This wasn't supposed to happen. Black Friday shopping was better than expected, oil prices were holding steady, and Wall Street had been coming off a decent rally on the day after Thanksgiving. But in a down market positive news is often greeted with a bounce that doesn't last very long. So despite a mostly flat session, the Dow ends up falling 237 points - much of it in the last hour or two of trading. Among local stocks, you get a good idea of the carnage: Amgen, down 2 percent, Activision down 2.9 percent, Countrywide down 10.5 percent (it's now at $8.64 a share), California Pizza Kitchen down 2.5 percent, Guess down 6.3 percent, KB Home down 9.4 percent and Occidental Petroleum down 4 percent. Behind all these down numbers is the growing belief that we're entering a recession (if we're not there already). From Alan Abelson's column in Barron's:

With the tally now encompassing 90% of the companies reporting, third-quarter earnings per share dropped 8.5% from the third quarter last year. A bad enough showing in itself, it's even worse when compared with a 9.6% gain in the second quarter over the corresponding '06 period and 11.6% when the whole world was smiling a year ago. It's the worst performance since that dispirited fourth quarter of 2001, hard on the heels of 9/11. It won't shock you, we're sure, to learn that financials took a real profits pummeling (down 33% from the year-earlier total) topped (if that's the word) only by the shares of companies that cater to consumers with more than a dollop of discretionary income to spend, which were off 39%.

If there is a recession, L.A. will not be immune, of course. The only question is whether it will be more or less severe than in other parts of the nation. You might recall that we were in the doldrums for several years after the rest of the country began recovering from the 1991 recession. The good news is that Socal has a very diverse economy - portions of which would hold up reasonably well in a downturn. But there are obvious vulnerabilities, such as a weak real estate market and a reliance on tourism dollars that will likely dry up. As in any recession, the real fear would be lost jobs. That's when folks stop spending at the malls so they can pay off the mortgage and health insurance. We're not there yet, but we're getting way too close for comfort.