Major Averages Dropped 2% After Upward Economic Growth Revision

Barry Adams
22 Dec, 2022
New York City

Investors sold stocks on Wall Street after third quarter economic growth was revised higher raising the prospects of more rate tightening by the Federal Reserve. 

The sharp upward revision to economic growth adjusted for inflation was driven by an acceleration in consumer spending and nonresidential fixed investments and a smaller decrease in private inventory investment. 

The S&P 500 index declined 1.8% to 3,807.33 and the Nasdaq Composite index dropped 2.6% to 10,428.73. 

Crude oil increased 12 cents to $78.37 a barrel and natural gas futures were nearly unchanged at $5.31 a thermal unit. 

The yield on 2-year Treasury notes edged higher to 4.26%, 10-year Treasury notes edged lower to 3.66% and 30-year Treasury bonds inched lower to 3.73%. 

 

Q3 GDP Revised Higher 

Real third quarter GDP growth was revised higher to 3.2% annual pace from the previous estimate of 2.9% after nonresidential fixed investment and consumer spending accelerated, the U.S. Bureau of Economic Analysis said Thursday.

Current dollar Gross Domestic Product increased at an annual pace of 7.7%, or $475.5 billion, in the third quarter to a level of $25.72 trillion, an upward revision of $25.0 billion from the previous estimate.

 

Weekly Jobless Claims Drop 

Initial claims of jobless benefits rose 2,000 to 216,000 in the week ending December 17 and continuing claims fell 6,000 to 1,672,00 in the week ending December 3, the Dept of Labor said Thursday.

 

Stock Movers 

AMC Entertainment Holdings Inc plunged 14.5% to $4.51 after the company announced a plan to raise $110 million through a preferred share unit. 

The company plans to hold a board meeting to approve a reverse stock split at a 1-to-10 ratio. 

The movie theater chain operator said it will use the proceeds to repay debt. 

Micron Technology Inc declined 2.8% to $49.75 after the company reported weak quarterly results and announced a plan to trim its workforce by 10% and suspend bonus in 2023. 

Revenue in the fiscal first quarter ending in November fell to $4.09 billion from $6.6 billion in the previous quarter and $7.7 billion in the quarter a year ago. 

The semiconductor chipmaker swung to a quarterly loss of $195 million from $2.3 billion a year ago and diluted loss per share was 18 cents from a profit of $2.04 a year ago. 

The company guided revenue in the fiscal second quarter of 2023 of $3.8 billion with a band of $200 million and gross margin between 5% and 10% and diluted earnings per share range between -$0.79 and $0.10. 

CarMax, Inc declined 7.2% to  $55.17 after the used-car retailer reported weaker-than-expected results. 

Revenue in the third quarter ending in November declined 23.7% to $6.5 billion after combined retail and wholesale used vehicle unit sales fell 28% to 298,807.

Net earnings plunged to $37.6 million from $269.4 million and diluted earnings per share dropped to 24 cents from $1.63 a year ago.