Stocks opened higher Tuesday after China's National Health Commission said it would increase COVID-19 vaccinations in seniors after widespread protests broke out over the weekend in response to the country's zero-COVID policies.
Also boosting stocks in early action was the latest S&P CoreLogic Case-Shiller National Home Price Index, which showed home prices fell for a third straight month in September. The data suggests that the Federal Reserve's plan to slow the economy in order to ease inflation is working – and comes ahead of tomorrow's highly anticipated speech from Fed Chair Jerome Powell. But the markets didn't spend too long in positive territory, moving lower in reaction to another economic data point, one that points to economic challenges (read, possible recession) ahead.
Specifically, The Conference Board's consumer confidence index, which measures prevailing business conditions and potential developments for the months ahead based on consumers' outlooks, fell to 100.2 in November from October's reading of 102.2. Still, this was above the consensus estimate.
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"Consumer confidence declined again in November, most likely prompted by the recent rise in gas prices,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. "Inflation expectations increased to their highest level since July, with both gas and food prices as the main culprits. Intentions to purchase homes, automobiles, and big-ticket appliances all cooled. The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023."
At the close, the S&P 500 Index was down 0.2% at 3,957 and the Nasdaq Composite was off 0.6% at 10,938. It was a second straight loss for both indexes. The Dow Jones Industrial Average, however, managed a marginal gain to end at 33,852 thanks to strength from American Express (AXP, +2.3%).
What Exactly is a Recession?
Today's housing data shows that the U.S. economy continues to cool. While this is good news in the Fed's fight to cool inflation, it also escalates conversations around the possibility for an even bigger economic downturn – and a potential recession.
But what is a recession exactly? "Like so much in economics, 'recession' is subject to varying interpretations," says Quincy Krosby, chief global strategist for LPL Financial. "One thing is clear, however, and that is as long as global central bankers continue to tighten financial conditions the global economy will continue to slow significantly."
There are many ways for investors to prepare their portfolios for more contraction in the U.S. economy. These can include increasing exposure to commodity ETFs and finding the best dividend stocks. However, it's also just good practice to familiarize yourself with some key economic concepts, including what is a recession. Here, we answer that question and others.
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