Wall Street contended with another volatile session as investors mulled the Federal Reserve’s path of interest-rate hikes while assessing mixed economic data and a slew of earnings reports. Amazon.com Inc. plunged after hours as its sales forecast trailed estimates. 

The S&P 500 closed lower, after swinging between gains and losses for most of the session. The Nasdaq 100 fell more than 1 per cent. Lackluster earnings from megacap firms this week dampened sentiment and underscored the impact of the Fed’s tightening regime. 

Markets were mixed on U.S. gross domestic product data. The report showed the U.S. economy rebounded after two quarterly contractions, which briefly assuaged concerns of an imminent recession. But it also highlighted that consumer spending remains under pressure because of inflation. Treasuries gained, with the 10-year yield pushing below 4 per cent on speculation of a Fed pivot. The dollar snapped a two-day drop.  

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The stock and currency markets digested the GDP data differently because it’s difficult to tell what the Fed is planning to do next, said Fiona Cincotta, senior financial markets analyst at City Index.

“The U.S. dollar is reading into this that perhaps it’s going to keep the Fed on that hawkish path for longer,” Cincotta said by phone. “Whereas the stock market seems to be reading it completely differently, almost as if it’s expecting the Fed to be sort of moving toward that less hawkish stuff.”

Economists still expect the Fed to hike by three-quarters of a percentage point for the fourth time in a row when it meets next week. But with recent data highlighting the effects of the Fed’s sharp rate hikes on the economy, investors expect the central bank to slow its pace of tightening after November’s meeting.  

“It’s not about a pivot and cutting interest rates,” Alec Young, chief investment strategist at MAPsignals, said in an interview. “It’s just about the Fed becoming more data-dependent and acknowledging there’s already a lot of tightening in the pipeline from all the rate hikes they’ve put through so far.”

More opinions on the GDP data:

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance

• “On the one hand, it is good to see that the economy is continuing to grow and that should bode well for the stock market. However, given that we are in the middle of an inflation fight, the Federal Reserve will likely feel that they need to continue to be aggressive in their rate hikes.”

Richard Flynn, managing director at Charles Schwab U.K.

• “Investors may be relieved by today’s GDP figures which exceeded expectations. This announcement follows strong September job data showing that, despite some stress fractures beneath the surface, the labor market remains strong in terms of net jobs created. That has helped bolster consumer spending; the downside is that credit card debt has increased, and savings rates have plunged due to still-hot inflation.”

Stan Shipley, economist at Evercore ISI

• “Demands for the economy was fine as real GDP climbed a more-than-expected +2.6 per cent in 3Q. The GDP deflator advanced less than expected +4.1 per cent. The inflation story is probably the most influential part of this release. Attention will now shift to 4Q activity. Despite news stories of layoffs, initial unemployment claims stayed low. For now, the fixed income market is discounting the risk of a near term recession.”

Earlier, the European Central Bank lifted its policy rate by 75 basis points -- in line with expectations -- and signaled more tightening ahead. But ECB officials weren’t unanimous about the size of the interest-rate hike and sought to avoid giving a specific signal on their next move in December, according to people familiar with the matter.

Share your views on key ESG themes

Key events this week:

• Bank of Japan policy decision, Friday
• U.S. personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.6 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.9 per cent
• The Dow Jones Industrial Average rose 0.6 per cent
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.4 per cent
• The euro fell 1.1 per cent to US$0.9971
• The British pound fell 0.4 per cent to US$1.1575
• The Japanese yen rose 0.1 per cent to 146.20 per dollar

Cryptocurrencies

• Bitcoin fell 0.6 per cent to US$20,630.98
• Ether rose 0.6 per cent to US$1,562.65

Bonds

• The yield on 10-year Treasuries declined seven basis points to 3.93 per cent
• Germany’s 10-year yield declined 15 basis points to 1.96 per cent
• Britain’s 10-year yield declined 17 basis points to 3.40 per cent

Commodities

• West Texas Intermediate crude rose 1.3 per cent to US$89.01 a barrel
• Gold futures fell 0.2 per cent to US$1,665.50 an ounce​