What a Week: Hard Sell

A report showing that U.S. manufacturing contracted in November shook up the stock, bond and currency markets Friday, as expectations for rate cuts and recession dominated a week thick with data and Fedspeak.

Markets had foundered through the week as the reams of data and Fed speeches rolled in. But investors were aligned by Friday morning in their fears that the economy's landing will be harder rather than softer. Stocks dropped, Treasury bonds rallied sharply and the dollar weakened. Amid all the signs of slow growth, Fed speakers retained their focus on inflation as key to their assessment of monetary policy.

Treasury bonds reacted most to the week's data gyrations, driving yields down to lows not seen since January. The move may be extreme, but not unfounded in its direction as reports came out showing weak new-home sales, lackluster retail sales in November, weak durable goods orders and contracting manufacturing activity. ...