Stocks drop after strong economic data

Inventories have been volatile in recent weeks. The Fed’s message that it will continue to raise interest rates to suppress inflation and recession forecast In 2023 both weighed heavily on the market.

Recent data showing slowing consumer price growth and suggesting that the economy is resilient have led to erratic bursts. Complicating matters, a strong economy can keep inflation rates at high levels, encouraging the Federal Reserve to raise interest rates – and keep them higher for longer – than many investors would hope.

“Once central banks pause, as they will sometime next year as inflation subsides, that will put more activity back into the markets,” said Susanna Streeter, chief investment and market analyst at UK Brokerage.

Hargreaves Lansdowne.

Until then, she added, “This vortex is going to be spinning.”

Weekly data published Thursday showed that 216,000 people filed initial claims for unemployment benefits last week, up 2,000 from the previous week. Claims, a proxy for layoffs, have been hovering around this level since May, a sign of continued labor market strength that could encourage the Fed to continue tightening monetary policy.

Meanwhile, a third estimate of economic growth in the last quarter of the year indicated production expanding at an annual pace of 3.2%. This is faster than the previous estimate of 2.9%.

The strong numbers are adding to investor concern that more Fed pain is coming.

The Fed has repeatedly stated that it wants to raise interest rates to a level it deems sufficient to fight inflation, even if it risks employment and economic production. In other words, recession,” said Steve Sosnick, chief strategist at Interactive Brokers. Investors seem to finally get that message, at least for now.

Government bond yields fell. Ten-year Treasury notes were trading at a yield of 3.669%, down from 3.684% on Wednesday.

The 10-year yield rose from about 1.5% at the end of last year, propelled by the Fed’s interest rate hike, but It has fallen from its highest level in October than more than 4.2%.

Global markets were mixed. Car companies’ losses affected the Stoxx Europe 600 Index, which fell by 1% despite gains in oil and gas stocks.

Hong Kong’s Hang Seng rose 2.7%, led by technology stocks. China’s securities regulator said late Wednesday that it will support overseas listings of technology companies, as part of a broader statement on its efforts to deepen capital markets.

Crude oil prices fell after rising in earlier trading on the back of shrinking US inventories and signs of lower Russian exports. Brent crude futures, the global benchmark, fell 1.5 percent to $80.98 a barrel.

Write to Joe Wallace at [email protected] and Jack Pitcher at [email protected]