US stocks climbed on Tuesday, pushing the S&P 500 to a fresh record close, as stronger-than-expected economic growth lifted bond yields and fueled gains in growth and AI-linked stocks.
The Commerce Department reported that US gross domestic product grew at a 4.3% annualized pace in the third quarter, the fastest expansion since Q3 2023 and well above economists’ expectations of 3.3%. The growth was driven largely by resilient consumer spending, reinforcing confidence in the underlying strength of the US economy.
Markets reacted swiftly. The S&P 500 rose 0.45% to 6,909.73, marking a new all-time closing high. The Nasdaq Composite gained 0.57%, while the Dow Jones Industrial Average advanced 0.16%. Growth stocks clearly outperformed, with the S&P 500 growth index climbing nearly 1%, while the value index was mostly flat.
Bond yields moved higher following the data, as traders priced in a lower probability of a January rate cut from the Federal Reserve, according to CME FedWatch. Shorter-dated yields rose the most, reflecting expectations that strong growth could keep monetary policy restrictive for longer.
“The bond market didn’t like this news,” said Stephen Massocca of Wedbush Securities, noting that higher rates tend to favor growth stocks while weighing on rate-sensitive sectors such as consumer staples, energy, and private credit.
AI-related names led the advance, extending a rebound from last week’s selloff tied to valuation concerns and heavy capital spending. Nvidia provided the biggest boost to the S&P 500, while Amazon, Alphabet, and Broadcom each gained more than 1%.
Not all signals were positive. US consumer confidence weakened in December, reflecting growing anxiety over jobs and income prospects. Factory production was unchanged in November after declining in October, highlighting pockets of softness beneath the headline growth figures.
Still, momentum remains strong heading into year-end. All three major US indexes are on track for a third straight annual gain, with the S&P 500 and Dow also poised to post an eighth consecutive monthly advance. The rally has revived hopes for a Santa Claus rally, which historically spans the final five trading days of the year and the first two sessions of January.
Trading volumes were light and expected to thin further as the holiday approaches. US markets will close early on Wednesday and remain shut on Thursday for Christmas.
On the corporate front, ServiceNow shares slipped after the company agreed to buy cybersecurity firm Armis for $7.75 billion in cash. Freeport-McMoRan climbed after copper prices hit a record high and Wells Fargo raised its price target on the miner. Meanwhile, Huntington Ingalls edged higher following President Trump’s announcement of plans for a new class of US battleships.
Strong US growth data lifted yields but powered stocks to new highs, with AI and growth names leading the charge as markets head into the final trading days of 2025.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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