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All three main U.S. equity indexes traded above and below the breakeven line early on Tuesday as markets weighed better-than-expected growth data against another survey showing consumer sentiment is sagging. Though the probability of hoped-for relief from lower policy-based interest rates is sinking as well, risk-on sectors, including technology and communication services stocks as well as energy and utility stocks, led the way higher.
The Bureau of Economic Analysis said before the opening bell Tuesday morning that gross domestic product (GDP) expanded at an annualized rate of 4.3% during the third quarter, following 3.8% growth in the second quarter.
As BMO Capital Markets Senior Economist Sal Guatieri notes, consumer spending was up 3.5% despite slowing employment growth: “The U.S. economy accelerated in the third quarter with broad strength across expenditure areas.”
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That the economy “maintains brisk momentum, despite tariffs and immigration curbs,” raises the odds the target range for the federal funds rate remains 3.50% to 3.75% following the next Fed meeting in January – “and possibly beyond,” according to Guatieri.
“Given the economy’s resilience, softness in both employment and inflation might be needed to spur rate cuts in 2026.” Indeed, the economist adds that a 2.2% increase in non-defense capital goods shipments in October suggests “no let-up in AI-driven investment spending.”
There will be consequences from the longest government shutdown in U.S. history, Guatieri cautions. “But,” he concludes, “a solid rebound now appears even more likely in Q1.”
By Tuesday’s closing bell, the tech-heavy Nasdaq Composite had climbed 0.6% to 23,561, the broad-based S&P 500 was up 0.5% at 6,909, and the blue-chip Dow Jones Industrial Average had added 0.2% to 48,442.
Listen to what the working people say
Though the bull market appears to have legs and GDP is strong, the Conference Board Consumer Confidence Index is weak, declining for a fifth consecutive month in December to 89.1 from 92.9 in November.
“Despite an upward revision in November related to the end of the shutdown,” Conference Board Chief Economist Dana Peterson says, “consumer confidence fell again in December and remained well below this year’s January peak.”
Write-in responses “continued to be led by references to prices and inflation, tariffs and trade, and politics,” though “mentions of immigration, war, and topics related to personal finances – including interest rates, taxes and income, banks, and insurance” increased in December.
“Consumers [are] concerned about employment,” observes Neil Dutta, head of economics at Renaissance Macro Research. “Stock prices are up. Gas prices are down. However, consumer confidence ends the year in the proverbial toilet. Attitudes about the labor market are likely behind the move.”
Dutta notes the Conference Board’s Labor Differential, which is the percent of respondents who say jobs are “plentiful” minus the percent who say jobs are “hard to get,” declined to a “fresh low” of 5.9.
“Consumers do not see stabilization in the labor market,” he concludes. “When consumers tell us it is getting more challenging to find jobs, it usually pays to believe them.”
NOW buys Armis for $7.75 billion
Meanwhile, in stock market activities Tuesday, ServiceNow (NOW, -1.5%) was not among the tech stocks in the green after the software maker announced the $7.75 billion, all-cash acquisition of privately held cybersecurity outfit Armis.
ServiceNow CEO Amit Zavery said in a statement the combination aims to “deliver an industry-defining strategic cybersecurity shield for real-time, end-to-end proactive protection across all technology estates.”
Elsewhere, NovoNordisk (NVO, +7.3%) got a boost as the Food and Drug Administration (FDA) approved the first GLP-1 weight-loss drug in pill form, an oral version of Wegovy.
Novo Nordisk plans to start selling the weight-loss pill in the U.S. in January at $149 for a beginner dose. Eli Lilly (LLY, -0.5%), which sells the competing injectable weight-loss drug Zepbound, was up and down on the news.
Nvidia (NVDA, +3.0%) topped today’s list of the 30 Dow Jones stocks, though Micron Technology (MU, -0.1%) failed to extend its rally on earnings and guidance that restored some confidence in the bullish theme of AI narrative.
Note that the stock market will close at 1 pm Eastern Standard Time on Wednesday, and the bond market will close at 2 pm. The markets are closed on Christmas Day.