The nonpartisan National Bureau of Economic Research is the widely regarded "timer" of recessions and they've just concluded that a recession began in December 2007. The announcement is probably the main reason for the stock slump today.

For several months, the evidence has been clear that the economy is in a recession, but the only question left was exactly when it started. Also, some profit-taking is to be expected since we recently had our best four-day rally in 75 years.

This is the country's first official recession since 2001, which was a fairly mild contraction as far as business slumps go. The big economic news this week will be Friday's jobs report. The jobs market most likely deteriorated last month.

Ben Bernanke spoke on the economy and his words were not comforting:

Mr. Bernanke's outlook for the economy was grim. "The likely duration of the financial turmoil is difficult to judge," he said. "But even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time."

He said that "cumulating job losses, weak consumer confidence, and a lack of credit availability" would depress consumer spending, traditionally the engine of American economic growth, and noted that exports were "not likely to be as great a source of strength for U.S. economic activity in coming quarters as they had been earlier this year."

This perhaps means that the Fed will cut interest rates to 0% as Japan did during its long slump. This will also have an important side effect—it will force money to get off the sidelines and back into the market. The Fed is telling investors that if they pull out of stocks, they won't get any money for their efforts. There will be no difference between a bank account and stuffing your dollars under a mattress.