US stocks were wobbly at market open on Tuesday after delayed economic data showed the American economy grew far faster than previously estimated, prompting investors to reassess expectations for future interest-rate cuts.
The Dow Jones Industrial Average slipped 53 points, or about 0.1%, while the S&P 500 and Nasdaq Composite hovered around the flatline, reflecting a cautious response to the stronger-than-expected data.
GDP surprise alters market tone
The Commerce Department reported that the US economy expanded at a 4.3% annualised pace in the third quarter, sharply above the 3.2% estimate forecast by economists polled by Dow Jones.
The report had originally been scheduled for release on October 30 but was delayed due to the record-breaking US government shutdown.
It also replaced a second estimate that had been set for release in late November, with one final revision still due from the Bureau of Economic Analysis.
The upside surprise in growth appeared to unsettle investors who had been positioning for further monetary easing.
Following the data release, fed funds futures traders slightly increased bets that the Federal Reserve would keep interest rates unchanged at its January and March meetings, according to the CME FedWatch Tool.
The shift reflected growing scepticism that policymakers will move quickly to cut rates in early 2026 if economic momentum remains firm.
Spending and government activity drive growth
Details of the report showed that consumer spending expanded by 3.5% in the third quarter, accelerating from a 2.5% increase in the previous period.
Increases in exports and government spending also contributed to the stronger growth outcome, while a smaller-than-expected decline in private fixed investment helped support overall output.
A closely watched measure known as real final sales to private domestic purchasers — which strips out inventories, trade and government spending — rose 3% during the quarter, up 0.1 percentage point from the prior period.
Federal Reserve officials monitor this figure for insight into underlying consumer demand, and the increase suggested household activity remained resilient despite tighter financial conditions.
Markets digest recent gains
Tuesday’s muted trading followed a strong prior session, when the S&P 500 logged its third straight gain.
The index was lifted by a 1.5% jump in Nvidia and advances in Micron Technology and Oracle. Ten of the S&P 500’s 11 sectors closed higher, led by materials and financials.
In that session, materials stocks benefited from record gold and silver futures prices, with Newmont and Freeport-McMoRan each rising about 3%.
The Dow gained roughly 228 points, or 0.5%, while the Nasdaq Composite advanced 0.5%.
Trading volumes are expected to thin as markets head into the holiday period.
The New York Stock Exchange will close early on Wednesday at 1 p.m. ET for Christmas Eve and remain closed on Thursday for Christmas Day.
With fewer catalysts on the immediate calendar, investors are likely to continue parsing economic data for clues on how long the Federal Reserve can maintain restrictive policy.
Tuesday’s GDP surprise reinforced the view that the US economy is still moving forward at a solid pace, complicating the outlook for rate cuts even as inflation remains stubbornly above target.
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