Stocks fell Thursday after economic data pointed to a strong labor market and faster economic growth than previously thought.
The S&P 500 tumbled 56.05 points, or 1.4%, to close at 3822.39. The Dow Jones Industrial Average fell 348.99 points, or 1%, to 33027.49. The technology-focused Nasdaq Composite lost 233.25 points, or 2.2%, to close at 10476.12. U.S. markets had rallied Wednesday, fueled by signs of revived consumer confidence, but on Thursday they were on track for their third consecutive weekly decline.
Stocks have been choppy in recent weeks. The Federal Reserve’s message that it will keep raising interest rates to quell inflation and forecasts of a recession in 2023 have both weighed on the market.
Recent data showing consumer-price growth is slowing and suggesting the economy is resilient have sparked intermittent rallies. Complicating matters, a robust economy could keep inflation at high levels, encouraging the Fed to raise interest rates higher—and keep them elevated for longer—than many investors are hoping for.
“Once central banks hit pause, as they will do at some point next year as inflation falls back, that will put some more vigor back into markets,” said Susannah Streeter, senior investment and markets analyst at U.K. brokerage Hargreaves Lansdown. Until then, she added, “that merry-go-round is going to be spinning.”
Weekly data published Thursday showed 216,000 people filed initial claims for unemployment benefits last week, up 2,000 on the week before. Claims, a proxy for layoffs, have hovered around that level since May, a sign of continuing labor-market strength that could encourage the Fed to keep tightening monetary policy.
A third estimate of economic growth last quarter, meanwhile, suggested output expanded at an annual pace of 3.2%. That is faster than the previous estimate of 2.9%.
The strong numbers are adding to investor angst that more Fed-induced pain is coming.
“The Fed has repeatedly stated their desire to raise rates to a level that they deem sufficient to fight inflation, even if it risks employment and economic output. In other words, a recession,” said Steve Sosnick, chief strategist at Interactive Brokers. “It appears that investors have finally digested that message, at least for now.”
Government bond yields slipped. Ten-year Treasury notes traded at a yield of 3.669%, down from 3.684% Wednesday.
Ten-year yields are up from about 1.5% at the end of last year, driven by the Fed’s interest-rate increases, but have fallen from their October high of more than 4.2%.
Global markets were mixed. Losses for auto companies weighed on the Stoxx Europe 600, which fell 1% despite gains for oil-and-gas stocks.
Hong Kong’s Hang Seng rose 2.7%, led by tech shares. China’s securities regulator said late Wednesday it would support overseas listings by tech companies, part of a wider statement on its efforts to deepen capital markets.
Crude-oil prices fell after earlier trading up on shrinking U.S. inventories and signs of a drop in Russian exports. Brent-crude futures, the global benchmark, fell 1.5% to $80.98 a barrel.