U.S. stocks rose on Tuesday and the S&P 500 notched a closing record after a flurry of economic data that included a reading of economic growth pushed bond yields higher and elevated growth names.
It was the U.S. benchmark’s first record close since Dec. 11. Canada’s benchmark stock index also closed at a record, with all-time fresh peaks in metals prices helping the advance.
The Commerce Department said U.S. gross domestic product increased at a 4.3% annualized rate in the third quarter, the fastest pace since the third quarter of 2023 and well above the 3.3% estimate of economists polled by Reuters, fueled by robust consumer spending.
While the data was delayed due to the 43-day government shutdown and many analysts expected the fourth quarter would show a slower pace of economic growth, markets are now pricing in a smaller chance of a January rate cut from the Federal Reserve, according to CME’s FedWatch Tool, and shorter-dated bond yields rose.
“The bond market didn’t like this news,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
“It seems to me that when we lose this battle, growth does well, and growth’s doing well today... but if you’re a food company, or you’re a chemical company, or you’re an oil and gas company, or even if you’re like a private credit company, that’s bad news. Unless interest rates go down, it’s bad.”
The Dow Jones Industrial Average rose 79.73 points, or 0.16%, to 48,442.41, the S&P 500 gained 31.30 points, or 0.46%, to 6,909.79 and the Nasdaq Composite gained 133.02 points, or 0.57%, to 23,561.84.
The S&P 500 growth index gained 0.8% while the value index was largely unchanged.
AI-related names added to recent gains, rebounding from last week’s selloff that was triggered by concerns about inflated valuations and worries that high capital spending by AI companies would pressure their profits.
Nvidia rose 3% as the biggest boost to the benchmark S&P 500 index, while Amazon.com, Alphabet and Broadcom each saw gains of more than 1% on the day.
Other economic data painted a less rosy image of the economy as U.S. consumer confidence weakened in December amid deepening anxiety over jobs and income. Factory production was unchanged in November after declining in October.
All three main indexes were poised for a third straight yearly gain. The S&P 500 and the Dow were also on track to rise for an eighth consecutive month.
The S&P/TSX Composite Index ended up 58.63 points, or 0.2%, at 32,058.73, its fourth straight day of gains and eclipsing Monday’s record closing high.
Since the start of the year, the index has advanced 29.65%, led by financial and metal mining shares, putting it on track for its biggest gain since 2009.
Canada’s economy shrank by a greater-than-expected 0.3% in October, the largest drop in almost three years, but is expected to stage a partial recovery in November.
“Trade-related uncertainty continues to weigh on export-oriented sectors, but conditions appear to be stabilizing rather than collapsing,” Abbey Xu, an economist at Royal Bank of Canada, said in a note.
Fourth-quarter GDP is tracking at around 0.5% annualized growth following a 2.6% jump in the third quarter, Xu added.
The TSX energy sector rose 0.6% as the price of oil settled 0.6% higher at $58.38 a barrel. Investors assessed stronger-than-expected U.S. economic growth and the risk of disruptions to oil supply from Venezuela and Russia.
The materials group, which includes the shares of fertilizer and metal mining companies, was up 0.3% as the price of gold advanced 1% to another all-time high. Silver and copper prices also rose to fresh records.
Technology was a drag in Toronto, dipping 0.4%, and consumer discretionary ended 0.9% lower.
Canadian bond yields moved lower across a flatter curve, with the 10-year down 4.5 basis points at 3.428%.
Recent gains in U.S. stocks have spurred hopes of a “Santa Claus rally”, a seasonal phenomenon where the S&P 500 posts gains in the last five trading days of the year and the first two in January, according to Stock Trader’s Almanac.
This year, that period begins on Wednesday and runs through January 5.
Trading volumes were light and likely to thin out further as the holiday approaches. U.S. and Canadian stock markets will close at 1 p.m. ET on Wednesday and remain shut on Thursday for Christmas. The TSX is also closed on Friday for Boxing Day.
Volume on U.S. exchanges was 14.01 billion shares, compared with the 16.67 billion average for the full session over the last 20 trading days.
ServiceNow declined 1.5% after the enterprise software maker agreed to buy cybersecurity startup Armis for $7.75 billion in cash.
U.S. military shipbuilder Huntington Ingalls edged up 0.3% after President Donald Trump announced plans for a new “Trump class” of battleships, which he said would be larger, faster and “100 times more powerful” than any previously built.
Miner Freeport-McMoRan climbed 2.5% and closed at a 15-month high of $52.29 as copper prices touched a record high and Wells Fargo raised its price target on the stock.
Declining issues outnumbered advancers by a 1.02-to-1 ratio on the NYSE and by a 1.6-to-1 ratio on the Nasdaq. The S&P 500 posted 35 new 52-week highs and five new lows while the Nasdaq Composite recorded 70 new highs and 178 new lows.
Reuters, Globe staff