Mounting concerns about the health of the global economy caused nerves to fray on Wall Street and overseas yesterday, causing one stock market after another to succumb to major selling squalls. Over here, the damage was immense, with the Dow Jones Industrial Average heading lower on a wire-to-wire basis, finally ending the session in the red by 266 points. The NASDAQ, meanwhile, tumbled 75 points; the Standard and Poor's 500 Index ended the day in the loss column by 33 points; and the Russell 2000 Index, the principal small-cap benchmark, closed down by 26 points. Yesterday's losses, which hit all the major equity groups, pushed the Standard and Poor's 500 Index and the Russell 2000 into the red for the year. The year-to-date gain in the Dow, meantime, was cut to 2.5%, while the NASDAQ is now up just 0.6% for the year thus far.
 
The rationale for the selling, in general, is a feeling--based on a succession of recent economic data issuances and the likelihood of reduced spending in this country following the signing of the new budget accord--that the U.S. economy will not get the second-half lift that economists and market participants had been expecting. On a more specific basis, several reports issued over the past week have been clearly worrisome, starting with last Friday's release showing that second-quarter GDP growth totaled only 1.3%, a full half a percentage point below consensus forecasts, and that the first-quarter rate of growth had been pared back from 1.9% to just 0.4%. This report was then followed on Monday by data showing that manufacturing had slowed dramatically in June. Then, yesterday, a Commerce Department release affirmed that consumer expenditures had fallen by 0.2% in June; a flat reading had been forecast. The consequent increase in the savings rate, which reflects a desire by leveraged consumers to repair their balance sheets, is suggestive of a floundering economy.
 
What essentially is happening is that with the debt-ceiling debate now settled for the time being, investors can again focus on the economy, and clearly they do not like what they are seeing. And there are yet more worries, as investors await a several additional critical reports this week, highlighted by the issuance of data on non-manufacturing activity later this morning. A slight increase in that survey metric is the forecast. Should such activity falter in much the same way that the companion manufacturing survey did, further selling in the battered stock market could follow. Then, on Friday, we will get a look at job growth and unemployment, when the government issues its payroll report for July. That is the month's most closely watched series. However, before all this, we will get a first look at the payroll situation this morning when ADP will release its report on private-sector job growth for last month. There is not always a good correlation between this private-sector report and the government's release, but investors do look at this earlier data for some guidance. Last month, though, was instructive, as a decent report from ADP was followed by a dour survey from the government.
 
Meanwhile, the worries are not just in our country, but in Europe, too, as a succession of countries face economic reversals and headwinds of their own, from Greece, to Portugal, to Italy, to Ireland and to Spain. The difficulties in Italy and Spain are especially problematic, given that these are two of the five largest economies in Europe.
 
Finally, the selling continued in Europe this morning, as all of the bourses were deeply in the red earlier in the session. Over here, however, we have seen some indications of possible bargain hunting at the opening of the trading day in less than an hour from now, as the Standard and Poor's 500 Index futures have raced out to a gain of some six points and the NASDAQ futures have climbed by nine points. That is not suggestive of much of a comeback, but even small steps would be appreciated by the forlorn bulls. Of course, how much of a rally, if any, we get today will be predicated, we think, on results of the data to be issued this morning, notably the ADP survey and the ISM report non-manufacturing. Stay tuned.