Transcripts

Wall Street's Sudden 600 Point Surge

SUSIE GHARIB: A dramatic U-turn on Wall Street today. The Dow traded in a 600-point range, down as much as 300 points, then closing up almost 300. The NASDAQ also erased its losses, gaining 24. But despite today's big rally, investors are still anxious and confused about the outlook for stocks and the U.S. economy. High on the worry list, whether the economy is sliding into recession, and if so, how long and how bad will it be? Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A recession in the U.S. this year may not be a foregone conclusion on Wall Street, but to many pundits it certainly seems likely. That said, in recent days the debate has shifted away from recession or not, to what exactly the 2008 recession will look like. Will it be as economic forecaster Nouriel Roubini (ph) predicts, severe, lasting at least a year? Or will it be what the Goldman Sachs economics team has been calling "recession light, a contraction that lasts six to nine months, but is mild by historical standards? Economist Robert Brusca thinks the U.S. might miss the definition of a recession, which is two quarters of negative growth. But he says, if America does visit the "R" word, it will not be a long stay.

ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS: I think that with the fiscal packages that we have now being talked about and with the monetary policy easing that we have under our belt and which we think are in prospect, I think it's going to be relatively short and shallow recession.

PRATT: Those in the gloomier camp say a severe recession will be accompanied by many lost jobs. Past severe recessions saw the unemployment rate rise above 8 percent. Decision Economics' Cary Leahey hopes this recession will be mild, but believes conditions are such that it could be a doozey.

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS: The household sector is heavily indebted. We all know that many people are facing higher mortgage and energy bills and that may mean a very significant cutback in spending going forward.

PRATT: One other component of the recession debate raging on Wall Street is whether a U.S. contraction will result in a global one. Some believe new engines of economic growth, such as India and China, will help prevent a global downturn. Others say many developed economies still run in sync with the U.S., so a severe recession here would most likely mean the same overseas.

BRUSCA: If you look at statistics from Europe and the United States, you find that their business cycles continue to be very closely tied to the U.S., and there's no evidence that there has been de-coupling. There's only been an idea.

PRATT: For many Americans, it won't matter whether the recession is short or long, mild or severe. Experts say that's because after a six-year expansion, a sharp slowdown in growth will feel downright awful to consumers. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.