Stocks drop on slower GDP, rate hike worries

Stocks fell a bit Thursday — the S&P 500 just barely — as Wall Street digested news of slower economic growth and the prospect of an interest rate hike in December.

The Dow ended down 24 points, or 0.1%, a day after the blue-chip index rallied nearly 200 points after the Federal Reserve kept the door open to a rate increase later this year. The Standard & Poor's 500 index dipped a scant 0.04% into the red and the Nasdaq composite finished down 0.4%.

The government reported that the economy grew at a slightly lower-than-expected 1.5% in the third quarter. That was a sharp drop from the 3.9% growth in the second quarter and below the 1.6% growth expected by economists, according to Bloomberg. The slowdown was partly attributed to businesses adding far more slowly to inventories, subtracting a whopping 1.4% from growth in the third quarter.

The economy grew 1.5% in the third quarter

The stock market's yo-yo reaction to the Fed's hints that they still might pull the trigger on an interest rate increase at its final meeting of the year continued in Thursday's session. Yesterday, stocks first tumbled on the Fed's suggestion that rate increases remain on the table for 2015, only to rally into the close leaving the Dow up nearly 200 points, or 1.1%.

But a follow through to the rally didn't materialize. Shares were mixed in Asia, with stocks in Japan rising but shares falling in Hong Kong and mainland China. All the major stock exchanges in Europe are in the red today.

Wall Street, which had all but eliminated the chance of the Fed moving this year, are again forced to price in the prospect of higher borrowing costs later this year. In its closely scrutinized policy statement Wednesday the Fed gave a more positive assessment of the U.S. economy and downgraded its fears that global market tumult and international developments would have an appreciable negative impact on growth at home.

The odds of Fed rate increase in December has risen to 46%, or nearly a 50-50 chance, according to futures markets. Before the Fed's statement yesterday the odds of a hike were closer to a 1 in 3 chance.

In other parts of the world, Japan's Nikkei 225 rose 0.2%, while Hong Kong's Hang Seng fell 0.6% and the Shanghai composite declined 0.4%.

In Europe, Germany's DAX index is down 0.3% and the CAC 40 in Paris is off 0.1%.

Adam Shell on Twitter: @adamshell.