Ellington

The Dow was down as much as 360 points today in intra-day trading but ended up 400 points or nearly 4.7 percent. Some of the rally seemed to be a result of oil prices that have dropped to almost half of their record high earlier in the year; those numbers withdrew some short-term inflationary fears and helped send airline stocks up.

Some of the late day rally may have been the result of buying ahead of options that expire tomorrow, according to CNBC, and the broader concern with this extremely volatile market is that it's reacting to -- and trying to price in -- either a serious recession or worse.

"Looking at inflation right now is like looking in the rearview mirror while ignoring the train wreck dead ahead," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi. "Even Fed policy makers are saying the economy appears to be in a recession, and that is why the stock market has fallen more than 40% from the highs last year, it is discounting a recession if not outright depression."

In a related MSNBC piece, U.S. Confronts Possibility of Deep Recession, notes that leaders on the economy have both made stark pronouncements (considered a bit out of character for their positions) about the economy:

"I don't think we can escape damage to the real economy," former Federal Reserve Chairman Paul Volcker said this week in Singapore. "I think we almost inevitably face a considerable recession."

The Fed's current chairman, Ben Bernanke, delivered a more measured but similarly grave assessment in a speech Wednesday, saying that even if markets stabilize, "broader economic recovery will not happen right away."

While the U.S. experience a mild recession in 2001 and relatively stagnant job growth since 2001, the very real concern is that this particular economic downturn could seriously affect job rates in the country:

Most economists forecast a sharp increase in the number of people who lose their jobs. But they do not see it leading to unemployment on the scale of either the 1970s or 1980s. The jobless rate is currently at 6.1 percent, and many economists expect it to rise to about 7 percent early next year — a level the country has not seen since 1993. Some analysts believe the unemployment rate could climb close to 8 percent, which hasn't happened since 1984.