This Day In Market History: Subprime Mortgage Crisis Officially Declared A Recession

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On Dec. 1, 2008, the National Bureau of Economic Research officially declared a U.S. recession.

Where The Market Was: The Dow Jones Industrial Average traded at 8,149.09 and the S&P 500 traded at 816.21.

What Else Was Going On In The World? In 2008, President George W. Bush signed the $700 billion Emergency Economic Stabilization Act of 2008. The Federal Reserve launched the Term Auction Facility to provide short-term loans to cash-strapped banks. Oil prices hit an all-time high of $147 per barrel.

2008 Recession Begins: By the time the NBER officially declared the 2008 economic downturn a recession on Dec. 1, 2008, most investors had already been in crisis mode for months. A recession is defined as two consecutive quarters of negative GDP growth, so the official declaration from the NBER always comes roughly six months after the economy begins to shrink.

In 2008, stocks did not react well to the news of a recession. The Dow dropped 7.7% on the day the recession was declared. At the close that day, the Dow was down 38.6% for the year and 42.5% from its all-time high on Oct. 9, 2007.

Bank stocks took a pounding. Shares of JPMorgan Chase & Co. JPM and Goldman Sachs Group Inc GS each dropped around 17% that day.

Crude oil prices also dropped 10% to below $50/bbl. Instead, investors piled into U.S. Treasury bonds. Yields on 10-year notes fell to record lows of 2.65%, while 30-year Treasury yields dropped to a record 3.18%.

Unfortunately, the worst of the crisis wasn’t over. The Dow would ultimately fall another 20.9% before hitting its financial crisis low of 6,443.27 on March 6, 2009.