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Here's what you need to know today...

1. US manufacturing might already be in a recession.

2. Layoffs increased last week.

3. Home sales are down.

S&P 500: 4,129.791Mo: +3% | 1Yr: -6% | 5Yr: +55%

The market drifted lower as the economic slowdown became clearer.

The manufacturing sector isn't doing well and might already be in a recession. The Philadelphia Federal Reserve reported factory activity in the mid-Atlantic region plunged to its lowest level in almost three years in April. The Institute for Supply Management's index of national manufacturing activity has declined for five straight months. The New York Fed did report a surprise jump in output in April after five months of declines, providing some hope of a turnaround.

Layoffs rose last week. The Labor Department reported initial unemployment claims rose to 245,000 last week, as layoffs from the tech sector might be starting to flow through. Layoffs are still roughly in line with pre-pandemic averages.

Home sales are down again. The National Association of Realtors said the volume of existing home sales fell 2.4% in March as mortgage rates resumed their climb and deterred buyers. There was a brief jump in sales in February for the first time in months.

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The Federal Reserve

The Federal Reserve, aka the Central Bank, aka The Fed, is in charge of our whole money system. When the economy is struggling, the Fed lowers baseline interest rates to make it cheaper for consumers and businesses to borrow and spend. The Fed also pumps more money into the system by buying bonds with new dollars that it essentially speaks into existence. The additional cash keeps the pipes flowing as the borrowing and spending heat up, stimulating economic activity.

Once the economy's strong enough to stand on its own, the Fed starts to raise interest rates and pull back some of that money to ensure the economy doesn't overheat. Inflation is the Fed's heat gauge, and the gauge has been reading hot.

So everyone's watching whether the Fed can dial up the economic restrictions quickly enough to slow inflation and cool the economy but not so quickly that it sparks mass unemployment.