Wall Street stocks retreated while the dollar rallied on Thursday following stronger than expected US economic data that could delay Federal Reserve interest rate cuts.

The US government revised its second-quarter economic growth rate upwards on Thursday to 3.8 percent from 3.3 percent, as consumers spent more than expected.

It marks the fastest quarterly growth rate in nearly two years.

"Is the US economy much stronger than believed?" queried InvestingLive currency analyst Adam Button, who added in a subsequent note that the US dollar could be poised to rally if there is a "big re-think" on the outlook for the US economy.

The greenback rose on Thursday against the euro, British pound and Japanese yen.

But US equity indices retreated for a third straight day after posting a record on Monday.

The Dow Jones lost 0.4 percent to 45,947. The S&P 500 slipped 0.5 percent to 6,604, while the Nasdaq also fell half-a-percent to 22,384.

The stock market "did not like the good economic data we got this morning, because (it) basically calls into question the market's assumption that the Fed will be cutting rates multiple times before the end of the year," said Briefing.com analyst Patrick O'Hare.

Analysts are focused on Friday's release of the Fed's preferred gauge of inflation – the Personal Consumption Expenditure (PCE) index – and next week's non-farm payrolls report.

The US central bank – citing a weak labour market – last week announced its first rate reduction of the year, and forecast there could be two more by the end of 2025.

But expectations were dealt a blow on Tuesday as Fed Chair Jerome Powell warned that stocks are "fairly highly valued" and that there was "no risk-free path" on rates.

The PCE data "may also shift investor expectations over the speed and depth of additional easing measures from the US central bank," said David Morrison, senior market analyst at financial services firm Trade Nation.

Among individual stocks, Intel shot up nearly nine percent following reports the company has approached Apple about investing in the struggling chipmaker. Apple rose 1.8 percent.

Amazon fell 0.9 percent as it reached an agreement to pay US$2.5 billion to settle allegations from a US regulator that it used deceptive practices to enrol consumers in Amazon Prime and made it difficult to cancel subscriptions.

Starbucks dipped 0.5 percent as it announced it would cut about 900 jobs and shutter some underperforming stores as part of a cost-cutting drive. (AFP)