U.S. stocks plunged Wednesday, as weak economic data rattled investors. After gyrating throughout the day, the S&P 500® Index closed down 1.79%, while the Dow Jones Industrial Average—at one point down more than 500 points—closed down 1.86%. Both indexes have lost roughly 3% over the past two days. Here’s what investors should know.

What’s driving stock markets lower?

The decline began Tuesday, after the Institute for Supply Management (ISM)’s monthly survey showed manufacturing activity shrank to its lowest level since June 2009. Then on Wednesday, a weak ADP private-sector hiring report and soft third-quarter automaker sales added to investor jitters. Also, the Conference Board’s measure of CEO confidence in the economy fell in the third quarter to its lowest reading since 2009.

Investors have been watching for any signs that manufacturing weakness is starting to spill over into services or consumer-based areas of the economy. S&P 500 companies will begin reporting third-quarter earnings soon, and the outlook already is grim: the analyst consensus is for a year-over-year decline.¹ We expect markets to be highly focused on any comments company managers make about the impact of trade uncertainty and tariffs.

Hopes for a comprehensive trade deal with China remain dim. Meanwhile, the World Trade Organization on Wednesday authorized the U.S. to impose $7.5 billion in tariffs on the European Union over a long-running dispute over European subsidies for European airplane maker Airbus. The EU has a similar claim against Boeing, and has also readied retaliatory tariffs.

Does the weak economic data mean a recession is coming?

It’s too soon to tell. Although recession talk has grown louder, particularly after the three-month/10-year Treasury yield curve inverted in March (the two-year/10-year yield curve inverted in August), predicting a recession is a complicated task, with a lot of moving parts. Although yield curve inversion (that is, when short-term rates become higher than long-term rates) historically has been a reliable recession indicator, it’s not foolproof—at times the yield curve has inverted but a recession hasn’t followed. Even when it does, the time lag between an inversion and a recession can vary widely.