Blame that pesky Chicago Purchasing Managers Index (PMI) for the morning's thud. Instead of obligingly rising to an expected 52 in September, it fell to 46.1, sending stocks plummeting soon after Wednesday's open. In the first hour of trading, the Dow fell almost 116 points or 1.2%% to 9,626, the Standard & Poor's 500 Index dropped more than 12 points or 1.2% to 1,048 and not to be outdone, the Nasdaq composite also fell 1.2% to 2,097. They swiftly began to right themselves and were in positive territory by around 1:00 p.m. before changing their minds. A down day for, among others, REITs, full-line insurers, consumer financial . . . a good one for precious metals, oil futures and some tech stocks.

MARKET INDEXES:

The PMI showed a Midwestern manufacturing sector rather weaker than hoped for, in fact contracting, and down from August's reading of 50, the level that signals an overall expansion in activity; economists were expecting the index to show continued improvement, to 52. The Purchasing Managers Index is considered a harbinger of Thursday's release of the Institute for Supply Management index.

The scandalized whispers this morning concerned the fact that the S&P started its steep slide a few minutes before the PMI was released to the public. Was it leaked? No, but it was released to a certain population before the general public got hold of it, and that made a difference:

PMI REPORT: WHAT HAPPENED at 9:42 a.m.

For both subscribers and regular Joes, the news threw cold water on the vague optimism that followed the revision, before the open, of the Commerce Department's final report for second-quarter gross domestic product: The government said that GDP sank at a pace of "just" 0.7% in the spring, better than the annualized 1.1% drop economists were expecting. The upward revision was primarily due to higher estimates for business spending on software and nonresidential construction. "Equities should like today's report," one source said, and that source was correct for a couple of minutes anyway.

DOW JONES INDUSTRIAL AVERAGE:

The GDP numbers show, or rather showed in the rear-view mirror, the economy at the bottom of a recession, maybe, with increased chance of an inventory boost in the third quarter. But the Chicago PMI data is considerably newer and consequently more disturbing, reminding us, if we needed reminding, that the economy still has a few speed bumps to navigate on the road to recovery.

There was good news/bad news on the employment front: The ADP National Employment Report of private payrolls showed private sector employment falling by an 254,000 in September (the data are collected for pay periods that include the week of the 12th of each month). This was more than the 240,000 expected by economists, but on an optimistic note, It was the fewest jobs lost since July 2008.

S&P 500:

The Mortgage Bankers' Association purchase application index fell 6.2% last week, while the refinance rate slipped 0.8%. This despite fantasy loan rates like the 4.94% rate for 30-year mortgages, the lowest rate since mid-May. Refinancings are counted, perhaps confusingly, as mortgage applications; and at 65.3% are making up a larger share of total applications, with homeowners hurrying to lock in low rates and pay down higher rate loans. If it continues, the drop in the purchase index could mean a slowing for home sales. Talk about your green shoots shriveling up.

A non-key but still valuable report out Wednesday was corporate profits in the second quarter, as brought to us by the Bureau of Economic Analysis. They were revised down a bit to an annualized $1.031 trillion from the original estimate of $1.050 trillion, up in either case from the first quarter's $0.976 trillion, which itself was a terrific jump. We're using the most relevant measure here, after-tax profits, or book profits (operating profits less inventory valuation and capital consumption) after taxes. Corporate profits are still down 19.2% year over year but last quarter they were down 24.8% year-over-year. We'll take our good news where we can find it.

NASDAQ COMPOSITE:

Gasoline was much in the news today. While stocks of crude oil rose 2.8 million barrels last week to 338.4 million, our gasoline supply dropped a surprising 1.6 million barrels last week, as demand jumped 3.8% to 9.13 million barrels a day, said the Energy Information Administration in its weekly report. Analysts were expecting a buildup of 1.2 million barrels in gasoline inventories. Gasoline imports fell to 851,000 barrels a day last week, down 17% from a week ago. Crude imports also fell, down 2.7% to 9.5 million barrels a day.

Gasoline demand is up 5.4% year-over-year, doubtless reflecting price declines at the pump. (I like to think I did my patriotic bit in all this, as a sick relative necessitated my making seven or eight 104-mile round trips in the last two weeks. A congratulatory phone call from the President would be nice.) Refineries are still limiting output, operating at a mild 84.6% of capacity, using only 14.59 million barrels of crude a day, down 1% from a week ago.

The EIA also reported an increase of 2.8 million barrels in crude inventories and a buildup of 300,000 in distillate stockpiles, which include diesel and heating oil, largely in line with expectations. Distillate stocks continue to build, up 0.3 million barrels in the week with total stocks far above normal. Great for the consumer, not so hot for corporate profits and some energy stock prices.

Demand for jet fuel is actually improving, down only 2.9% since this week last year, compared with recent double-digit drops. A few years ago Southwest was one of the small handful of airlines making any money due to the fact that it had locked in prices several years previously, when crude was cheap. Any airline or refinery not doing that now is positively daft.

You could look at the decline in gasoline stocks as bullish, but it was at least partly due to lower gasoline imports, due to the fact that we don't need any more gasoline right now. Crude prices rose in reaction to today's data, rising 5% and surpassing $70 a barrel. Benchmark crude for November delivery added $3.90 to settle at $70.61 a barrel on the New York Mercantile Exchange (although down a few cents after hours). Other crude futures prices were up strongly as well.

WEST TEXAS INTERMEDIATE CRUDE:

Well, after six negative quarters, the S&P500 has given us two consecutive positive quarters. On June 30 it closed just above 919; today it finished at 1057, a gain of 138 points or 15% for the quarter. Even better news was the monthly rise of 3.6% for historically cruel September. The Dow turned in 14.9% for the quarter, its best quarterly performance since 1998, and 2.27% for the month. Can this go on?

Maybe, but perhaps not at that 15% rate: Many investors are convinced this rise is begging for a profit-taking correction. In any event, tops on my Christmas list is for the Index Fairy to fill the gap between the October 2007 high and the March 2009 low. That means a 50% retracement to above 1121 for the S&P 500 and, after a likely fallback, support and a continued move up. Faltering at that level would not be good. We're already more than 40% toward our goal.

What will get us there? The fast answer is revenue growth; I'd say earnings growth but countless companies have been achieving that with cost-cutting, a very limited way to goose earnings. A better answer is increasing our exports, which might result in not just more jobs, but more and different kinds of work, which is the true foundation of economic growth. If all you want is more jobs, then just divide the labor you're already doing. Your fifth-grade teacher misinformed you when she said that division of labor is responsible for the glories of a growing economy. She misinformed you about a lot of things, but that's another story. Economies that constantly make and sell new things, and sell many of them to other countries, are the only economies that grow broadly and steadily. It's an easy fact to lose sight of.

We're not in the process of becoming a manufacturing powerhouse so in the meantime, just plain new jobs will have to suffice. Tomorrow brings three employment related reports, but in the meantime, this is a mildly encouraging chart of manufacturing hours worked:

MANUFACTURING HOURS FOR AUGUST:

A few semiconductor firms went to the head of the class today. Contract manufacturer Jabil Circuit (JBL) jumped after reporting fourth-quarter earnings that exceeded Wall Street projections despite a revenue drop, as well as a forecast that came in above estimates. Shares of other contract manufacturers were also up, including Molex Inc. (MOLX), up 60 cents to $20.88; Sanmina (SANM), up 56 cents to $8.60; and Celestica (CLS), up 56 cents to $9.48. Contract electronics manufacturing is not to be sneezed at as a leading indicator of economic activity.

JABIL CIRCUIT:

Winners Wednesday included publishing, drug retailers, consumer electronics, gold, renewable energy equipment and specialty finance. Wealth-manager Ameriprise (AMP) soared on news that Bank of America (more below) will sell it parts of asset-manager Columbia Management.

AMERIPRISE:

Wearing dunce caps were REITs of almost every stripe — mortgage, retail, specialty, industrial and office — full-line insurers and consumer financial.

REAL ESTATE INVESTMENT TRUST INDEX:

And in news that I'm sure rattled a few on Wall Street, Ken Lewis, the CEO of Bank of America Corp. (BAC) is leaving the company, the country's largest bank by assets, after nearly a year of trouble and strife that followed his company's acquisition of Merrill Lynch; the announcement came after the close. The news, coming after shareholders had stripped Lewis of his chairman's title earlier this year, wasn't surprising because of the intense pressure he came under after the Merrill deal. Will we ever know whether Treasury Secretary Tim Geithner, with Ben Bernanke's blessing, strongarmed Lewis into acquiring Merrill even after Merrill's massive problems became evident and Lewis wanted to call off the deal? That would have been quite legal, by the way: there was a clause allowing the acquirer to back off in just such a contingency. Some insiders say Geithner sure did, and from what I've read . . . . anyway, apparently Lewis decided "on his own" to leave and will be gone by the end of the year. No successor has yet been named.

BANK OF AMERICA:

You know, with all that driving I've been doing, traffic patterns — the devil's very own handiwork — have been a preoccupation lately. I'm convinced that highway driving is strongly linked to lunacy. Perhaps you have had an experience like this:


Big day tomorrow for reports. Market movers should be motor vehicle sales, jobless claims, personal income and outlays, the Institute of Supply Managers Manufacturing Index, pending home sales and the EIA natural gas report. Of interest will be construction spending, job cuts, a slew of bond, bill, and note announcements, and oh yes, Ben Bernanke testifies to the House Committee on Financial Services on regulatory reform.