Dow falls more than 200 points on fears about economy

A growing pessimism about the American economy sent stocks sliding in early trading on Wednesday.

At midday, the Dow Jones industrial average was down 209.26, or 1.7%, to 12,360.53. If the markets do not recover, this would be the steepest one-day drop since March.

The newest data causing concern is the ISM manufacturing index released Wednesday morning, which showed that manufacturing growth has slowed to its lowest rate since 2009, in part due to rising commodity prices.

Earlier in the morning the payroll company ADP reported that private employers added only 38,000 new jobs, not enough to absorb the new workers entering the labor force.


The troubling numbers Wednesday came after Tuesday’s report that housing prices fell below where they were at the depth of the economic crisis.

The stream of disappointing reports are feeding into a growing pessimism about the health of the economy as the government’s monetary stimulus plan nears its end.

“Overall, it looks like this recovery has hit its second ‘soft patch’ which, for a recovery
that is less than two years old, is troubling to say the least,” Paul Ashworth, an economist with Capital Economics, wrote to clients.

These fears have taken a break over the last four days, allowing the major stock indexes to rise. But over the last month, the Dow has fallen more than 3% from the highs reached in late April.

Some economists have argued that the current crop of bad data are part of an economic realignment that could end up strengthening the American economy in the long term.