In the latest example of how good news for the economy can be bad for Wall Street, most U.S. stocks slumped Thursday after strong economic reports raised the possibility of interest rates staying painfully high.

The S&P 500 fell 0.7% for its sharpest drop since April and pulled further from its record set earlier this week. The Dow Jones Industrial Average dropped 605 points, or 1.5%, and the Nasdaq composite slipped 0.4%.

One report suggested growth in U.S. business activity is running at its fastest rate in more than two years. S&P Global said its preliminary data showed growth improved for businesses not only in the services sector but also in hard-hit manufacturing.

A separate report, meanwhile, showed the U.S. job market remains solid despite high interest rates. Fewer workers applied for unemployment benefits last week than economists expected, an indication that layoffs remain low.

Mortgage rates dip below 7%

The average rate on a 30-year mortgage dipped this week to just below 7% for the first time since mid April, a modest boost for home shoppers navigating a housing market dampened by rising prices and relatively few available properties.

The rate fell to 6.94% from 7.02% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.57%.

This is the third straight weekly decline in the average rate. The recent pullbacks follow a five-week string of increases that pushed the average rate to its highest level since November 30.

“Rates below 7% are good news for prospective buyers, and MBA expects them to continue to inch lower this summer,” said Bob Broeksmit, CEO of the Mortgage Bankers Association.