Wall Street tumbles on rate, recession worries, bleak chipmaker outlook

(For a Reuters live blog on U.S., UK and European stock

markets, click or type LIVE/ in a news window) Dec 22 (Reuters) - Wall Street's major averages closed

sharply lower on Thursday with the technology-heavy Nasdaq

leading declines amid investor worries that data showing a

resilient economy would lead the U.S. Federal Reserve to keep

hiking interest rates for longer than feared. Micron Technology Inc's glum forecast added to the

downbeat mood and caused the semiconductor index to

sharply underperform the broader market. Losses in rate-sensitive growth stocks saw technology

and consumer discretionary indexes the

hardest hit among the S&P 500's 11 industry sectors. The final estimate of the third-quarter U.S. gross

domestic product was for 3.2% annualized growth, above the

previous estimate of 2.9%. Meanwhile, the Labor Department said filings for state

unemployment benefits rose to 216,000 last week but were below

economist estimates for 222,000. And a third report showed the Conference Board's leading

indicator, a gauge of future U.S. economic activity, fell for a

ninth straight month in November. "We're moving past one of the big worries of 2022 which was

the Federal Reserve response to high inflationary pressure to

the worry about 2023, which is a recession unfolding in the

United States and probably globally too," said Matt Stucky,

senior portfolio manager for equities at Northwestern Mutual

Wealth Management Company. "Today's data, in my mind, kind of confirmed this is the

direction we're heading," said Stucky, adding that high

inflation, a bad economy and tight job market should lead

investors "to come to grips with reality that earnings estimates

are too high" for 2023. By 4:00PM ET, the Dow Jones Industrial Average fell

348.26 points, or 1.04%, to 33,028.22, the S&P 500 lost

55.84 points, or 1.44%, to 3,822.6 and the Nasdaq Composite

dropped 233.25 points, or 2.18%, to 10,476.12. Recession fears on the back of the Fed's prolonged interest

rate hiking cycle have weighed heavily on equities this year,

with the benchmark S&P 500 on track for its biggest

annual percentage drop since the 2008 financial crisis. "Strong economic data, especially strong labor market

data, keeps the Fed's foot on the economic brake," said Liz Ann

Sonders, Chief Investment Strategist at Charles Schwab who would

prefer to see economic weakness hit "sooner rather than later

because then it gives the Fed the ability to pause." "You increase the risk of an overshoot if they continue

to be aggressive because then the hit is bigger," she said. Before it pauses, the Fed argues it needs to see more

weakness in the labor market and the economy in order to bring

inflation down and keep it down sustainably. The Philadelphia SE Semiconductor index sold off

sharply while Micron's equipment supplier Lam Research

was leading the sector's declines throughout the session. Tesla Inc shares plunged after the electric-vehicle

maker doubled its discount offering on models in the United

States this month, amid concerns over softening demand. CarMax Inc sank after the used-vehicles retailer

paused share buybacks following an 86% quarterly profit plunge. AMC Entertainment Holdings Inc shares slumped after

the world's largest cinema chain said it would raise $110

million through a preferred stock sale.

(Reporting by Sinéad Carew in New York, Shubham Batra, Amruta

Khandekar, Ankika Biswas and Johann M Cherian in Bengaluru;

Editing by Shounak Dasgupta, Anil D'Silva and Aurora Ellis)