Damian Troise
Stocks are edging closer to records following updates that showed the economy grew sharply during the third quarter, but inflation remains high and consumers are losing confidence.
The S&P 500 rose 0.3 per cent and is just below the all-time high it set earlier this month. The Dow Jones rose 68 points, or 0.1 per cent, at midday. The Nasdaq composite rose 0.4 per cent. The Australian sharemarket is set to slip, with futures pointing to a loss of 14 points, or 0.2 per cent, at the open. The ASX added 1.1 per cent on Tuesday. The Australian dollar was trading at US66.89¢ AT 5.12am AEDT.
A majority of stocks with the S&P 500 were losing ground, but several big technology stocks pushed the market higher. Nvidia rose 2.5 per cent and Google’s parent company, Alphabet, rose 1.4 per cent. They are among several companies with outsized valuations that tend to have more impact on the broader market’s direction.
Novo Nordisk jumped 8 per cent after US regulators approved a pill version of the blockbuster weight-loss drug Wegovy, the first daily oral medication to treat obesity.
Wall Street is getting the latest economic updates during an otherwise quiet holiday-shortened week. Markets in the US will close early Wednesday for Christmas Eve and remain closed for Christmas on Thursday.
The US economy grew at a 4.3 per cent annual rate during the third quarter. That builds on 3.8 per cent growth during the second quarter and marks a sharp turnaround from the first quarter, when the US economy shrank for the first time in three years.
The latest report also showed that stubborn inflation continues to hover over the economy. The Federal Reserve’s favoured inflation gauge — called the personal consumption expenditures index, or PCE — climbed to a 2.8 per cent annual pace last quarter, up from 2.1 per cent in the second quarter.
The yield on the 10-year Treasury rose to 4.18 per cent from 4.15 per cent just before the report on gross domestic product for the third quarter was released. The yield on the two-year Treasury, which more closely tracks expectations for Fed actions, rose to 3.54 per cent from 3.49 per cent just prior to the report’s release.
The Fed has been taking a more cautious policy approach amid mixed signals from the economy. Economic growth has been occurring at the same time that inflation remains stubbornly above the central bank’s 2 per cent target. The job market is also slowing, adding another layer of concern to whether the central bank should continue cutting interest rates.
On Wednesday, the Labor Department will release its weekly data on applications for jobless benefits, which stands as a proxy for US layoffs.
“The Fed has been balancing off inflation risks versus weakening labor markets and today’s report further complicates their dilemma,” wrote Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, in a note to investors.
The Fed has cut interest rates three times in 2025 and the central bank’s rate-setting committee is divided about additional rate cuts in 2026. The committee members, at their last meeting, projected a wide range of possibilities from holding rates steady to two or more reductions.
Wall Street expects the Fed to hold rates steady at its upcoming meeting in January.
Consumer spending and confidence has been shaky amid worries about high prices, especially with a wide-ranging US trade war that could drive prices for many goods even higher.
The latest update from business group The Conference Board showed that consumer confidence fell in December to its lowest level since tariffs were rolled out in April. Meanwhile, retail sales have been weakening, with consumers growing more cautious.
Consumers have become more targeted in their buying during the holiday shopping season, according to Visa’s Consulting and Analytics division. From Nov. 1 through Sunday, cash and credit card sales rose 4.2 per cent, which is less than the 4.8 per cent increase during the same period a year ago.
Markets were mixed in Asia and Europe.
The price of gold continued rising. It was up 0.6 per cent Tuesday and is up about 70 per cent for the year.
Oil prices were relatively stable after jumping a day prior. US benchmark crude rose 0.2 per cent and the price of Brent crude, the international standard, rose 0.1 per cent.
AP
