Dow Dives 680 as Wall Street Learns It's Really a Recession

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.

Speaking in Austin, Texas, Federal Reserve Chairman Ben Bernanke discussed the economic environment, leaving the option for an additional reduction in the fed funds rate on the table. The Fed's target interest rate currently rests at 1%.

Treasury Secretary Henry Paulson also spoke Monday, saying that his agency is coming up with additional plans to help stagnant credit markets and provide relief for the housing market.

Beyond the dim economic reports, investors had other incentives to sell. Monday's session offered occasion for investors to close the book on November, which was filled with wild market swings, including a five-day surge in the Dow and S&P that closed out the month.

"We've had a lot of very extreme and in some cases bizarre market movements," said Brian Gendreau, investment strategist at ING Investment Management. He said that much of the volatility has been due to hedge-fund redemptions. That process may be anywhere between half to three-quarters done, he said.