US Financial Markets Ponder Yesterday's Economic Quadruple Whammy

Panicked securities investors take the weekend off, to contemplate the true meaning of yesterday's grim economic news

It was a thrilling ride yesterday in the US financial markets, as grim news rolled in on oil prices, the job market, the declining dollar, and a possible war looming against Iran. The chart on the left (click to enlarge) demonstrates the devastating effect yesterday's quadruple whammy of bad news wreaked upon the US stock markets, as heretofor inexplicably bullish security investors fell into panic, triggering a sizable stock market sell off, in a startling demonstration of truly palpable fear. This morning's Standard-Examiner story provides the facts in a tidy nutshell:

WASHINGTON The U.S. economy entered dangerous new terrain Friday as crude oil prices leapt up by a record $10-plus a barrel, the unemployment rate notched its highest monthly jump in 22 years and growing fears of recession sent the stock market plummeting.
The bleak day began with news from the Labor Department that the unemployment rate ticked up in May by a half-percentage point to 5.5 percent. The last time it jumped so much in one month was in 1986. The Bureau of Labor Statistics also said that employers shed 49,000 jobs, the fifth consecutive month of job losses.
Contracts for deliveries next month of crude oil, called futures, then began climbing because of an escalation of saber-rattling between Israel and Iran, the world’s fourth-largest oil exporter, whose location in the Persian Gulf means that any conflict would likely affect global oil supplies.
By the time trading settled late Friday, oil futures had posted a record one-day move-up of $10.75 a barrel to $138.54. That was nearly twice the record uptick set just one day earlier of $5.49.
Europe’s central bank president, Jean-Claude Trichet, started the two day surge in oil prices Thursday when he suggested that he might hike interest rates. That strengthened the euro, Europe’s currency, against the dollar. Oil is priced in dollars on world markets; a weaker dollar vis-a-vis other leading currencies incites sellers to require higher prices. [...].
Adding to the glum news for motorists, investment bank Morgan Stanley predicted $150-a-barrel oil by the Fourth of July, and should a major hurricane hit production in the Gulf of Mexico, the sky could be the limit on oil prices. Americans are virtually assured now of paying far more than $4 a gallon for gasoline. The nationwide average, according to the AAA motor club, was already $3.98 on Friday afternoon, and that didn’t reflect a $15-a-barrel rise in oil prices Thursday and Friday, which could tack on an additional 15 cents to a gallon of gasoline.
As oil headed up, stocks dropped sharply. The Dow Jones Industrial Average plunged 394.64 points to 12,209.21, while the S&P 500 skidded 43.37 points to 1,360.68. The tech-heavy Nasdaq was off 75.38 points to 2,474.56. [...]
Adding to Friday’s grim news was the U.S. dollar’s slumping again. Earlier this week, Federal Reserve Chairman Ben Bernanke caused a stir by stressing the importance of a strong dollar, a task historically reserved for the treasury secretary. His words helped the greenback regain some ground temporarily, but it fell Friday against the euro, which traded at $1.577 to the dollar.
By talking up the dollar and watching it fall, Bernanke showed how little control policymakers have over the currency’s value. [Emphasis added].

Yes, early in the week, investment pundits where whistling a decidedly happy tune, confident that FED Chair Ben Bernanke had finally stepped up to defend the dollar, by bringing inflationary rate cuts to a final halt. By the stock market close on Friday however, it was obvious that those market commentators who had been so gleeful on Wednesday had been merely whistling in the dark, with Friday's evidence of the dollar's continuing decline against the euro.

And then there's this re the jobs numbers:

“Recession is written all over the jobs numbers. The job losses are significant and broad across many industries and areas of the country,” said Mark Zandi, the chief economist for forecaster Moody’s Economy.com.
The surge in the unemployment rate probably overstates the job-market weakening in May, he said, because it could reflect college students looking for work early because they know it will be tougher to find jobs this summer.
“Nonetheless, the job market is eroding and so, too, is the broader economy,” Zandi said. [Emphasis added.]

President Bush got Zandi's observations only half right, of course:

President Bush spoke briefly about the economy Friday, using a swearing in ceremony for his new housing secretary to say that the unemployment numbers were skewed by a larger-than usual number of young people seeking employment.

That's right. Dubya believes the general economy is fine, although Bush did grudgingly go so far as to admit that "the reported loss of 49,000 US jobs in May is 'clearly a sign' that US economic growth has slowed".

Happy-talk still pours out of the White House; and US policy-makers continue to whistle in the dark.

Buckle up, folks. As yesterday's cross-the-board numbers indicate, we're not just heading into recession... the 2008 Bush recession has arrived with a vengeance.

And what about it, gentle readers? Will Monday's securities markets open to the upside, or will the stock market sell off continue where it left off at Friday's 4:00 p.m. closing bell?