By Rita Nazareth
(Bloomberg) — The latest batch of economic data did little to encourage wagers the Federal Reserve will keep cutting rates in the near term, with bond yields rising and stocks wavering. The dollar trimmed its decline.
A report showing the U.S. economy expanded at the fastest pace in two years left traders betting the Fed will pause its easing cycle in January. Treasuries erased gains while the S&P 500 struggled to gain traction after a three-day advance that put the gauge on the verge of a record.
Inflation-adjusted gross domestic product increased at a 4.3% annualized pace. That was higher than all but one estimate in a Bloomberg survey and followed 3.8% growth in the prior period.
“If the economy keeps producing at this level, then there isn’t as much need to worry about a slowing economy and concerns may actually flip back to the price-stability constraint,” said Chris Zaccarelli at Northlight Asset Management.
Separate data showed U.S. consumer confidence declined for a fifth consecutive month on more pessimistic views of the labour market and business conditions.
While worries surrounding the jobs market, tariffs, and inflation continue to swirl, the economy continues to defy its doubters by chugging higher, according to Bret Kenwell at eToro.
“If consumers remain resilient through the holiday and the fourth quarter, it should bode well for U.S. GDP and corporate earnings,” he said. “Earnings have continued to surprise to the upside and have been a major contributor to this year’s rally. Bulls are hoping to see this trend continue in 2026.”
The S&P 500 was little changed. The yield on 10-year Treasuries rose three basis points to 4.19%. The dollar fell 0.2%, with the currency on track for its worst year since 2017.
Money markets trimmed bets on rate cuts in 2026, with a less than 20% chance of a Fed reduction expected in January. An upcoming $70 billion sale of five-year notes will test demand for the bonds.
The latest GDP reading vindicates the astounding rebound in stocks since the April lows, as the US economy has remained remarkably resilient in the face of meaningful changes to trade policy, according Michael Reynolds at Glenmede.
“As attention shifts to the year ahead, the outlook for US economic growth appears bright,” he said. “The combined effects of tariff policy, fiscal stimulus, shifts in the labour market, AI-related productivity, and the potential for deregulation point to above trend prospects in 2026.”
Equity traders are trying to decipher what a strong GDP report combined with a weak hiring environment means for monetary policy, according to Scott Wren at Wells Fargo Investment Institute.
“Investors should pay attention to the positive trends in place,” he said. “We believe the next 12 months will favor U.S. equities, based on our expectations for higher US GDP, broadening and accelerating earnings growth, moderating inflation and improved global growth.”
Meantime, investors added new short bets across U.S. stock futures last week, leaving net positioning near neutral levels, according to Citigroup strategists.
The team led by Chris Montagu notes that allocation to U.S. large-caps has broadly cooled into the year-end. However, exposure to the Russell 2000 index of small caps is now bearish, marking a u-turn from last week. Net profit levels have improved for all except the Nasdaq.
“Even though tech stocks have been volatile in recent months, there is little reason to doubt tech’s staying power and leadership in this market, especially for 2026,” said Paul Stanley at Granite Bay Wealth Management.
Valuations in tech are high, Stanley noted, but some “Magnificent Seven” names have actually underperformed the S&P 500 this year. That suggests that there is still more room to run and that not all tech stocks are trading at runaway or complacent valuations, he said.
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 10:04 a.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 rose 0.3%
- The MSCI World Index was little changed
- Bloomberg Magnificent 7 Total Return Index rose 0.2%
- The Russell 2000 Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was little changed at $1.1770
- The British pound rose 0.2% to $1.3482
- The Japanese yen rose 0.4% to 156.39 per dollar
Cryptocurrencies
- Bitcoin fell 1.7% to $86,767.76
- Ether fell 2.6% to $2,910.23
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.19%
- Germany’s 10-year yield declined two basis points to 2.87%
- Britain’s 10-year yield declined two basis points to 4.52%
- The yield on 2-year Treasuries advanced four basis points to 3.55%
- The yield on 30-year Treasuries advanced two basis points to 4.85%
Commodities
- West Texas Intermediate crude fell 0.3% to $57.82 a barrel
- Spot gold fell 0.2% to $4,435.34 an ounce
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Last modified: December 23, 2025
