Wall Street stocks tumbled on Thursday, closing in a sea of red after data that indicated a strong labour market and better-than-expected economic growth.

The Dow Jones closed 1.1 percent down at 33,027, while the S&P 500 lost 1.5 percent to 3,822.

The Nasdaq plunged 2.2 percent to 10,476.

Calling the tumble a "Grinch selloff," Edward Moya of the OANDA trading platform said the drop came as "better-than-expected US economic data supported the (Federal Reserve's) case for more ongoing rate increases."

The Fed has hiked its benchmark lending rate multiple times this year to rein in surging inflation.

Although it moderated its pace of rate increases this month, Fed Chair Jerome Powell has signalled that the central bank's battle is not yet over, fuelling market jitters.

On Thursday, jobless claims did not rise as much as economists expected, in "a reminder that employers overall still aren't laying off large numbers of workers" despite challenging circumstances, said Nancy Vanden Houten of Oxford Economics.

Meanwhile, revised data from the Commerce Department showed that the US economy expanded 3.2 percent in the third quarter, markedly higher than the 2.6 percent first estimated in October.

A resilient economy could see inflation remaining at higher levels, prompting the Fed to push on with steep rate hikes and hold them at higher levels for longer.

For now, investors are keeping an eye on personal consumption expenditures price index data due on Friday, watching for shifts in the Fed's preferred inflation measure for signs on its path to come. (AFP)