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Stocks slide amid resilient economy

By Jonna Lorenz
The Dow Jones Industrial Average dropped 482.78 points Monday after the Institute for Supply Management reported stronger-than-expected growth in the services sector. File Photo by John Angelillo/UPI
The Dow Jones Industrial Average dropped 482.78 points Monday after the Institute for Supply Management reported stronger-than-expected growth in the services sector. File Photo by John Angelillo/UPI | License Photo

Dec. 5 (UPI) -- U.S. stocks fell Monday after the latest economic reports showed growth continuing at a hotter-than-expected rate.

The Dow Jones Industrial Average dropped 482.78 points, or 1.4%, to close at 33,947.1. The S&P 500 slid 72.86 points, or 1.79%, to close at 3,998.84, and the Nasdaq Composite fell 221.56 points, or 1.93%, to 11,239.94.

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Tech companies and banks saw some of the biggest losses during Monday's slide. Ceridian HCM and Signature Bank both fell 7.44%; Salesforce Inc. lost 7.35%; Zions Bancorporation fell 7.33%; and Paycom Software slid 7.18%.

Among those to record gains Monday were United Airlines, up 2.6%; MGM Resorts, up 1.9%; and Boeing Co. up 1.2%.

RELATED U.S. economy added 263,000 jobs in November

Economists pegged Monday's sell-off to ongoing strength in the economy. The services sector grew for the 30th consecutive month in November, with the Services Purchasing Managers Index at 56.5%, up 2.1 percentage points from 54.4% in October, the Institute for Supply Management reported.

The Business Activity Index was up 9 points to 64.7%, and the New Orders Index fell a half-point to 56%.

The resilient economy fueled fears among investors that the Federal Reserve will push the economy into a recession with ongoing interest rate hikes aimed at cooling inflation.

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The Fed has raised its target federal funds rate six times this year -- including four consecutive increases of 0.75 percentage point -- from near zero in March to a target range of 3.75% to 4%.

"Good economic news is bad news for stocks, as it will keep the risk elevated that rates might have to end up higher later next year," said Edward Moya, senior market strategist at OANDA, according to Kiplinger.

"The risks that the Fed might need to do more remain elevated, and that is why this economy needs to head to a recession. This next recession, however, won't be rescued by quick Fed easing or a fiscal response, as that will fuel inflation risks."

RELATED Stocks surge on talk of slower rate hikes, pushing Dow into bull market

Last week, Fed Chairman Jerome Powell suggested a smaller, half-point increase may come this month, sending stocks surging Wednesday, with the Dow ending November in a new bull market.

But stocks slid Friday after the Labor Department reported stronger-than-expected job growth in November.

"Clearly, equity markets want to move higher, but that's very dependent on inflation getting under control," said Peter Essele, head of portfolio management at Commonwealth Financial Network, according to CNBC.

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"When you have above expectation prints on any econ number that comes out, that tends to fuel inflationary concerns, which sends rates higher."

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