On Tuesday, the S&P 500 Index ($SPX) (SPY) rose +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) rose +0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose +0.50%. March E-mini S&P futures (ESH26) rose +0.42%, and March E-mini Nasdaq futures (NQH26) rose +0.49%.
Stock indexes closed higher on Tuesday due to strong confidence in US economic fundamentals after the US Q3 GDP report was stronger than expected +4.3%, although most other economic reports were weaker than expected. In any case, stocks were cut as the probability of a Fed rate cut at the next meeting on January 27-28 dropped from 20% to 13%. Also, the yield on the 10-year T-note rose slightly.
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US Q3 real GDP grew +4.3% (q/q annualized), stronger than expectations of +3.3% and the Q2 rate of +2.5%. The third quarter GDP price index rose +3.8% (q/q annualized), stronger than expected at +2.7% and higher than the second quarter’s +2.1%. The Q3 core PCE price index rose +2.9% (q/q annualized), in line with expectations, but higher than Q2’s +2.6%.
The Conference Board’s December US consumer confidence index fell -3.8 points to 89.1 from November’s revised level of 92.9 (initial 88.7), weaker than the reported 91.0.
The December Philadelphia Fed non-manufacturing index fell -0.5 points to -16.8 from -16.3 in November, which was weaker than expected to rise to -15.0.
Durable goods orders fell -2.2% month on month in October, weaker than expectations of -1.5%. Durable goods export orders increased by +0.2% m/m in October, slightly weaker than the market expectation of +0.3%. Orders for core capital goods (ex-transportation and defence), a proxy for capital spending, rose +0.5% m/m in October, which was slightly stronger than market expectations of +0.3%.
US industrial production fell -0.1% per cubic meter in November, slightly weaker than the +0.1% market expectation. Manufacturing output fell -0.4% per cubic meter in November, weaker than the market expectation of +0.1%.
The December Richmond Fed manufacturing index rose +8 points to -7 from November’s -15, and was stronger than the market expectation of -10.
Seasonal factors are bullish for stocks. Since 1928, the S&P 500 has risen 75% in the last two weeks of December, climbing an average of 1.3%, according to data from Citadel Securities.
Markets are giving a 13% discount on the likelihood that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on January 27-28.
There was a slight rise in foreign stock markets on Tuesday. Euro Stoxx 50 closed up +0.10%. China’s Shanghai Composite closed +0.07% higher for its fifth consecutive daily gain. Japan’s Nikkei Stock 225 closed up +0.02%.
interest rates
March 10-year T-notes (ZNH6) fell by -1.5 ticks on Tuesday. The 10-year T-note yield rose +0.2bp to 4.165%. T-note prices fell following a stronger than expected US Q3 GDP report of +4.3%, although most other economic reports released on Tuesday were slightly weaker than expected on balance.
T-note prices were also cut due to excess supply. The Treasury sold $70 billion of 5-year T-notes and $28 billion of 2-year floating rate notes on Tuesday. The Treasury will sell $44 billion of 7-year T-notes on Wednesday.
European government bond yields fell. On Tuesday the 10-year German Bund yield fell from Monday’s 9-month high and ended the day down -3.6bp at 2.862%. 10-year UK gilt yields fell -2.7bp to 4.509%.
The swaps are giving a discount of 0% to a -25bp rate cut by the ECB at its next policy meeting on February 5.
US Stock Movers
Except Tesla, all the stocks of the Magnificent Seven closed with gains on Tuesday. Nvidia (NVDA) rose more than +3%. Alphabet (GOOGL) and Amazon.com (AMZN) closed up more than +1%.
Chip stocks closed mixed. Marvell Technology (MRVL) and Nvidia (NVDA) rose more than +3%, while GlobalFoundries (GFS) was the weakest chip stock with a loss of -1.7%.
Cryptocurrency-exposed stocks are trading lower, with Bitcoin (^BTCUSD) down about -0.8%.
Riot Platforms (RIOT) fell more than -5%, and Tactic (MSTR) fell nearly -4%. Coinbase Global (COIN) and Mara Holdings (MARA) declined by more than -2%.
Miners found support as gold, silver and copper all hit new record highs on Tuesday. Freeport-McMoRan (FCX) closed up +2.5%, and Newmont Mining (NEM) closed up +0.35%.
Sable Offshore Corp (SOC) surged +36% following news that the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration has approved the company’s Las Flores Pipeline restart plan.
ZIM Integrated Shipping Services (ZIM) rose more than +5% after news of buyout interest from several potential bidders.
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On the date of publication, Rich Asplund did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. Please see the Barchart Disclosure Policy here for more information.
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