On Tuesday, US stocks showed mixed performance at market open following surprising economic data that revealed a stronger-than-expected expansion in the country’s GDP. The Dow Jones Industrial Average slipped by 53 points, equivalent to roughly 0.1%, while the S&P 500 and Nasdaq Composite remained near the flatline as investors reassessed their interest-rate expectations.
US Economy Grows Above Forecasts
According to the Commerce Department, the US economy expanded at an annualized pace of 4.3% during the third quarter of 2025. This growth rate sharply exceeded the 3.2% estimate predicted by economists and underscored the resilience of economic activity. The report had been delayed due to the record-breaking US government shutdown but replaced the second GDP estimate originally scheduled for later in November.
A closer look at the data shows that consumer spending increased by 3.5% in the third quarter compared to 2.5% in the previous period, bolstered by higher exports and government expenditures. Private fixed investment levels fell less than expected, contributing to underlying economic strength. Meanwhile, a key metric known as real final sales to private domestic purchasers — often monitored by Federal Reserve policymakers — rose by 3%, highlighting steady household demand despite tighter financial conditions.
Investors Hold Scepticism Over Rate Cuts
The unexpectedly strong GDP report has cast doubts on the Federal Reserve’s likelihood of implementing rate cuts in early 2026. Data from the CME FedWatch Tool indicated growing investor sentiment that the Fed will hold interest rates steady in its meetings scheduled for January and March. While inflation remains higher than target levels, the robust economic growth complicates the case for loosening monetary policy anytime soon.
In the trading session that preceded Tuesday’s report, the S&P 500 gained for the third consecutive day. Tech giant Nvidia saw a 1.5% jump in its shares, with similar gains recorded by Micron Technology and Oracle. Materials and financial sectors led the charge, helped by record gold and silver futures prices. Notably, Newmont Corporation and Freeport-McMoRan shares each rose by approximately 3%.
Investors Navigate a Slow Holiday Period
As the holiday season approaches, trading volume is expected to remain subdued. The New York Stock Exchange will close early at 1 p.m. ET on Christmas Eve and remain closed on Christmas Day, leaving limited catalysts for market movement. Investors are likely to focus on upcoming economic data to gauge how long restrictive monetary policies will persist.
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The GDP surprise serves as yet another reminder of the dynamic economy and the complexities it adds to forecasting future Federal Reserve moves. As 2026 approaches, investors remain watchful for new developments that could shape the financial landscape.
