US stocks close in the red on monetary tightening fears

Wall Street stocks tumbled Thursday, closing in a sea of red after data that indicated a strong labor market and better-than-expected economic growth.

The Dow Jones Industrial Average closed 1.1 per cent down at 33,027.49, while the broad-based S&P 500 Index lost 1.5 per cent to 3,822.39.

The tech-rich Nasdaq Composite Index plunged 2.2 per cent to 10,476.12.

Calling the tumble a "Grinch selloff," Edward Moya of the OANDA trading platform said the drop came as "better-than-expected US economic data supported the (Federal Reserve's) case for more ongoing rate increases."

The Fed has hiked its benchmark lending rate multiple times this year to rein in surging inflation.

Although it moderated its pace of rate increases this month, Fed Chair Jerome Powell has signaled that the central bank's battle is not yet over, fueling market jitters.

On Thursday, jobless claims did not rise as much as economists expected, in "a reminder that employers overall still aren't laying off large numbers of workers" despite challenging circumstances, said Nancy Vanden Houten of Oxford Economics.

Meanwhile, revised data from the Commerce Department showed that the US economy expanded 3.2 per cent in the third quarter, markedly higher than the 2.6 per cent first estimated in October.

A resilient economy could see inflation remaining at higher levels, prompting the Fed to push on with steep rate hikes and hold them at higher levels for longer.

For now, investors are keeping an eye on personal consumption expenditures price index data due Friday, watching for shifts in the Fed's preferred inflation measure for signs on its path to come.