Stocks fell Thursday after economic data pointed to a strong labor market and faster economic growth than previously thought.
The S&P 500 tumbled 1.6% in afternoon trading. The Dow Jones Industrial Average fell 1.2% and the technology-focused Nasdaq Composite lost 2.4%. 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
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…