The market spent much of Friday running numbers on what a Microsoft Corp. (NASDAQ: MSFT) buy-out of Yahoo! Inc. (NASDAQ: YHOO) might yield in terms of competition in the online ad market. What may have been missed is that the S&P 500 had its worst January since 1990 according to Reuters.

The S&P fell about 4%, but the figure for the Nasdaq Composite was much worse. It dropped 8%. Some off the most important stocks in the index had breathtaking falls. Apple Inc. (NASDAQ: AAPL) fell-off about 30%. Intel Corp. (NASDAQ: INTC) fell 15%. Google Inc. (NASDAQ: GOOG) moved down 25%. With their huge market caps, these stocks get tremendous weight in the index.

What this tells the market is that Wall Street is deeply mistrustful about any recovery in the economy. Tech helped keep U.S. stocks from an awful year in 2007. They are now extremely unlikely to reprise that role in 2008. That does not leave any sector to help the market through a tough period. The economic slowdown has already touched most industries.

If the past is prelude, the stock market is in for a bone-jarring drop in 2008. A day of M&A news is just a distraction.

Douglas A. McIntyre is an editor at 247wallst.com.