Stocks fell sharply yesterday on reports that employers added few jobs in July and on weak outlooks from Disney and other companies.

In our updated forecasts we expect the weaker economic outlook to increase public sector borrowing and debt.

At best, the banks will charge a higher interest rate, something that will further damage the company's already weak cash-flow outlook.

(Wednesday) Despite the weak outlook, the European Central Bank is expected to resist cutting interest rates during its meeting, keeping them at 2 percent.

"Facing a weak outlook for computer orders, we will post a loss in the first quarter and expect a very difficult first half."

"People looked at fundamentals and realized they are not so good," a trader said, referring to the weak outlook for the economy, inflationary pressures and bank problems.

"Following the terrorist attack we would expect an even weaker outlook, and the possibility the economy will fall into an outright recession has grown substantially."

There will be concern, too, if a weak outlook for profits prompts US companies to sit for even longer on an estimated $2 trillion of cash.

On the flip side, households have become more wary about spending because of the weak economic outlook.

"Following the terrorist attack, we should expect an even weaker outlook," said Richard T. Curtin, the director of Michigan's consumer survey.