The smart money has spoken, and the word trembling from its lips is "recession."
Stocks nose-dived yesterday -- with the Dow Jones industrial average plummeting a heart-thumping 512 points -- amid growing fears that policymakers have failed at keeping the economy from slipping into another coma and lingering doubts over a possible downgrade of the federal government's AAA credit rating.
The worst stock disaster in more than two years was sparked by a move by big investors, like hedge funds and multinational corporations, moving billions in excess cash into short-term savings accounts, the institutional equivalent of stuffing the mattress.
Their fear is that the July jobs data, due today, will come up short yet again -- continuing the stock carnage.
"We're knocking on the door of a recession," said one hedge-fund manager while lamenting the "deafening" silence out of the Federal Reserve about how to avoid an economic crisis.
A previous forecast of 100,000-plus jobs being added in July is now being seen at about half that amount. Some outlier forecasts are maintaining that the nation actually lost jobs.
The last two monthly job reports have been bad news for the White House, pushing the unemployment rate to 9.2 percent.
Even if today's numbers come out better than expected, signs of economic disaster loom large, which could prompt Wall Streeters to swear off stocks until they get a signal from Washington that the nation's financial leaders are taking control of the situation.
Also casting a dark cloud: Standard & Poor's has yet to make a final ruling on the US credit rating following this week's much-criticized deal to raise the nation's debt limit while promising to cut spending by $2.4 trillion over 10 years.
S&P had wanted a $4 trillion deficit reduction, and its failure to say what it thinks of the debt deal helped spark rumors yesterday that a market-wrenching downgrade could still happen.
Also dragging down prospects of recovery are signs of continued weakness in Europe. European Central Bank boss Jean-Claude Trichet said economic risks in the region "may have intensified," which sent shares of European banks tumbling
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