The Rising Risk of an Economic Recession

NYSE: SPY | SPDR S&P 500 News, Ratings, and Charts

SPY – The market nosedived immediately after a report was released as economic activity and manufacturers outlook reignited fears that the U.S. could enter soon enter a recession. Continue reading for more details. .

Get Free Updates

Join thousands of investors who get the latest news, insights and top rated picks from StockNews.com!

This morning’s ISM report came in at 47.8, well below expectations and the third consecutive month of reading below 50, indicating a contraction in economic activity.  This is also the lowest reading since June of 2009. 

The stock market took a nosedive immediately after the report was released as the precipitous decline in both economic activity and manufacturers outlook reignited fears the U.S. could enter a recession in the next few months. 

The bleak reading comes on the heels of continued weakening data from Germany, India and China, alongside a report from the World Trade Organization which expects total global trade to expand by only merchandise 1.2% in 2019; this is down from 3.1% forecast at the beginning of the year. 

Economics and business leaders alike blame the trade tariffs on the global slowdown. The United States and China are the world’s two largest economies, collectively comprising 40 percent of the world’s annual output. As they are locked in conflict, every other trading nation is vulnerable to the effects.  With the number of tariffs the U.S has placed against China set to increase from $112 billion to $250 billion by mid-October. 

For whatever reason, President Trump keeps blaming the Federal Reserve, and its reluctance to match the European Central Bank and Bank of Japan with negative interest rights. 

But, the real culprit is that businesses simply can’t commit to investing in factories or purchasing goods needed for production without the clarity of if it will make economic sense or if their supply chains will be disrupted. 

The policy uncertainty and the real enforcement of trade restrictions are starting to be felt in other places such as Singapore and Taiwan, which had previously been seen as beneficiaries of businesses exiting China. 

Business consumption, as measured by the Production and Employment indexes, has been contracting at faster rates, again primarily driven by a lack of demand, contributing negative numbers.  

While the U.S employment and consumer spending remain robust, there are signs they both could be weakening. 

Last month, the consumer confidence index took an unexpected dip and while current conditions portions remain optimistic the future outlook dropped to the lowest level in 3 years. 

If businesses keep reigning in spending, this could hamper job creation as firms employ fewer workers to produce goods and services for export.  This, in turn, could negatively impact consumer spending creating a downward spiral leading the economy into a recession. 


SPY shares were trading at $294.01 per share on Tuesday afternoon, down $2.76 (-0.93%). Year-to-date, SPY has gained 19.28%, versus a 19.28% rise in the benchmark S&P 500 index during the same period.


About the Author: Option Sensei


Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for TheStreet.com, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating

Get Free Updates

Join thousands of investors who get the latest news, insights and top rated picks from StockNews.com!


Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

When Does the Next Bull Run Start?

The 5 month rally for stocks (SPY) was too much, too soon calling into question whether it indeed was a bubble. Thus, not surprising stocks are seeing a healthy correction in September. What matters now is determining when to buy this dip for the next bull run ahead. That is the focus of today’s commentary.

:  |  News, Ratings, and Charts

Is Now a Good Time to Buy Shares of Carnival Corp.?

Cruise stocks have been the worst-hit by the pandemic. All cruising has been halted in most parts of the world. Also, these companies have high, fixed costs, and they are not generating any sort of revenue. They have been fighting for survival by raising money which will dilute future earnings. However, these poor fundamentals also mean the stocks could have upside when cruising returns. Find out if it's time to buy Carnival Corporation (CCL).

:  |  News, Ratings, and Charts

3 Dividend Stocks with EXPLOSIVE Growth

With the market volatility back, investors typically look towards dividend stocks from safe harbor. But what if you could invest in a dividend stock that exhibits strong growth? Here are 3 dividend stocks with explosive growth: Innovative Industrial Properties (IIPR), Medifast (MED), and China Distance Holdings Limited (DL).

:  |  News, Ratings, and Charts

Is eBay a Buy at $52?

The current sell-off offers an opportunity to buy eBay (EBAY) at a discounted price. The stock is well positioned to rally based on short- and long-term bullishness, impressive financial performance and a rising popularity of e-commerce platforms.

:  |  News, Ratings, and Charts

3 Dividend Stocks with EXPLOSIVE Growth

With the market volatility back, investors typically look towards dividend stocks from safe harbor. But what if you could invest in a dividend stock that exhibits strong growth? Here are 3 dividend stocks with explosive growth: Innovative Industrial Properties (IIPR), Medifast (MED), and China Distance Holdings Limited (DL).

Read More Stories

More SPDR S&P 500 (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News