Rough start on Wall Street

Stocks slumped Wednesday morning as a barrage of weak economic reports exacerbated fears of a prolonged recession.

The Dow Jones industrial average (INDU), the Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) all slumped in the early going.

Overseas markets were down, with the exception of Hong Kong. London's FTSE index and Frankfurt's Dax were down more than 2%, and the CAC in Paris fell more than 3%. The Nikkei fell 1.3% in Tokyo, though the Hang Seng surged 3.8%.

Economy: Investors were hit by a wave of gloomy reports.

The biggest disappointment was the Commerce Department's report on durable orders, which fell 6.2% in October, a retraction in manufacturing that was much worse than expected. Durable orders were expected to slide 2.5%, according to a consensus of economists surveyed by Briefing.com. This follows an decline of 0.2% the prior month.

The Labor Department's report on jobless claims was not as bad as expected, though it provided little cause for celebration ahead of the holidays. Jobless claims totaled 529,000 in the week ended Nov. 22, the department said, which was less than the 537,000 expected by a consensus of economists surveyed by Briefing.com.

The Commerce Department said personal income rose 0.3%, which was better than the 0.1% projected in economist consensus provided by Briefing.com. This is compared to an increase of 0.2% in the prior month.

Personal spending slipped 1% in October, the department said, which was not as bad as the 0.7% decline expected by Briefing.com's consensus of economists, but was still the biggest gain since the September 11 attacks on New York and Washington. There was a decline of 0.3% the prior month.

Peter Cardillo, analyst for Avalon Partners, said, in an interview before the economic reports were released, that weak economic data could put further pressure on stocks.

At 10:45 a.m. ET, President-elect Barack Obama is expected to announce his appointment of former Federal Reserve Chairman Paul Volcker to lead a special council aimed at battling the economic crisis.

After three straight days of gains in the Dow Jones industrial average, Cardillo said a positive reaction to Obama's announcement is the best potential market-driver on the day before Thanksgiving.

"I think Mr. Obama's press conference just might steer us towards a fourth day of gains," said Cardillo.

Cardillo said the bulk of Wednesday's trading volume will take place in the early part of the session, before traders take off for the Thanksgiving holiday.

U.S. financial markets will be closed Thursday, with only a half-day of trading scheduled Friday.

Oil and money: Crude prices steadied after the previous session's drop. U.S. crude for January delivery rose $1.71 to $52.48 a barrel on the New York Mercantile Exchange.

The dollar edged higher versus the euro and the British pound, but fell versus the yen.

China rate cut: On Wednesday, China's central bank cut its key interest rate by a hefty 1.08 percentage points. The move is aimed at boosting the country's slowing economic growth.