Wall Street down after strong US GDP, jobs

US stocks and bonds fell after reports showing the American economy grew faster than initially estimated during the third quarter, while weekly jobless claims unexpectedly dropped, putting investors on notice the Federal Reserve might change its stimulus program sooner than anticipated.

In afternoon trading in New York, the Dow Jones Industrial Average retreated 0.18 per cent, the Standard & Poor's 500 Index fell 0.24 per cent, while the Nasdaq Composite Index slipped 0.04 per cent.

Declines in shares of Microsoft, last 3 per cent lower, JPMorgan Chase, last down 1.7 per cent, and Goldman Sachs Group, last 1.2 per cent weaker, led the Dow lower.

US Treasuries also fell, pushing yields on the 10-year bond two basis points higher to 2.86 per cent.

"Investors aren't going to take much risk before having more clarity on central-bank policies, as well as more US economic data for further clues on when to expect the start of tapering," John Plassard, vice president at Mirabaud Securities in Geneva, told Bloomberg News.

Fed policy makers next meet December 17 and 18.

US gross domestic product expanded at a 3.6 per cent annual rate in the third quarter, up from the 2.8 per cent pace reported earlier, according to the Commerce Department. The acceleration was driven by the biggest jump in inventories since 1998.

"To the extent that the massive accumulation in inventory may have been involuntary, we are likely to see an unwind in inventory this quarter which will provide some downside risks to fourth-quarter GDP performance," Millan Mulraine, senior economist at TD Securities in New York, told Reuters.

Some are more optimistic.

"While many analysts are quick to dismiss current quarter growth prospects because of the large inventory build last quarter, we do not share this view," Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York, said in an email to clients, according to Bloomberg News.

Separately, US jobless claims fell 23,000 to 298,000 in the week ended November 30, according to the Labor Department. It was the latest sign, hot on the heels of a stronger-than-expected ADP employment report this week, of accelerating strength in the US labour market.

Tomorrow's government jobs report is expected to show that nonfarm payrolls increased 180,000 in November, and the unemployment rate fell to 7.2 per cent from 7.3 per cent, according to a Reuters survey of economists.

On the other side of the Atlantic, European Central Bank policy makers kept the key benchmark rate steady at a record low 0.25 per cent, as had been widely expected.

"[W]e may experience a prolonged period of low inflation," ECB President Mario Draghi Draghi said at a news conference in Frankfurt. Policy makers "expect the key ECB interest rates to remain at present or lower levels for an extended period of time."

The Bank of England also kept its key interest rate at a record low 0.5 per cent.

Europe's Stoxx 600 Index fell 0.9 per cent. The UK's FTSE 100 slipped 0.2 per cent, France's CAC 40 dropped 1.2 per cent, while Germany's DAX declined 0.6 per cent.

- BusinessDesk

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