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Recession Assertion Rattles Markets

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The Associated Press

Published: December 2, 2008

NEW YORK - The reality that the nation is indeed in recession and that the downturn may well be prolonged sent Wall Street plunging Monday, hurtling the Dow Jones industrials down nearly 700 points and wiping out more than half of last week's big gains.

All the major indicators fell more than 7 percent, with the Standard & Poor's 500 index down nearly 9 percent.

The market spent the day absorbing a litany of bad news that convinced investors that the optimism that fed a 1,276-point gain in the Dow over five sessions was premature.

Stocks first slid on initial reports that the first weekend of the holiday shopping season saw only modest gains.

Meanwhile, a gauge of U.S. manufacturing activity fell to a 26-year low Monday and the Commerce Department said construction spending fell a dismal 1.2 percent in October.

Speeches from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson also did little to assuage investors about the downturn.

Then at midday, Wall Street got confirmation of what everyone has suspected for months, that the nation is indeed in a recession.

The National Bureau of Economic Research, considered the arbiter of when the economy is in recession or expanding, said the U.S. recession had begun a year ago, in December 2007.

That assessment made the retail sales figures all the more unnerving.

Although Monday's plunge was notable because it cut short a five-day rally, the first such winning streak for the Dow and the Standard & Poor's 500 index since July 2007, it also fit what has become a pattern on Wall Street.

The market has made a number of big, optimistic moves higher, including triple-digit gains in the Dow, only to quickly give them back as another batch of bad news arrives.

According to preliminary calculations, the Dow Jones industrial average fell 679.95, or 7.70 percent, to 8,149.09. The Standard & Poor's 500 index dropped 80.03, or 8.93 percent, to 816.21, while the Nasdaq composite index fell 137.50, or 8.95 percent, to 1,398.07.

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