The threats seem to be coming from all directions.
Jittery stock traders react to each day's news as if it could be the start of Financial Crisis 2.0. On Thursday, the Standard & Poor's 500 index suffered its biggest one-day drop in more than nine months because of worries about debt problems in Greece, Portugal and Spain. Concerns about China's plans to limit economic growth and proposed regulatory bank changes from Washington also have pummeled the market.
The fears aren't as intense as in 2008, when the S&P 500 fell 38.5 percent. But January was the worst month for the market since it began its recovery last March. And the S&P 500 has fallen 7.3 percent from the high of 1,150.23 it reached Jan. 19.
It's not as if something devastating has happened, either in Europe, where economies have been struggling for some time, or in Washington. It was expected that the Obama administration would try to restrict big banks. What's different now is that investors have much more to lose than they did a year ago, so they sell at the first whiff of a problem. Even with its recent losses, the S&P 500 is still up 58 percent since hitting bottom March 9.
Investors are linking financial problems in Europe with the U.S. economic recovery. Some worry that governments' debt problems will spread in the same way that bad mortgages in the U.S. took down economies here and abroad in 2008.
"They are shell-shocked because they've seen a similar movie before and they didn't like the ending," said Anthony Chan, chief economist at J.P. Morgan Private Wealth Management. "They're wondering whether this is the sequel or not."
Chan said investors are probably overreacting to the problems in Europe. But, he said, they are more demanding about what they want to see from the world's economies.
"The market is going not going to be allayed by signs of recovery, they're going to be looking for signs of sustainability," Chan said.
Fourth-quarter earnings reports bear that out. Profits have come in stronger than expected but still left stocks sputtering.
Even a supporting hand from the Federal Reserve hasn't given the market new oomph. The Dow Jones industrial average rose a modest 42 points on Jan. 27 after the Federal Reserve issued a more upbeat assessment of the economy and pledged to keep interest rates low to help fan a recovery.
On Friday, the stock market drew little support from the government's surprise announcement that the nation's unemployment rate fell in January to 9.7 percent from 10 percent. Investors also seemed unimpressed by two signs that the labor market is improving — increases in the number of hours worked and in the number of temporary workers hired.
Instead, the market focused on the fact that employers cut 20,000 jobs in January. Analysts had forecast that employers created 5,000 jobs.
Analysts have few expectations that the market will start rallying soon. Many are looking at a difficult 2010.
Rick Bensignor, chief market strategist at Execution LLC in New York, predicts stocks will fall at least 11 percent from their Jan. 19 high. That would constitute a market correction, which is generally defined as a drop of more than 10 percent.
Until now, the biggest setback in the market's rebound had been a 7 percent slide from mid-June to mid-July.
"I think essentially no matter what the market was going to come off at this point," Bensignor said. "We just stretched the rubber band too much."