Tech Stocks Power S&P 500 To Record Close After GDP Surprise
With expectations for economic growth accelerating, traders have picked cyclical stocks as potential winners in 2026.
The S&P 500 Index closed at a record Tuesday as gains in technology stocks offset investor concerns about strong US economic growth potentially delaying interest-rate cuts.
The S&P 500 Index rose for a fourth-straight session, climbing 0.5% to notch its first record since Dec. 11, as gains in mega-cap tech stocks, including Nvidia Corp., Broadcom Inc. and Google-parent Alphabet Inc., outweighed weakness in the health-care and consumer staples sectors. The breadth of the gains was narrow, with an equal-weight version of the index falling 0.3%.
The tech-heavy Nasdaq 100 Index rose 0.5% and the blue-chip Dow Jones Industrial Average ended the day 0.2% higher. The Cboe Volatility Index, or VIX, hovered below 14.
Official data showed the US economy expanded at the fastest pace in two years, with annualized GDP growing at 4.3% in the quarter compared with expectations for 3.3% growth. The Federal Reserve’s preferred inflation measure — the personal consumption expenditures price index — rose at an annualized rate of 3.5%, exceeding estimates and showcasing the strength of American shoppers.
“There will likely be light trading volume but the path of least resistance is higher until the end of the year,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. He called Tuesday’s GDP number “exceptional.”
The case for near-term cuts “is made weaker by this a bit-better-than-our-optimistic baseline data,” said Peter Williams, economist at 22V Research.
The market is currently pricing in two rate cuts for 2026, though the Fed is expected to come under additional political pressure for easing policy next year.
US President Donald Trump said he expects the next Fed chair to lower rates if the economy is doing well. Treasury Secretary Scott Bessent said it’s worth discussing whether the central bank’s 2% inflation target should be re-framed as a range.
With expectations for economic growth accelerating, traders have picked cyclical stocks as potential winners in 2026.
Traders were closely watching the reports after an extended US government shutdown made it difficult to discern the Fed’s interest rate path after it cut rates at each of its last three meetings.
Another rate reduction is not “a prerequisite for the markets to continue to perform well here,” said Mona Mahajan, head of investment strategy at Edward Jones, in a Bloomberg TV interview on Tuesday morning.
Stock market volatility has dropped, with the VIX trading near a 12-month low, but Citigroup strategists led by Chris Montagu said that investors have added short bets across the US stock market last week.
Novo Nordisk’s US-listed shares soared early Tuesday after the Food and Drug Administration approved sales of a pill version of its Wegovy obesity drug as it competes for market share with Eli Lilly & Co.
Still ahead this week, initial jobless claims and mortgage application data is expected Wednesday.
