A wave of daunting economic headlines took control of the markets on Monday, slicing off nearly half the gains from last week's winning streak.

The latest bleeding came as the markets received confirmation the U.S. has been in a recession for a year, a fact backed up by gloomy speeches from regulators and a new report showing manufacturing activity stands at 26-year lows.

Today's Market

The Dow Jones Industrial Average lost 679.95 points, or 7.70%, to 8149.09, the S&P 500 slumped 80.03 points, or 8.93%, to 816.21 and the Nasdaq Composite fell 137.50 points, or 8.95%, to 1398.07. The consumer-friendly FOX 50 slid 56.42 points, or 8.09%, to 640.96.

Monday's plunge erased more than half of last week's 1,300 point gain. 

“Being off 1% or 2% is one thing, but to lose half of your gains is not healthy,” said Frank Davis, director of sales and trading at LEK Securities. "The market action is still very dicey."

By the time the selling stopped, the Dow posted its fourth-worst one-day point decline on record. The two worst one-day point declines also fell this year, the most recent of which was September's 778-point drop. On a percentage basis, the index's plunge was the 12th worst in history but no where near as steep as Black Monday's 23% decline. 

Monday's losses stood in contrast to a five-day buying binge that saw the Dow surge 1276 points, or 16.91%, a record point gain for five consecutive days and the largest percentage gain since the Great Depression. The index is now off 42% from its record close of 14164 set October 2007. 

Wall Street wasn't alone as global stock markets plunged and crude oil prices sank below $50 a barrel to hit new 3 1/2-year lows. Cash fled to the relative safety of government bonds as Treasury prices soared and yields plummeted to their lowest levels in at least 50 years.

All 30 components of the Dow lost at least 4% of their value, led by Bank of America (BAC) and Citigroup (C), which fell by about one-fifth each. Financial giants JPMorgan Chase (JPM) and American Express (AXP) and aluminum maker Alcoa (AA) posted double-digit percentage drops as well. Even defensive stocks like McDonald's (MCD) and Wal-Mart (WMT) fell sharply. 

The Nasdaq Composite plunged in tandem with the broader market. Virgin Media (VMED) and Amylin Pharmaceuticals (AMLN) suffered the steepest percentage losses on the Nasdaq 100. Tech heavyweights like Cisco (CSCO) and Dell (DELL) also fell sharply. 

Bernanke, Paulson Speeches Spook Markets

The markets tumbled to session lows following a pair of afternoon speeches from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, the chief architects of the Bush Administration's financial rescue plans.  

Paulson said the Treasury Department is still looking at new ways to stabilize the financial markets. 

"Today we continue to work through a severe financial crisis," said Paulson. "While we are making progress, the journey ahead will continue to be a difficult one. But I have confidence that we are pursuing the right strategy to stabilize the financial system and support the flow of credit into our economy."

Bernanke said further interest rate cuts are "certainly feasible" even though they are already at historically-low levels. However, the Fed chief also said the scope for using "conventional interest rate policies to support the economy is obviously limited." 

“The likely duration of the financial turmoil is difficult to judge, and thus the uncertainty surrounding the economic outlook is unusually large. But even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time," said Bernanke. 

Bearish Reports Overshadow Black Friday News

“A lot of people are reverting back to look at the fundamentals and they are not very good. The economic data that has come out is disappointing at a minimum," said Davis. 

On the economic front, the National Bureau of Economic Research said the U.S. fell into a recession in December 2007, the first such contraction since 2001 and the end of 73 months of economic expansion. The judgment comes despite the fact the U.S. hasn't seen two consecutive quarters of negative growth, which is how NBER typically defines recessions. 

The markets didn't see a significant decline following the NBER report as nearly all on Wall Street have known the U.S. is in a recession. 

“To say that it started a year ago doesn’t mean anything to anybody. Everyone knows the economy is in a recession," said Peter Boockvar, equity strategist at Miller Tabak. 

There were a handful of new reports underscoring the economic contraction, including the steepest decline in manufacturing activity since May 1982. The Institute for Supply Management's manufacturing index deteriorated to 36.2 in November, down from 38.9 the month before.  

Also, the government said construction spending fell by a larger-than-expected 1.2% in October as the credit crisis and housing slump continue to take their toll. Economists had expected a more modest 0.9% decline. 

Those reports may be bad omens for Friday's all-important monthly jobs report, which Wall Street fears could show a loss of nearly 300,000 jobs in November. 

The markets were also hurt by a prediction from influential Oppenheimer analyst Meredith Whitney, who said the U.S. credit card industry may pull back more than $2 trillion of credit lines over the next 18 months, a move that would likely lead to a plunge in consumer spending.

Wall Street failed to rally around initial reports that indicate Black Friday may not have been so bad as customers aggressively went after massively-discounted items.

The three-day estimates show 172 million shoppers flooded the nation's malls and Web sites, exceeding estimates and beating last year's tally of 147 million shoppers. However, retailers were forced to offer steep price cuts, lessening their ability to turn a profit. 

Crude Reverts to 2005 Levels

The energy market also suffered a dramatic pullback Monday as crude oil futures settling down $5.29 to $49.14 a barrel, a fresh 3-1/2-year lows. Gold futures tumbled as well, falling $41.60 to $774.60 an ounce. 

The decline in oil prices comes after a weekend OPEC summit in Cairo where the cartel decided not to cut production further to fight prices. At the same time, Saudi Arabia endorsed $75 a barrel as a "fair price" for the commodity that has been slammed by the weak global economy, plummeting 62% since hitting $145 a barrel in July

Corporate Movers

Pilgrim's Pride (PPC) said it is filing for Chapter 11 bankruptcy protection but will keep operating and reorganize rather than liquidate assets. The chicken producer has been hurt by volatile prices and has been forced to extend credit lines three times since September. 

General Motors (GM), the automaker said to be teetering on collapse, raced over the weekend to finalize a viability plan that may include an offer to bondholders to exchange debt for equity, The Wall Street Journal reported. 

Ford (F) is considering the sale of its Volvo brand and along with GM has asked the Swedish government for aid, the Financial Times reported.

Yahoo! (YHOO) closed lower as shareholders discounted a Times of London report that Microsoft (MSFT) is in talks to buy the Internet giant's online search business in a complicated $20 billion deal. Influential blog AllThingsDigital cited a key executive said to be involved in a new management team as saying the report is "total fiction." 

Johnson & Johnson (JNJ) unveiled a $1.07 billion cash offer to acquire medical products supplier Mentor (MNT), which will likely operate as a stand-alone business unit. The $31-a-share offer is nearly double Mentor's closing price on Friday. 

JPMorgan Chase (JPM) is laying off 3,400 Seattle employees from newly-acquired Washington Mutual (WM), the Seattle Times reported, citing a company spokesman. While the cuts represent 80% of WaMu's workers from the city, most branch workers will retain their jobs, the newspaper reported. 

Citigroup (C) is reportedly considering shedding NikkoCiti, its Japanese trust company, in a move aimed at raising up to $420 million. 

Boeing (BA) saw its shares sink after the Journal reported Delta Air Lines (DAL) will likely scale back 787 Dreamliner orders  from newly acquired Northwest (NWA). However, Delta will also likely increase its orders for the more expensive 777-200 LR and the changes aren't likely to hurt Boeing's bottom line, the newspaper reported. 

Viacom (VIA) CEO Sumner Redstone sold his controlling stake in video game company Midway Games (MWY), according to regulatory filings. 

Global Markets

European indexes plunged in tandem with their U.S. counterparts as the Dow Jones Euro Stoxx 50 slumped 141.92 points, or 5.84%, to 2288.39 and the FTSE 100 Index fell 222.52 points, or 5.19%, to 4065.49.

Asian markets fared better overnight as Japan's Nikkei 225 closed down 115.05 points, or 1.35%, to 8397.22 and Hong Kong's Hang Seng Index jumped 220.60 points, or 1.59%, to 14108.84.