The Dow Jones Industrial Average fell by 513 points on Thursday, its worst day since the 680 drop in December 2008.
Chemical stocks were hit particularly hard during Thursday's sell-off, with several falling by more than 7%.
The decline was the latest in a series of bad news, which overshadowed what has largely been a strong earnings season for North American chemical companies.
“If we’re not in a recession then it sure is feeling like one. If you look at the way the market is feeling right now, though the unemployment rate improved, it feels a lot like a recession," said Phil Flynn, an analyst with the brokerage firm PFG Best. Flynn follows refined products.
In July, a statistic that measures the growth of the US manufacturing sector fell to its lowest point since the end of the recession. Manufacturing activity barely grew in July, according to that statistic, the purchasing managers index (PMI) of the Institute for Supply Management (ISM).
US GDP grew at annual rate of just 1.3% in the second quarter, and the nation’s first-quarter growth was revised sharply downward to 0.4% from the earlier 1.9% estimate.
In Europe, the sovereign debt crisis continues. In China, the fragility of the demand from end-users remains a worry, because it is constrained by lack of credit and slower growth in consumer goods sectors such as autos.
The cumulative effect has increased concerns that the US could fall into another recession.
Flynn said: "If you look at the growth for the second quarter, we are sure close to a recession."
But he added: "One caveat is to look at earnings, which are quite strong right now."
Dan Lippe, an analyst with Petral World, said the US economy is now more likely to fall into a recession in 2012.
"I would not call it a double dip but instead view the recovery was weaker and shorter than we experienced during the past 20 years. The US economy has been in recovery since sometime in 2009," Lippe said.
“Historically, the first recovery or two following major financial crises are typically weaker and shorter – so it's not a surprise," he said.
However, not all statistics point to a recession, Lippe said. "The interest rate curve does not yet provide any clear signals of recession, and the index of leading indicators increased again in June."
An aromatics trader in the US said several people have been talking about a double-dip recession during the past few days.
“I’m not sure if we are going into another recession. Things in [the] EU are not looking good, that’s for sure. The US is struggling as well, but I think we can deal with it," the trader said.
Another aromatics trader said: "It looks a lot like the African bird ostrich behaviour all over the place. We just won't face the facts, and until we do and make real changes it will be chaos, more chaos and returning chaos. Double dip, triple dip, you name it.”
In Latin America, many market participants said that next week will be crucial in determining whether the pessimistic economic news point to another recession.
For the petrochemical industry, crude oil will be a key indicator, since the two are so tightly correlated.
So far, that does not bode well for the industry. West Texas Intermediate (WTI) fell by $5.30 on Thursday and was trading down on Friday.
