Dow slumps after US economy grew much faster than previously thought in the third quarter

Dow slumps after US economy grew much faster than previously thought in the third quarter
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The Dow fell sharply in the third quarter as the US economy grew much faster than previously thought; It’s a sign that the Federal Reserve’s battle to cool the economy to fight inflation is having only limited effect.

The Commerce Department’s latest reading Thursday morning showed that the broadest measure of the US economy, gross domestic product, grew at an annualized rate of 3.2% between July and September. This was above the 2.9% forecast a month ago. Economists polled by Refinitiv had expected the GDP to remain unchanged from its previous reading.

The report said the stronger-than-expected reading was due in part to increases in exports and consumer spending, offset by a decline in new housing spending. Consumer spending is responsible for more than two-thirds of the country’s economic activity.

U.S. stocks tumbled Thursday on fears that stronger-than-expected GDP could prompt the Fed to continue raising rates more than expected in 2023. The Dow lost about 800 points, or 2.3%, while the S&P 500 fell 2.9% and the Nasdaq was 3.9% lower.

“The data has been stronger overall, and if there’s one thing the Fed doesn’t want to see these days, it’s better-than-expected data,” said Paul Hickey of Bespoke Investment Group.

Fed was raise interest rates to cool demand for goods and services throughout the year and reduce inflation. Economists have been worried for some time that the Fed’s actions could plunge the US economy into crisis. recession next year

Inflation has cooled In recent readings, however, the US economy remained strong. Some surveys released this week show that the Fed’s higher rates are not slowing business or consumer spending.

And lately chief financial officers survey found that the current level of interest rates did not affect their spending plans. Andes Mountains consumer confidence It recovered in December, reaching the highest level since April, according to a survey by the Conference Board.

In addition, employers continued. Renting at a historically strong pacedespite Layoffs have increased in some industries, especially in technology.

A separate Department of Labor report on Thursday showed that unemployment claims were relatively unchanged.

Initial weekly applications for unemployment insurance benefits rose to 216,000 for the week ending December 17. The previous week’s total was revised up by 3,000 to 214,000.

According to Refinitiv, economists had expected initial applications to reach 222,000.

Initial demand totals for the week are hovering around pre-pandemic levels. Weekly requests averaged 218,000 in 2019.

Continuing receivables, which include regular fundraisers, dropped slightly to 1.672 million in the week ended Dec. The number of ongoing receivables in the previous week was revised as 1.678 million.

Meanwhile, mortgage rates dropped again last week—the sixth week in a row—and the average 30-year flat-rate mortgage fell to 6.27% from 6.31% the previous week, according to Freddie Mac. At this time a year ago, the 30-year fixed rate mortgage was 3.05%.

“Prices have dropped significantly in the last six weeks, which is beneficial for potential home buyers,” said Sam Khater, chief economist at Freddie Mac.

The final GDP report is one of the most retrospective readings the government has ever released, looking at the state of the economy about three months ago. Economists’ current forecast is for growth in the current period to be just 2.4%, significantly slower than Thursday’s reading.

– CNN’s Anna Bahney and Matt Egan contributed to this report.

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