NEW YORK, Dec 23 — A mini stocks rally triggered by positive US economic data faltered yesterday, while the yen held onto gains against the dollar after surging earlier in the week.

Wall Street indices were stuck in the red the entire day, with more positive economic data prompting concerns among investors about rate hikes by the US Federal Reserve.

The Dow finished 1.1 per cent lower, while the tech-heavy Nasdaq Composite fell 2.2 per cent.

"The momentum of the rally the stock market enjoyed yesterday has not carried over this morning,” said Patrick O’Hare at Briefing.com.

"Better than expected third quarter GDP and weekly initial claims data... has fuelled concerns about Fed tightening” interest rates further and for longer, he added.

Revised Commerce Department figures now show the US economy expanded at a 3.2 per cent annualized rate in July through September, markedly higher than the 2.6 per cent first estimated in October.

Meanwhile, jobless claims did not rise as much as economists expected.

Both figures indicate that the US economy is still chugging along handsomely, while the Fed has signaled it will raise interest rates until it achieves a sufficient slowdown in activity to tame rampant inflation.

The drop in Wall Street equities "likely reflects the growing feeling of concern that the Federal Reserve will continue pushing rates upwards in the absence of any major economic distress signal,” said Joshua Mahony, senior market analyst at online trading platform IG.

"The bears are back in charge today,” he added.

Tech stocks took a beating after US computer storage memory manufacturer Micron posted softer-than-expected earnings, with its shares slumping 3.4 per cent.

"Micron’s earnings did not provide any optimism for the chip sector as they struggle with an inventory glut that will make it difficult for them to be profitable,” said market analyst Edward Moya at trading platform OANDA.

Equities have been volatile in recent weeks as investors weigh up interest rate hikes and global recession risks against the reopening of China’s economy.

Yesterday’s reaction of investors to good economic news was the opposite the day before, when a bigger-than-expected jump in US consumer confidence this month sent stocks soaring.

Asian stocks took their cue from Wednesday’s gains in New York, led by Hong Kong which rose by more than two per cent. Tech firms tracked their US counterparts higher and property stocks were boosted by comments from top Chinese officials pledging support for the beleaguered sector.

Towards the end of the day, Shanghai dipped on worries about rising Covid cases in China.

But hopes for a Santa rally — a period of rising share prices around the year-end holidays — were crushed as the momentum failed to carry over into European trading.

London ended the day down 0.4 per cent, while Paris shed 1.0 per cent and Frankfurt fell 1.3 per cent.

"Bye-Bye Santa rally, Grinch selloff is here to stay,” said OANDA’s Moya. — AFP