Growth forecasts for the U.S. are being drastically cut after yesterday’s disastrous Philadelphia Fed manufacturing survey. Economists predicted slight expansion, instead we got the worst reading since March of 2009.

JP Morgan (NYSE:JPM), who just cut its GDP forecasts, cut them again. And the cuts are big. From 2.5% to 1% in the 4th quarter and from 1.5% to 0.5% in the 1st quarter of 2012.

Citi (NYSE:C) was less dramatic, cutting 2012 growth from 2.7% to 2.1%. Citi also cut earnings estimates for the S&P 500 by around 4%.

It’s pretty appalling that economists are so far behind the curve. The miss on the Philly Fed number was huge, and economists totally missed it. But let’s try to keep the economic expectations in perspective.

We know housing is stuck, we know unemployment is not moving, and we know that state governments (and the Federal government to some extent) are cutting spending. This recovery is a slog, and perhaps the mistake was expecting too much, too soon.

Most economists are still saying that they don’t see the U.S. economy slipping into recession. I’m not sure that makes me feel so much better, given that these same economists are missing on their estimates of growth right now.

Still, it will take some kind of shock to push the U.S. into recession. Like maybe a total meltdown in Europe. And there’s simply no way to say that’s not going to happen.

It’s clear that the few healthy Euro-zone countries are thinking more about saving themselves than their indebted neighbors. Can’t say I blame them. And it’s a result of a poorly constructed union.

One bright spot for Europe: it looks like the Eurobond idea is back on the table. It has been suggested that replacing individual countries bonds with a Eurobond backed by all countries of the union is solution to the debt problems. The idea was quickly dismissed by Germany, but now it’s back on the table.

Once again, we can only hope Europe gets a workable solution in the near future. It’s dickering and half-measures are not working. In fact, they are making the situation worse because the world knows the resolve to truly deal with debt is not there.

Stocks are acting like they want to rebound today. And let’s face it — investors have priced in a lot of bad news. If the 4% revision to S&P 500 earnings is the worst case scenario, then stocks are cheap.

Of course, I wouldn’t recommend blindly trusting these revised estimates, but at the same time, there are some attractive stocks out there. I expect no one really wants to hear about banks, but Citi looks extremely cheap, trading at a big discount to book value.

Microsoft (Nasdaq:MSFT) is another stock that looks very cheap.

However, I don’t think there’s any need to rush into any stocks. But if you’re going to buy something, do it before the stock market puts together a couple days of a rally. This doesn’t mean buy in on a day like yesterday, when prices are basically in a free-fall. But today, when prices show more stability, is a better option. And it is options expiration.

The extreme volatility we’ve seen over the last two weeks could be with us for a while. And that means any rally will reverse. The last thing any of us needs to do is compound the bad vibes by buying a top. Pick your spots and pay attention to support levels.

TradeMaster Daily Stock Alerts’ Jason Cimpl tells us that support for the S&P 500 is at, 1,131, 1,115 and 1,101. You’ll have better results if you buy a stock as the index is bouncing off support, rather than when it is hitting resistance.

Gold prices are hitting yet another new high today. It’s probably not the best time for new money in gold. And if you own gold, you might consider hedging with some put options or even by selling some covered calls.

I own gold personally, and in several portfolios here at Wyatt Investment Research. But let’s be realistic: with gold hitting record highs every day, it could be prone to a reversal.

Write me anytime at [email protected].

Published by Wyatt Investment Research at