pound's decline against other currencies are threatening to force inflation above the 2 per cent target. Wage deals are also running well above that level.