NEW YORK: Wall Street stocks tumbled on Thursday (Dec 22), closing in a sea of red after data that indicated a strong labour market and better-than-expected economic growth.
The Dow Jones Industrial Average fell 348.99 points, or 1.05%, to 33,027.49, the S&P 500 lost 56.05 points, or 1.45%, to 3,822.39 and the Nasdaq Composite dropped 233.25 points, or 2.18%, to 10,476.12.
Calling the tumble a “Grinch selloff”, Edward Moya of the Oanda trading platform said the drop came as “better-than-expected US economic data supported the (Federal Reserve’s) case for more ongoing rate increases”.
The Fed has increased its benchmark lending rate multiple times this year to rein in surging inflation.
Although it moderated its pace of rate increases this month, Fed chair Jerome Powell has signaled that the central bank’s battle is not yet over, fueling market jitters.
On Thursday, jobless claims did not rise as much as economists expected, in “a reminder that employers overall still aren’t laying off large numbers of workers” despite challenging circumstances, said Nancy Vanden Houten of Oxford Economics.
Meanwhile, revised data from the Commerce Department showed that the US economy expanded 3.2% in the third quarter, markedly higher than the 2.6% first estimated in October.
A resilient economy could see inflation remaining at higher levels, prompting the Fed to push on with steep rate hikes and hold them at higher levels for longer.
“Strong economic data, especially strong labour market data, keeps the Fed’s foot on the economic brake,” said Liz Ann Sonders, chief investment strategist at Charles Schwab who would prefer to see economic weakness hit “sooner rather than later because then it gives the Fed the ability to pause”.
“You increase the risk of an overshoot if they continue to be aggressive because then the hit is bigger,” she said.
Before it pauses, the Fed is expected to look for more weakness in the labour market and the economy in order to bring inflation down and keep it down sustainably.
For now, investors are keeping an eye on personal consumption expenditures price index data due Friday, watching for shifts in the Fed’s preferred inflation measure for signs on its path to come.
“We’re moving past one of the big worries of 2022 which was the Federal Reserve response to high inflationary pressure to the worry about 2023, which is a recession unfolding in the United States and probably globally too,” said Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management Company.
“Today’s data, in my mind, kind of confirmed this is the direction we’re heading,“ said Stucky, adding that high inflation, a bad economy and tight job market should lead investors “to come to grips with reality that earnings estimates are too high” for 2023.
Micron Technology Inc's glum forecast added to the downbeat mood and caused the semiconductor index to sharply underperform the broader market for its biggest daily decline in over a month.
Micron itself finished down 3.4%.
Tesla Inc shares plunged 8.9% after the electric-vehicle maker doubled its discount offering on models in the United States this month, amid concerns over softening demand. – AFP, Reuters
Source: The Sun Daily
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