Yesterday marked the worst start of a new year that Wall Street has seen in 25 years.

From the Financial Times : “The Dow Jones Industrial Average fell 1.7 per cent to 13,043.96 points, its worst percentage decline on the first trading day of a year since 1983. The S&P 500 closed 1.4 per cent lower at 1,447.16 and the Nasdaq Composite shed 1.6 per cent to 2,609.63.”

Turns out the markets weren’t too keen on the ISM data that we mentioned yesterday, that showed manufacturing had weakened in December, sinking below 50 to 47.7.

“I learned in econ class that when the ISM hits a level of 45 for two consecutive months, it indicates a recession,” our currency counselor, Chuck Butler, tells us in today’s issue of The Daily Pfennig.

“I know that economists believe a recession is defined by two consecutive quarters of negative growth. But I argue that point...and in 2001 I was bang on, and months ahead of the economists’ call that a recession ‘had’ occurred.”

The minutes from December’s FOMC meeting were released yesterday, showing that the Feds believe they may need to cut rates again. Apparently, the turmoil in the housing market was worse than they expected, and surprise, surprise, it has affected consumer spending. According to the minutes, “tighter credit condition, higher gasoline prices and the continuing housing correction might be restraining growth in real consumer spending.”

Basically, the Fed is caught between a rock and a hard place – nothing new here. They are “trying to fight inflation while dealing with the slowdown in U.S. growth,” one expert told the FT .

There were some bright spots for traders yesterday, however: energy stocks and precious metals.

Gold futures hit a high not seen in 28 years today, surging above $860 an ounce. The yellow metal ended the year with a 31% gain, its seventh consecutive year of gains. Our friend, James Turk, at GoldMoney.com had this to say:

“Will gold continue its winning streak in 2008? Of course only time will tell because no one can predict the future. Nevertheless, one thing is certain. If central banks persist with actions that debase national currencies, the gold price will continue to rise in terms of those currencies.

“Given all the debasement that we have seen over the past seven years, it seems like a sure bet that central banks are not going to change their ways. Their pronouncements to ‘fight inflation’ and to protect a currency’s purchasing power are nothing more than hollow rhetoric.”

Meanwhile, crude oil hit $100 a barrel on the weak dollar, geopolitical uncertainty, and the possibility that global demand will outstrip supplies.

The center of Nigeria’s oil industry, Port Harcourt, was invaded yesterday, which helped push the price of oil up, as did news that China’s refineries are running at record levels to offset a gasoline shortage in the Far East.

But there is an interesting twist to this story.

“It was little more than the will of one trader that pushed the price into the three-digit range,” Addison and Ian at The 5 Min. Forecast tell us. “Only a single oil contract was purchased yesterday for a hundred bucks, a paper trade made on the floor of Nymex for one lot (1,000 barrels) of oil.

“In other words, somebody was just looking to be the first guy to own $100 oil. We won’t be surprised when that ticket ends up on e-Bay. Despite the playful manner in which oil achieved $100, it’s found support at $99 ever since.”

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.