Wall Street dips as US economy slips

Wall Street stocks slid on Thursday despite data showing the US economy contracted for a second straight quarter.

The drop follows a surge in Wall Street's main stock indices on Wednesday, after investors welcomed comments by US Federal Reserve chief Jerome Powell suggesting its next super-sized increase could be its last.

The Federal Reserve hiked interest rates by three-quarters of a percentage point, its second hike in a row of that magnitude and the fourth increase this year.

"The reported basis for the positive response was a belief that the Fed Chair effectively lowered the temperature on the future pace of rate hikes," said market analyst Patrick J. O'Hare at Briefing.com.

O'Hare said the reversal "is being pinned in part on the idea that the stock market overreacted to what the Fed Chair said yesterday."

While equities moved higher at the open of trading, they quickly fell back.

About 20 minutes into trading, the Dow was down 0.4 per cent, the broader S&P 500 shed 0.5 per cent and the tech-heavy Nasdaq Composite -- which jumped 4.1 per cent on Wednesday, gave up 0.8 per cent.

US gross domestic product (GDP) fell at an annual rate of 0.9 per cent in the April-June quarter, following a 1.6 per cent decline in the first quarter.

Two consecutive quarters of contraction in GDP is generally accepted as the technical definition of a recession.

Meanwhile, a key inflation measure, the personal consumption expenditures price index, rose 7.1 per cent in the latest three months, the same pace as in the first quarter, the data showed.

The Fed and other central banks have been raising interest rates to rein in soaring inflation, but that risks slowing growth or even tipping the economy into recession.

European stock markets were mostly higher in afternoon trading.

Europe's energy sector was in particular focus with Britain's Shell and France's TotalEnergies posting bumper second-quarter profits on elevated oil and gas prices.

Asian indices mostly climbed following a surge on Wall Street, fuelled by hopes that the US central bank could slow its pace of inflation-fighting interest rate hikes.

The dollar meanwhile struggled to bounce back from a sell-off -- sitting at a month low against the yen -- that came in response to Powell's comments.