Stock Market, Economy Running on Empty

News at a Glance

• Wall of Worry Wins: Bad stats sink stocks
• Happy Birthday, Recession: NBER makes it official
• Christmas on Sale: Discounts in demand
• Price Augmentation: J&J buying Mentor

The official arbiters of recessions at the National Bureau of Economic Research decided one began a year ago when jobs first began vanishing. Wall Street buyers waited for bigger bargains.

At 12:47 p.m. ET, the Dow was down 432 points to 8397, with all 30 of its components in the red. Citigroup (C) sagged on skeptical commentary from Wall Street analysts despite last week's federal rescue. Bank of America (BAC), JPMorgan (JPM) and American Express (AXP) also called in sick.

The Nasdaq dropped 92, or 6%, to 1443. The S&P 500 downsized 53 points to 843. It had rebounded 19% since closing at an 11-year low on Nov. 20.

The ISM Manufacturing Index based on a survey of purchasing managers slipped to 36.2 from October's 38.9, with new orders sliding to their lowest level since 1980. The price concerns so prevalent this summer have evaporated without a trace, replaced by deep pessimism on just about everything else.

London, Paris and Frankfurt shed 6% as the European version of the business survey limped to its lowest reading in its 11 years. Tokyo dropped 1% in mixed Asian trading as the Bank of Japan called an emergency meeting on the credit crunch plaguing corporations.

Closer to home, early Christmas sales merely matched last year's levels and low expectations, suggesting that retailers who've already cut margins to the bone may need to discount deeper still to earn their slice of stingy holiday gift budgets.

But at least the first weekend of holiday shopping wasn't nearly as grim as the November auto sales that Detroit will cite this week in its push for a federal bailout. General Motors (GM) shares motored 71% higher last week on hopes that Congress will pay up. But small investors who bought debt issued by GM's GMAC affiliate may not prove as lucky, pushed to the back of the creditors line by a new corporate plan to convert some of its debt into equity at a discount. The so-called SmartNotes peddled to bank customers by GMAC over the past decade were looking anything but, trading at 16 cents on the dollar on worries that GM may be unable or unwilling to dodge bankruptcy, according to Bloomberg. The boards of all three Detroit auto makers were in the final stages of assembly for the restructuring plans they're to submit to Congress by Tuesday.

Johnson & Johnson (JNJ) has suffered much less pain, and celebrated its good fortune Monday by offering $1.1 billion for breast implants maker Mentor (MNT), a 92% premium to that stock's close Friday.

Meanwhile, struggling U.S. financial giants continued to sell overseas assets in order to raise capital. Citigroup was expected to get as much as $420 million for its Japanese trust bank. AIG (AIG) likely netted a bit less by unloading its Swiss private bank to investors from Abu Dhabi.

Despite such distress sales and big injections of public funds, U.S. credit-card lenders may cut $2 trillion in credit lines over the next 18 month, sapping consumer liquidity by 45%, warned Oppenheimer & Co analyst Meredith Whitney.

Crude dropped 8% to $50 a barrel after OPEC postponed the latest cut in output to whip the export quota cheaters into line. Gold lost 5%, while platinum corroded 7% on worries about diminished auto industry demand.