U.S. Stocks Climb Along an Upward Curve as Economic Data Fuels Rally Momentum

U.S. equities extended their recent winning streak on Tuesday, with major indices posting solid gains despite early session volatility. The S&P 500 climbed 31.30 points to close at 6,909.79, marking a fresh record high, while the Nasdaq surged 133.02 points to 23,561.84. The Dow Jones also participated in the rally, gaining 79.73 points to finish at 48,442.41. These moves reflected the broader upward curve that has characterized market sentiment in recent trading sessions.

Economic Growth Surprises, Inflation Concerns Resurface

The catalyst for Tuesday’s market activity stemmed from a Commerce Department report revealing stronger-than-anticipated economic expansion. Real GDP jumped 4.3 percent in Q3 2025, significantly outpacing economist expectations of 3.3 percent growth and the prior quarter’s 3.8 percent advance. While the robust expansion initially sparked trading uncertainty during the morning session, the subsequent rally suggests investors interpreted the data as evidence of resilient economic fundamentals supporting the upward trajectory across equity markets.

However, the same report introduced a complicating factor—consumer price inflation accelerated sequentially from Q2 to Q3. This dual narrative of strong growth paired with rising price pressures created a complex backdrop for Federal Reserve policy deliberations. With the central bank’s first 2026 meeting scheduled for late January, market participants faced renewed questions about the path of interest rates in the coming year.

Interest Rate Outlook Shifts as Fed Expectations Recalibrate

The CME Group’s FedWatch Tool currently signals an 86.7 percent probability that the Federal Reserve will maintain rates unchanged at its January gathering, a dramatic shift from just one month prior when such odds stood at 58.0 percent. This recalibration reflects markets’ reassessment of inflation dynamics and the Fed’s likely response.

According to Mike Fratanton, Chief Economist at the Mortgage Bankers Association, “These economic readings demonstrate an uneven expansion with inflation persisting well above the FOMC’s target levels.” Fratanton projects that policymakers will hold steady in January but likely reduce rates once more during 2026. Meanwhile, Kevin Hassett, director of the National Economic Council and a potential successor to Federal Reserve Chair Jerome Powell, remarked to CNBC that the U.S. remains “significantly behind the curve” in terms of rate cuts, suggesting a dovish lean within the administration.

Momentum Sustains Despite Sectoral Divergence

Market technicians attributed the upward curve momentum to both recent positive price action and positioning dynamics. Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, noted that “the path of least resistance is higher through year-end,” suggesting technical support for continued equity strength. Notably, natural gas stocks outperformed broader indices, with the NYSE Arca Natural Gas Index gaining 1.0 percent, while airline equities faced headwinds, with the NYSE Arca Airline Index declining 2.5 percent.

Global Markets Paint Mixed Picture

Overseas markets reflected varied performance throughout Tuesday’s session. Japanese equities remained essentially flat, with the Nikkei 225 hovering near unchanged levels, while China’s Shanghai Composite edged up 0.1 percent. Australian shares showed more pronounced strength, with the S&P/ASX 200 advancing 1.1 percent. European bourses presented a mixed showing—the French CAC 40 retreated 0.2 percent while both Germany’s DAX and Britain’s FTSE 100 posted modest 0.2 percent gains.

Bond markets initially struggled but recovered as the session progressed, with the benchmark ten-year Treasury yield ending unchanged at 4.169 percent after reaching an intraday high of 4.202 percent. The relatively muted fixed income response suggests investors are still digesting the mixed signals from the latest economic data.

Week Ahead: Jobless Claims and Holiday Thinning

Forward-looking activity may center on Wednesday’s weekly jobless claims report, though trading volumes are expected to remain subdued as markets approach the Christmas holiday on Thursday. The combination of economic data suggesting resilience alongside inflation concerns continues to shape the narrative for equity investors positioning their portfolios as the year draws to a close.