Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed higher on Tuesday as investors digested a better-than-expected gross domestic product (GDP) update from the Bureau of Economic Analysis (BEA).
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During the third quarter, U.S. GDP rose by 4.3% on an annualized basis, above the consensus estimate of 3.3% and marking the fastest pace of growth since 2023. Consumer spending, which is the largest component of GDP, climbed by 3.5% compared to 2.5% during the second quarter, signaling a resilient consumer amid an uncertain economic backdrop.
The BEA also announced that core personal consumption expenditures (PCE), which is the Fed’s preferred gauge of inflation, increased by 2.9% during the quarter, matching the estimate. However, core PCE remains well above the Fed’s inflation target of 2%. With inflation still a concern, the odds of a 25 bps interest rate cut at the January 28 Federal Open Market Committee (FOMC) meeting fell to 13.3% compared to 19.9% a day ago and 24.4% a week ago, according to CME’s FedWatch tool.
That didn’t sit well with President Trump, who accused “eggheads” concerned about inflation of bringing down the economy.
“Nowadays, when there is good news, the Market goes down, because everybody thinks that Interest Rates will be immediately lifted to take care of ‘potential’ Inflation,” Trump said in a Truth Social post. He added that the next Fed Chair must agree with him and “lower Interest Rates if the Market is doing well, not destroy the Market for no reason whatsoever.”
Meanwhile, the Consumer Confidence Index (CCI) fell to a nine-month low of 89.1 in December as concerns about tariffs and inflation persist. Analysts were expecting a reading of 91.0. A reading above 100 indicates optimism, while a reading below 100 indicates pessimism.
“Confidence weakened for a fifth consecutive month as perceptions of business conditions were negative, and apprehensions about jobs and income deepened,” said The Conference Board (TCB).
Finally, the Trump administration announced that it would begin imposing an unspecified tariff on Chinese semiconductor imports beginning on June 23, 2027. The lengthy delay is likely a sign of the U.S. respecting a trade truce between the two countries reached in October.
The S&P 500 (SPX) closed with a 0.46% gain, while the Nasdaq 100 (NDX) returned 0.50%.
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