Stock Market Rises as GDP Growth Reduces Rate-Cut Expectations

Dec 24, 2025, 2:35 AM

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US stock markets experienced a positive turn on Tuesday, with the S&P 500 achieving a new record close of 6,909.79, marking a 0.5% increase. The Nasdaq Composite also rose by 0.6%, while the Dow Jones Industrial Average gained approximately 0.2% as investors reacted to new economic data that suggested stronger-than-expected growth in the US economy over the summer months.

The third quarter GDP report revealed that the US economy expanded at an annualized rate of 4.3%, significantly surpassing the anticipated growth rate of 3.3%. This unexpected surge in economic activity has led traders to adjust their expectations regarding potential interest rate cuts by the Federal Reserve. Currently, there is an over 85% probability that the Fed will maintain interest rates in January, a rise from 80% the previous day and 75% last week.

Despite the positive economic indicators, consumer confidence has shown signs of decline, with the Conference Board reporting a decrease for the fifth consecutive month. This suggests that while the economy is growing, consumer sentiment may not be as robust, potentially impacting future spending and investment decisions.

The stock market's upward trend has continued for four consecutive sessions, buoyed by recent data that included a surprising drop in inflation and a lukewarm assessment of the labor market. These factors have kept expectations for interest rate cuts largely intact, even as the GDP growth figures prompt a reassessment of near-term monetary policy.

In addition to the broader market movements, specific companies have also made headlines. For instance, shares of Novo Nordisk surged after the company received official US approval to market its Wegovy weight-loss pill, reflecting positive developments in the pharmaceutical sector amidst the overall market rally.

Looking ahead, US stock markets are set to close early on Wednesday and remain closed on Thursday for the Christmas holiday, which may lead to reduced trading volumes and volatility in the coming days. Investors will be closely monitoring economic indicators and corporate earnings reports as they navigate the final weeks of the year.

Overall, the combination of strong GDP growth and shifting expectations regarding interest rates has created a favorable environment for US stocks, with analysts suggesting that the market may continue to see gains into the new year, albeit with some caution regarding potential volatility from upcoming economic and political events.

As the year draws to a close, market participants will be keen to assess how these economic trends will influence their investment strategies moving forward, particularly in light of the Federal Reserve's monetary policy decisions and consumer sentiment trends that could shape the economic landscape in 2026 and beyond.

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