S&P 500 Closes at Record High in Tech-Led Advance: Markets Wrap

(Bloomberg) — Wall Street traders parsing a batch of economic reports in a session marked by a slowdown in transactions drove stocks to all-time highs. Short-dated bonds underperformed. The dollar fell.

In a narrow tech-led advance, the S&P 500 rose for a fourth straight day. Volume was below the average of the past three months ahead of the Christmas holiday. The index rebounded even after data did little to encourage bets the Federal Reserve will cut rates in the near term.

Treasury two-year yields – more sensitive to imminent Fed moves – remained above 3.5%. That was after data showed the economy expanded at the fastest pace in two years. A drop in consumer confidence spurred only a mild bounce in bonds from session lows.

The economy continues to chug higher, but Main Street may feel differently as evidenced by consumer confidence, noted Bret Kenwell at eToro.

“If consumers remain resilient through the holiday and the fourth quarter, it should bode well for US GDP,” he said. “Earnings have continued to surprise to the upside. Bulls are hoping to see this trend continue.”

The S&P 500 topped 6,900. Its equal-weighted version – which gives Dollar Tree Inc. as much clout as Apple Inc. – edged lower. A gauge of big techs climbed about 1% while smaller firms underperformed.

The much-anticipated Santa Claus Rally period officially begins this Wednesday. Since 1950, the S&P 500 has averaged a 1.3% return, with positive results occurring 78% of the time, according to Adam Turnquist at LPL Financial. That said, seasonal trends reflect historical tendencies, not guarantees, he noted.

Meantime, the session after Christmas has historically been the most consistently positive day of the year for stocks, noted Bespoke Investment Group. In the 39 years since 1953 when the market was open Dec. 26, the S&P 500 has only declined six times.

Read: Fed Chair Should Lower Rates If the Market Does Well, Trump Says

“There’s going to be more bumps in this road, but there’s also good reason to believe the trends driving the economy — AI investment and high-end consumer spending — will continue in 2026, and that the market can continue to follow earnings growth to the upside,” said Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team.

President Donald Trump said he expects his Fed chair to lower rates if the market is doing well, the latest signal that the president is eager for a nominee committed to borrowing cost cuts as he nears an announcement of his choice to replace Jerome Powell.

“I want my new Fed Chairman to lower Interest Rates if the Market is doing well, not destroy the Market for no reason whatsoever,” Trump said in a social media post Tuesday. “Anybody that disagrees with me will never be the Fed Chairman!”

Money markets see a less than 20% chance of a Fed reduction in January.

Inflation-adjusted gross domestic product increased at a 4.3% annualized pace. That was higher than all but one estimate in a Bloomberg survey and followed 3.8% growth in the prior period.

“The strongest pace of economic growth in two years is bolstering confidence that corporate earnings will continue to expand robustly in 2026,” said Jose Torres at Interactive Brokers.

Read: Bessent Sees Room for a Future Revamp of the Fed’s 2% Target

“If the economy keeps producing at this level, then there isn’t as much need to worry about a slowing economy and concerns may actually flip back to the price-stability constraint,” said Chris Zaccarelli at Northlight Asset Management.

The GDP reading vindicates the rebound in stocks from April lows, as the economy has remained remarkably resilient in the face of changes to trade policy, according Michael Reynolds at Glenmede.

“The outlook for US economic growth appears bright,” he said. “The combined effects of tariff policy, fiscal stimulus, shifts in the labor market, AI-related productivity, and the potential for deregulation point to above trend prospects in 2026.”

Traders are trying to decipher what a strong GDP report combined with a weak hiring environment means for monetary policy, according to Scott Wren at Wells Fargo Investment Institute.

“Investors should pay attention to the positive trends in place,” he said. “We believe the next 12 months will favor US equities, based on our expectations for higher US GDP, broadening and accelerating earnings growth, moderating inflation and improved global growth.”

Separate data Tuesday showed US orders for business equipment fell by more than forecast in October. Non-defense capital goods shipments including aircraft, which feed directly into the equipment investment portion of GDP, were stronger than expected, indicating some momentum headed into the fourth quarter.

Another report showed industrial production barely increased on average across October and November, restrained by weak manufacturing output.

“The economy is demonstrating a Goldilocks scenario with above-potential US economic growth, and declining but elevated inflation and a less robust labor market,” said Eric Teal at Comerica Wealth Management. “The Fed will likely maintain a dovish bias.”

However, in cutting rates further, Teal noted there is an increased risk in pushing long-term bond yields higher and undermining the dollar.

The economy, earnings, and Fed easing give markets decent momentum, but stretched valuations — especially in mega-cap tech — and fading rate-cut tailwinds mean returns will depend more on earnings growth and broader market participation than multiple expansion, according to Adrian Helfert at Westwood.

Helfert also notes that the 2025 rally is no longer just mega-cap driven, and if the broadening continues alongside resilient consumers and steady margins, it will support a grind-higher scenario rather than a sharp correction.

Investors added new short bets across US stock futures last week, leaving net positioning near neutral levels, according to Citigroup Inc. strategists led by Chris Montagu.

“Even though tech stocks have been volatile in recent months, there is little reason to doubt tech’s staying power and leadership in this market, especially for 2026,” said Paul Stanley at Granite Bay Wealth Management.

Valuations in tech are high, Stanley noted, but some “Magnificent Seven” names have actually underperformed the S&P 500 this year. That suggests that there is still more room to run and that not all tech stocks are trading at runaway or complacent valuations, he said.

Corporate Highlights:

US airlines expect to ferry a record number of passengers over the holidays after a year in which economic uncertainty and a government shutdown have whipsawed travel demand. ServiceNow Inc. has reached a deal to buy the cybersecurity startup Armis in a deal valued at $7.75 billion, representing its largest acquisition to date. A patient died after receiving Pfizer Inc.’s drug for hemophilia, marking another setback for the company in the treatment of blood disorders. Johnson & Johnson was ordered to pay about $1.56 billion to a Maryland woman who blamed the company’s talc-based baby powder for causing her asbestos-linked cancer, the largest such jury verdict for an individual in 15 years of litigation. Novo Nordisk A/S won approval to sell a pill version of its blockbuster obesity shot Wegovy in the US, a crucial step in its effort to defend its market share from rival Eli Lilly & Co. Ford Motor Co. cut back its EV plans last week in a major announcement, but it simultaneously placed a big bet on a new business line: producing batteries for energy storage. Equinor ASA and Orsted A/S said they are engaging with US authorities over security concerns tied to their offshore wind projects, after the Trump administration issued another round of work suspension orders. Orsted A/S agreed to sell a majority stake in a Taiwanese wind farm to local firm Cathay as it presses ahead with plans to repair its balance sheet. Saks Global Enterprises, facing limited options ahead of a more than $100 million debt payment due at the end of this month, is considering Chapter 11 bankruptcy as a last resort, according to people with knowledge of the situation. Ryanair Holdings Plc was fined nearly €256 million ($302 million) by Italy’s antitrust watchdog for allegedly using an “abusive strategy” to thwart customers who booked through travel agencies. Samsung Electronics Co.-owned Harman International is buying a key driver-assistance business from Germany’s ZF Group for €1.5 billion ($1.8 billion), as financial stress across Europe’s auto-supplier sector forces companies to rethink their portfolios. S&P Global Ratings downgraded China Vanke Co. to selective default on Tuesday, labeling the developer’s recent onshore bond extension as a distressed debt restructuring tantamount to a default. Huawei Technologies Co.’s ultra-luxury Maextro S800 sedan is so popular in China nowadays, it’s outselling Porsche AG’s Panamera, Mercedes-Benz Group AG’s S-Class and all other vehicles with sticker prices of at least $100,000. Japan’s Tokyo Electric Power Co. saw its shares jump on Tuesday, after local media reported the company plans to develop a data center near its nuclear power plant that’s due for a restart in Niigata prefecture. What Bloomberg Strategists say…

“The strengthening link between stocks and bonds speaks to a balance of economic data and risks that’s just right to sustain gains in both markets as 2026 begins.”

—Kristine Aquino, Managing Editor, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.5% as of 4 p.m. New York time The Nasdaq 100 rose 0.5% The Dow Jones Industrial Average rose 0.2% The MSCI World Index rose 0.5% Bloomberg Magnificent 7 Total Return Index rose 0.9% The Russell 2000 Index fell 0.7% S&P 500 Equal Weighted Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.2% to $1.1790 The British pound rose 0.3% to $1.3500 The Japanese yen rose 0.5% to 156.29 per dollar Cryptocurrencies

Bitcoin fell 0.6% to $87,684.95 Ether fell 0.5% to $2,970.73 Bonds

The yield on 10-year Treasuries was little changed at 4.16% Germany’s 10-year yield declined four basis points to 2.86% Britain’s 10-year yield declined three basis points to 4.51% The yield on 2-year Treasuries advanced three basis points to 3.53% The yield on 30-year Treasuries declined one basis point to 4.82% Commodities

West Texas Intermediate crude rose 0.8% to $58.46 a barrel Spot gold rose 1.1% to $4,493.88 an ounce ©2025 Bloomberg L.P.