Does Today's Stock Sell-Off Signal a Broader Downturn?

Barring an obscene rise or fall in the market, I think the most important overall conclusion to draw from any one day of stock trading is that it's very difficult to draw important overall conclusions from any one day of stock trading. But with that said, today's sell global sell-off is inauspicious. It's not only today's markets -- at 3:15PM the Dow is down about 200 -- but also the consumer woes, the foreclosures, the prospect of more bank failures. Let's review some of the bad news that could signal a stalled recovery, or something worse:

The Naked Capitalism blog has an excellent rundown of some factors that could contribute to an even broader downturn in the market.

1) Consumer spending still stinks. Retail numbers are still way lower than economists' predictions. Outside of auto sales (juiced by Cash for Clunkers giveaways) consumer spending was down 0.6 percent.

2) The housing market is still hurting. Mortgage foreclosures in July hit a record 360,000. Sure, home sales are surging in some key areas, but it's only because the bottom fell out of housing prices and interest rates are scraping the ocean floor.

3) The banks are still in trouble. Here's Yves Smith:

Despite the stress test baloney, the banking system is undercapitalized by a large margin. Even if the remaining writedowns are smaller in absolute terms than what is, past, they dig deeper into depleted equity bases. Colonial Bank, a $25 billion bank taken out last Friday, was deemed well capitalized until recently. We noted its much bigger neighbor, $140 billion Regions Bank, similarly deemed to be well capitalized, has effectively said it is insolvent How many other banks are broke save thanks to overly permissive accounting?

4) Another jobless recovery. I've written before that the recovery is going to be very, very painful, even when it's clearly under way. Hours-per-week is at its lowest on record, part-time work is at its highest on record and hiring numbers have never been worse. So it's no surprise that wages suffered their worst year-over-year drop since 1960. It all points to an job engine that will take a long time to jump-start. Fewer jobs and depressed wages means depressed consumer demand.