Does a Falling Stock Market Presage Recession?

The trading floor of the New York Stock Exchange (NYSE) in the age of the internet.

The trading floor of the New York Stock Exchange (NYSE) in the age of the internet. Note all the computer monitors.
Wikimedia Commons / Ryan Lawler

In case you have not noticed, the American stock markets have been falling precipitously over the past two trading days. The action began last Friday when the Dow-Jones Industrial Index fell 666 points, or 2.5%. Then Monday, the Dow continued its descent by falling 1,175 points. At one point yesterday, its fall reached 1,597 points, but the market recovered part of this loss by its close. If the economy has been doing so much better over the past year, why is the stock market diving for the abyss? Is this a sign the economy is on the edge of collapse? What is going on?

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