U.S. economy: Return of the double-dip?

(MoneyWatch) Does the rotten May jobs report augur bad news for the overall economy? The answer is unclear at this point. Here's what we know: The globe is slowing down. Chinese manufacturing fell to a level that barely qualifies as expansion; India's economy expanded by 5.3 percent in the first quarter, down from 9.2 percent a year earlier; Latin America is stumbling; and U.S. growth was only 1.9 percent in the first quarter, after a tepid 1.7 percent last year.

The question plaguing investors is whether the slowdown will morph into a double-dip recession. Unfortunately, the answer lies with Europe. If the eurozone implodes due to a Greek default/exit or less dramatically, if confidence in large economies like Spain and Italy causes depositors and investors to flee, the eurozone could create Lehman Brothers Version 2.0. That scenario would freeze up the global financial system and likely plunge the eurozone into a deep recession. Although the U.S. economy is in far better shape than it was in 2008, the effect of a European recession could push the U.S. over the edge into a (gasp) double-dip recession.

Meanwhile, as the world waits for the outcome of the second round of Greek elections on June 17 and a more detailed plan of how policymakers will address the broader debt crisis, investors are voting with their stock sell orders. All three U.S. stock indexes closed down by 6-7 percent in May and the first day of June was no better. The beneficiary of the collective anxiety is the U.S. Treasury market, where prices soared and the yield fell to an all-time low of 1.45 percent. That means that after adjusting for inflation, investors are paying the U.S. government for the privilege of holding their money for 10 years.

-- DJIA: 12,118, down 2.7% on week, down 0.8% on year

-- S&P 500: 1,278, down 3% on week, up 1.6% on year

-- NASDAQ: 2,747, down 3.2%, up 5.5% on year

-- July Crude Oil: $83.23, down 8.4% on week (down 15.8% YTD, an 8-month low)

-- August Gold: $1,622.10, up 3.3% on the week

-- AAA National Average Price for Gallon of Regular Gas: $3.61

THE WEEK AHEAD:

Mon 6/4:

10:00 Factory orders

Tues 6/5:

10:00 ISM Non-manufacturing

Weds 6/6:

7:00 MBA mortgage purchase applications index

8:30 Productivity & costs

2:00 Fed Beige Book

Thurs 6/7:

8:30 Weekly jobless claims

3:00 Consumer credit

Fri 6/8:

8:30 International trade