A measure of US consumer confidence posted its sharpest decline in more than three years in December, rattling investors already nervous about the prospect that a global economic slowdown was spilling over into the United States.
In a sign households were growing more worried about the economy, the Conference Board on Thursday said its consumer confidence index fell this month by 8.3 points to a reading of 136.4, the largest one-month drop since July 2015.
Other data released by the Labor Department, however, showed the number of new applications for jobless benefits dipping in the latest week.
US stocks, which enjoyed a huge rally on Wednesday, were trading sharply lower after Thursday's data, with the S&P 500 index down about 1.8 per cent early in the afternoon. Prices of US Treasuries were higher, while the US dollar was weaker against a basket of currencies.
US stock prices have plunged in December as investors worried the US economy could face headwinds due to the global economic slowdown. Adding to those concerns on Thursday was data showing earnings at China's industrial firms dropped in November for the first time in nearly three years.
Whipsawing financial markets could lead to further drops in consumer confidence, which could eventually make consumers more shy about spending, said Stephen Stanley, chief economist at Amherst Pierpont Securities.
"It will definitely be worthwhile to keep a close eye on the various measures of consumer attitudes," Stanley said.
The drop in consumer confidence in December was mostly fueled by falling measures of expectations, with more people expecting jobs will become more scarce.
LABOR MARKET STRENGTH
The labor market, however, appears to still be strong. Initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 216,000 for the week ended Dec. 22, the Labor Department reported.
Initial claims have now fallen in three of the last four weeks and are just above the 49-year low of 202,000 reached in the week ended Sept. 15.
After several years of near-steady falls, claims trended higher between mid-September and mid-December, prompting concern the U.S. economy was losing momentum.
It remains unclear how much of that increase was related to the difficulty government statisticians have in adjusting the claims data for seasonal swings. Economists polled by Reuters had forecast claims increasing to 217,000 in the latest week.
The latest claims data "signals improvement in the labor market relative to a few weeks ago, but softening in conditions relative to a few months ago," said Daniel Silver, an economist at JPMorgan.
Worries about the economy have also been stoked by signs of weakness in the housing market.
US home prices rose just 0.3 per cent in October, leaving the year-over-year increase at 5.7 per cent, the smallest gain in more than two years, data from the US Federal Housing Finance Agency showed on Thursday.
A report on new home sales in November will not be released on Thursday as previously scheduled due to a partial shutdown of the federal government.
The Federal Reserve raised interest rates last week for the fourth time this year, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.