A typically reliable gauge of business conditions in the U.S. is published by Morgan Stanley and tracks headlines in financial media. As the chart indicates, the recent drop in the Headlines Index is severe and is now approaching the level last seen in early 2009. The latest reading of 13 is well below the 33 level considered necessary to forecast continued growth in the economy and just a fraction of the postrecession average of 55. The last time the index dropped this dramatically was in 2008 just before the Great Recession began. Trade tension with China may be fueling part of the collapse, but conditions are signaling that consumers are likely to retrench spending that will ultimately lead to lower profits and slower growth.

• The sub-component for Manufacturing fell all the way to 0 in the latest reading, suggesting a contraction in manufacturing orders and new employment could be imminent.

• The data is consistent with the latest release of the NY Fed’s Empire State business conditions that plunged a record-breaking 26 points into negative territory, well below expectations.

• Equity investors seem impervious to the weak economic data and rising risk of recession, bidding the S&P 500 to a new high as they trust the Fed will again be the white knight to save the day.