By Adam Samson

The economy has come squarely back into focus with a heavy stream of economic data released on Thursday. Morgan Stanley also warned the global economy is "dangerously close to a recession" and cut its global economic growth outlook significantly. Goldman Sachs also pared back its forecast of economic growth.

Manufacturing in the Philadelphia area contracted sharply in August. The Philadelphia Federal Reserve's gauge of manufacturing activity came in at -30.7, far short of expectations of 3.7. Reading above 0 point to expansion, while those below 0 indicate contraction.

A number below the -20 level is "rare outside of a recession" and poses a "very worrying development" for policymakers who are working to keep the economy afloat, according to economists at Barclays Capital.

The markets are being driven lower "not only be the euro zone ... but also a relentless release of domestic data that speaks to both an underlying inflationary environment and anemic – if not stagnant growth here in the U.S.," Peter Kenny, managing director at Knight Capital Group said in a note to clients.

Wall Street has also been paying close attention to the sovereign debt crisis in Europe for several months. The fears peaked last week when reports suggesting certain large European banking institutions may have issues gaining access to sufficient capital sparked massive selloffs and volatility.

Read more: http://www.foxbusiness.com/markets/2011/08/18/daily-market-update/#ixzz1VP5IwwAS