Wall Street Slides As Economic Data Fans Rate Hike Worries

Wall Street main indexes dropped on Thursday after fresh data underscored strength in the U.S. economy and aggravated concerns over the Federal Reserve’s continued policy tightening.

Losses in rate-sensitive megacap growth stocks such as Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) pulled technology (.SPLRCT) and consumer discretionary shares (.SPLRCD) lower.

The final estimate of third-quarter U.S. GDP revealed gross domestic product increased at a 3.2% annualized rate, above the previous estimate of 2.9%.

Meanwhile, a Labor Department report showed the number of Americans filing for state unemployment benefits increased to 216,000 last week, much below economists’ estimate of 222,000, indicating a still tight labor market.

“The GDP data beat a lot of expectations. There are concerns that the economy is not giving up too easily and it’s putting up a fight that will likely require the Fed to remain hawkish and keep interest rates higher for longer,” Sam Stovall, chief investment strategist at CFRA Research in New York, said.

Wall Street’s main indexes marked their biggest daily gain so far in December on Wednesday, with help from upbeat Nike Inc (NKE.N) and FedEx Corp (FDX.N) quarterly earnings, as well as improving consumer confidence and easing inflation expectations.

Fears of a recession following the U.S. central bank’s prolonged interest rate hikes have weighed heavily on equities this year, with the benchmark S&P 500 (.SPX) set for annual declines of 19.7%, its worst such performance since the 2008 financial crisis.

The Fed struck a hawkish tone last week at its policy meeting by saying that it expects interest rates to remain higher for longer, sparking a selloff across stock markets.

The bets for a 25-basis point hike to 4.5%-4.75% in February by the Fed remained largely unchanged at around 70% following the data on Thursday, although expectations for the terminal rate inched up to 4.89% by May 2023.

At 9:50 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 331.19 points, or 0.99%, at 33,045.29, the S&P 500 (.SPX) was down 50.70 points, or 1.31%, at 3,827.74, and the Nasdaq Composite (.IXIC) was down 197.23 points, or 1.84%, at 10,512.14.

Micron Technology Inc (MU.O) slipped 3.2% after the chipmaker forecast a bigger-than-expected second-quarter loss, sparking declines in peers.

Nvidia Corp (NVDA.O), Qualcomm Inc (QCOM.O), Advanced Micro Devices Inc (AMD.O) and Intel Corp (INTC.O) were down between 3.0% and 5.1%, pushing the Philadelphia SE Semiconductor index (.SOX) more than 3% lower.

CarMax Inc (KMX.N) slid 8.6% to the bottom of the S&P 500 after the used-vehicles retailer paused share buybacks following an 86% plunge in quarterly profit.

AMC Entertainment Holdings Inc (AMC.N) slumped 12.5% after the world’s largest cinema chain said it would raise $110 million through a preferred stock sale.

Declining issues outnumbered advancers for a 5.83-to-1 ratio on the NYSE and a 3.28-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and nine new lows, while the Nasdaq recorded 27 new highs and 180 new lows.

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