Stocks fell sharply on Thursday as fresh economic data revived worries about the Federal Reserve’s attempts to battle inflation.
The number of Americans filing new claims for unemployment benefits increased less than expected last week, Labor Department data showed on Thursday, suggesting that the job market remained tight. At the same time, an update on gross domestic product indicated that the economy rebounded faster than previously estimated in the third quarter.
Combined, the economic reports suggested to investors that the Federal Reserve might need to continue to push interest rates higher and hold them there longer in an attempt to slow the economy.
By afternoon trading, the S&P 500 and Dow Jones industrial average were down by more than 2 percent, and the tech-heavy Nasdaq index was down by roughly 3.5 percent.
Stock trading has been volatile throughout the week as investors grapple with the Fed’s resolve to remain aggressive in its fight against inflation. Fed officials indicated last week that interest rates would rise more drastically than many had expected as policymakers try to wrangle stubborn price increases.
“We have more work to do,” Jerome H. Powell, the Fed chair, said last week.
The latest update on gross domestic product showed that the U.S. economy grew at an unexpectedly strong 3.2 percent annual pace from July through September. The growth during the quarter followed a contraction during the first half of the year.
Investors will get another update on consumer spending and inflation Friday, when the government releases the personal consumption expenditure price index for November. The report is monitored by the Fed as a barometer of inflation.
Despite Thursday’s strong numbers, a recent string of economic data has been mixed, and experts expect the coming expenditure report to show that inflation continued to cool in November.
Emily Flitter
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