Stocks on tenterhooks as US recession signs build

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A wake-up call from the U.S. heartland has spooked Wall Street by raising fears of a recession that will push equities into a correction.

After Tuesday's dire picture on manufacturing from the Institute for Supply Management , which rattled the market, investors await Thursday's ISM services report and Friday's employment report to confirm or quash recession worries.They will also be looking for evidence on the strength of the consumer, which has been a cornerstone of the current economic expansion.

That tipped the Dow and S&P 500 into their biggest one-day percentage declines since Aug. 23. The S&P 500 is now down 4.6per cent from its record July 26 closing high. A correction is traditionally defined as a 10per cent decline."This one is significant. We're seeing a real contraction in the manufacturing sector," Blancato said.

"We are of course now watching non-manufacturing ISM and ultimately, most importantly, the nonfarm payrolls on Friday for the composition of how much of the deterioration we are seeing is only in manufacturing and are there any signs this is spreading to services," said Torsten Sløk, chief economist at Deutsche Bank Securities in New York.

According to Detrick, no month has had more single days moves of 1per cent in either direction since 1950 than October. Since 1928, six of the 10 biggest single-day drops have come during the month, while three of the 10 best one-day performances have also occurred in October.

 

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