Economic outlook: rain with spots of sunshine

Business Editor Kevin Smith chronicles this week's economic turbulence in a story today - Lehman Brothers declares bankruptcy, Bank of America to buy Merrill Lynch, American International Group fights for life and the Dow drops 500 points.

Rep. Adam Schiff, D-Pasadena, is quoted high with a sentiment shared by many:

"I never saw anything like this in my lifetime," he said. "During a more typical financial crisis you might lose one major institution and maybe one smaller bank, but to see several financial giants who have been around for so long start to fold up their tents ..."

"I'm hoping that the earthquake has hit and this is not a pre-shock for bigger things to come," Schiff said.

In that vein, a smattering of good (or at least better) news today:

• The Dow rallied, gaining 141 points to close above 11,000.
• The Labor Department reports consumer prices went down for the first time in two years in July (sure, it's only by .01 percent, but down is better than up, right), leading experts to anticipate further "price moderation" in coming months, especially if energy prices continue to decline.
• Shares of WaMu and Wachovia bounced as AIG secured enough funding to keep fighting.

And, perhaps taking a hint from the Labor Department, Home Depot announced it will cut prices on more than 1,200 items by 5 percent to 50 percent over the next three weeks. The price cuts will remain in effect at least through the next quarter, according to an AP story.