An outpouring of negative economic and financial reports soured the mood on Wall Street Friday as banks and other lenders further tightened credit in their struggle to contain damage from losses on mortgages, business loans and related debt.
Shares sank, and investors fled to the safety of Treasuries as the Standard & Poor’s 500-stock index fell 2.71 percent and the Dow Jones industrial average dropped 315.79 points, or 2.51 percent, to 12,266.39. Both indexes capped their worst four months since 2002.
Prices of municipal bonds, bank loans and high-yield debt all fell as well.
The markets for ultrasafe debt backed by the federal government and other nations were alone in posting gains. Some commodities, including gold, were also up.
“The drumbeat of economic news has been unrelentingly bad,” said Edward Yardeni, a normally upbeat investment strategist. “The recession scenario is looking more and more credible.”
Let’s look at 10 recent items which have come across my screen, which I think leave little doubt that we are in a recession. (It could just as easily have been 20, but I think 10 are enough to prove the point.) In no particular order:
1. After hovering above 50 in recent months, the Chicago ISM number dropped sharply to 44.5 in February, notching its lowest reading since December 2001 and coming in well below expectations. This brings this survey in line with the disastrous services survey of last month.
2. The University of Michigan Consumer Sentiment Survey for the United States came in at 70.8. This is the lowest reading for the index in 16 years.
3. “The New York City Purchasing Manager’s Survey fell for the second consecutive month to 427.7 in February. The current conditions index fell to 43.4, down from 47.9 in January. The six-month outlook index was below 50 for the second consecutive month for the first time in the survey’s history; at 47.5 it was down from 70 in February of 2007. The worsening conditions reflect rising prices coupled with slower job growth and layoffs in financial services, as well as tightening credit conditions and higher unemployment.” (economy.com)