Key terms to know as financial markets decline

International markets fell sharply overnight, leading to a decline in U.S. markets on Monday as investors fretted about a possible recession. Panic had been building for days.

The S&P 500 fell 8.6% and the NASDAQ 100 fell 5.4% Monday morning, with technology stocks including Apple, Amazon and Google falling sharply. Investors bought U.S. Treasuries, sending mortgage rates lower.

Greg McBride, chief financial analyst at comparison website Bankrate, said the “door to refinancing has opened” for people with mortgages with rates above 7%.

Here’s what you need to know.

Stock exchange news: How US markets are feeling the impact of the global market decline

What is a correction and what is a recession?

AND adjustment is a market decline of at least 10% from the last peak, which typically occurs once a year.

According to the World Economic Fund, there is no globally recognized definition recession. The National Bureau of Economic Research defines a recession as “a large decline in economic activity spread across an economy, lasting more than a few months, typically visible in output, employment, real income, and other indicators.”

An “earnings recession” occurs when earnings decline or grow negatively for at least two consecutive quarters. According to Forbes, during an earnings recession, most company earnings have declined “year-over-year for two or more consecutive quarters.”

AND bear market occurs when a stock or market index falls by 20% or more and bull market is a steady increase in stock prices without a bear market or a 20% decline.

How long do recessions last?

There is no set length for a recession, and it ends when the economy starts growing again. A recession may only last a few months, but the economy may need years to return to its previous peak, says Investopedia.

Do interest rates fall during a recession?

The World Economic Forum says central banks can lower short-term interest rates, which can help boost consumer spending on expensive items like cars or homes. Governments can also add policies like tax cuts or start infrastructure programs.

Is the recession good for homebuyers?

If you’re thinking about buying a home, a recession could mean an improvement in borrowing costs.

The World Economic Forum said that if banks cut short-term interest rates to help end the recession, the cost of borrowing money for expensive items like homes and cars would be lower, which could lead to increased consumer confidence and spending.

Contributors: Medora Lee, Paul Davidson and Dan Morrison, USA TODAY.