Economic indicators for the month of August confirm what we had already seen with last week's employment report: economic activity is soggy. Given this week's events, we may see different behavior on the part of government with increased expenditures on defense-related goods, as well as changes in businesses and consumers. While many economists are indicating that this may be the last straw that breaks the camel's back in terms of economic recession in the U.S. and around the world, we can't be sure of that. We wouldn't expect retail sales to turn around immediately, but keep in mind that the tax rebate checks coupled with the Fed's easing that has taken place to date (and which is only starting to influence the economy now) will help to keep economic activity from collapsing.

Even before this week's disastrous event, market players were expecting the Federal Reserve to lower the federal funds rate target by 25 basis points. Now, a consensus is developing that the rate cut could easily amount to 50 basis points. This would help consumers and businesses further.