Stocks Tumble Hard as Recession Fears Become Reality

Updated from 1:38 p.m. EST

Stocks in New York were suffering a merciless beatdown Monday, as the Bureau of Economic Research confirmed what many had suspected -- the U.S. has been in a recession for nearly a year.

The NBER, which tasks itself with declaring the timing of business cycles, said the U.S. entered a recession in December 2007.

"That's good news in some ways," said Hugh Johnson, chief investment officer at Johnson Illington Advisors. "Nobody's going to think so, but I think so." The reason for Johnson's optimism, he said, is that the average recession lasts between 16 and 17 months. If the current downturn started nearly a year ago, then the economy should soon approach a recovery, he said.

However, Johnson said, there are many indications that the current recession will be longer than average. He said that gloomy leading indicators, along with a dim outlook for the housing market, point to a prolonged downturn. "The problem is, I can't make the case for the end," he said.

The Dow Jones Industrial Average was recently down 404 points to 8425, and the S&P 500 fell 50 points to 846. The Nasdaq was lower by 86 at 1449.

Other economic data released Monday were also bearish. The Census Bureau's October construction spending figures showed a 1.2% decline compared with flat spending for September.

The Institute for Supply Management's November manufacturing index registered at 36.2, a 26-year low. Economists were expecting a reading of 37.

"However you look at the numbers the message is the same; manufacturing is in freefall, with output collapsing. We see no prospect for near-term improvement," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. He said the survey is an indication that the recession will continue.