The Dow Jones fell 513 points, or more than 4 percent. The S&P 500 lost 60 points, nearly 5 percent. And the Nasdaq shed 137 points, down 5percent.
For the Dow, all of the gains of the year are gone. One financial advisor described it as “rip your face off rally.”
Continued worries about Europe, Italy and Spain in particular. Also, some of the sell-off could be attributed to the monthly jobs report due out tomorrow, but that's speculation often heard when the market drops the day before the report.
Whatever tomorrow's jobs number, unemployment is too high. 14 million people are out of work. Add in the number of unemployed combined with the underemployed and discouraged comes in around 25 million. In a healthy economy, the country needs to create about 150,000 jobs each month to tread water.
The latest results of consumer spending fell 0.2% as our incomes barely increase (0.1%). Consumer sentiment has dropped to levels not seen since the recession was almost declared officially over in June 2009.
With people worried about the future, frustrated and worried about the debate in Washington over the debt ceiling, no wonder the national savings rates has increased. Then again, after years of being negative, with Americans spending more than they were bringing in, it's a good thing we are saving more. Unfortunately, it comes at a time when our spending could help create jobs.
All the while keeping in mind that corporations are sitting on huge piles of cash and opting not to hire, partially because of a lack of demand and because they are worried about the state of the economy.
There could some signs of life. Back-to-school spending was strong last month, sales were up 4.6% compared to last year. The worry – sorry – is that what consumers are buying are necessities and discounted ones at that. Will the spending continue, especially as gas prices have been steadily rising.
Stay tuned for tomorrow, Friday, 8:30am when the July jobs report will be released. The expectation is about 84,000 jobs.