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US stocks decline as economy outpaces expectations

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US stocks decline as economy outpaces expectations

Stocks on the American exchanges declined after national GDP grew faster than expected, fueling speculation about when the Federal Reserve would begin scaling back record stimulus. The US economy grew at an annualized rate of 2.8 percent last quarter, exceeding most economists’ expectations.

A closer look at the GDP data show consumer spending and business investment declined, while inventories increased. The economy probably cooled toward the end of the third quarter, as the markets scaled back in anticipation of the partial government shutdown. The Fed’s failure to slow the pace of quantitative easing in the fall pushed back expectations as to when bond tapering might occur. Economists now believe the Fed will maintain the $85 billion pace of monthly asset purchases until March 2014 at the earliest.

The Standard & Poor’s 500 declined more than 1.3 percent to 1,747.15 after closing on a one-week high in the previous session. The Dow Jones Industrial Average fell more than 152 points to 15,594.00 after setting an all-time high on Wednesday. All but two of the Dow’s 30 members reported losses, led by Goldman Sachs (NYSE:GS) , The Walt Disney Company (NYSE:DIS) and AT&T (NYSE:T) , which declined at least 1.98 percent.

The NASDAQ Composite declined 1.9 percent to 3,857.33, after a weak day for technology stocks.

“The market will be volatile,” said Ernie Cecilia of Bryn Mawr Trust Company. Market participants are still trying to piece together the Federal Reserve’s next course of action regarding asset purchases, and whether a prolonged stimulus plan is in the works.

Market sentiment could change Friday, when the Labor Department is expected to show the US economy added only 125,000 payrolls last month. The slower pace of job creation over the summer and early fall was one of the major obstacles preventing the Fed from shifting the course of monetary policy.

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