Actually, the stock market has been running on fumes, and it's about time someone noticed.
Stocks plunged Friday, erasing all of the previous day's big gains, as a drop in consumer spending fanned worries that the economic recovery won't be sustainable.
Major stock indexes tumbled more than 2 percent in afternoon trading, including the Dow Jones industrials, which gave back all of Thursday's 200-point gain. The biggest declines were among banks, energy and materials companies.
As stocks fell, investors moved to safer assets like the dollar and Treasurys. At the same time, the Chicago Board Options Exchange's Volatility Index, known as the market's fear gauge, soared nearly 25 percent to 30.88, the highest since early July. Its historical average is 18-20. It hit a record 89.5 a year ago.
The decline in stocks marked an about-face for the market, which had rallied on Thursday after the government reported a 3.5 percent jump in gross domestic product in the third quarter.
Investors started shedding stocks after the Labor Department said personal spending fell 0.5 percent in September. Though the decline was in line with forecasts, it was the largest drop in nine months and followed a 1.3 percent jump in August fueled by the government's popular Cash for Clunkers car rebate program.
The day's report cast further doubt on the economy's recovery, which many economists fear has been driven by the government stimulus measures. Without a rebound in consumer spending, which makes up a major part of the U.S. economy, investors worry the recovery won't last.
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