Stocks S(t)ink

The lead article in today’s New York Times, “Stocks in Worst Tumble in Two Years Amid Global Worry,” describes an entirely predictable sell-off with the Dow Jones declining 500 points. The lack of confidence was triggered by the failure of the President of the European Commission to commit to any backup of Italy or Spain which are struggling under a massive debt load in the same way Greece has.

But these countries are much bigger than Greece with much larger economies. Concern about their fate combined with the totally unsatisfactory conduct of the debt ceiling debate in the United States led to massive declines in stock markets around the world as well as the United States. And with unemployment numbers for the month due out today, there may be additional blows to the U.S. stock market as well.

The Dow Jones has sunk 11 percent in the past two weeks, but some say it is just an adjustment to an overly optimistic reaction to corporate profits. Whether that’s the case or not remains to be seen. Not all economic news was bad, however, as the price of a barrel of oil declined to $87, and that may mean lower prices at the pump just in time for Labor Day.