U.S. stocks opened modestly lower on Tuesday after a stronger-than-expected third-quarter GDP report fueled concerns that resilient economic growth could lead the Federal Reserve to slow the pace of future interest rate cuts.
The U.S. economy expanded at an annualized rate of 4.3% in the third quarter, accelerating from 3.8% in the previous period and comfortably beating the 3.3% market consensus. The data highlighted continued momentum in economic activity, driven largely by robust consumer spending.
In early New York trading at 9:35 ET (14:35 GMT), the S&P 500 slipped 0.1%, the Nasdaq 100 was little changed, and the Dow Jones Industrial Average fell around 0.2%.
Commenting on the market reaction, Bloomberg macro strategist Tatiana Darie said equities weakened after the strong GDP print and a sharp rise in consumer spending trimmed expectations for rate cuts in 2026. She noted that while the data is backward-looking, the resilience of U.S. consumers poses an upside risk to the more dovish interest rate outlook that markets have priced in for next year.
Wall Street entered the session after a three-day rally that pushed major U.S. indices slightly into positive territory for the month. With year-end holidays approaching and trading volumes thinning, markets are expected to remain sensitive to incoming economic data despite lighter activity.
Strong GDP reinforces growth narrative
The latest GDP figures were released following a significant delay caused by the federal government shutdown. According to the Commerce Department, the 4.3% growth rate for the July–September period marked the fastest expansion in over a year and exceeded the 3.2% consensus forecast cited by economists surveyed by The Wall Street Journal.
The report represents the first official estimate of third-quarter growth, even as the fourth quarter is already nearing completion. Federal agencies, including the Commerce Department, have been working through data backlogs created by the shutdown, which delayed the GDP release by nearly two months.
Fed rate outlook and leadership transition watched
Despite the strong GDP reading, analysts at CIBC believe the data is unlikely to materially alter the policy path of the Federal Reserve. CIBC economist Ali Jaffery said the central bank places greater emphasis on labor market conditions than on activity data, noting that recent employment trends have softened in the fourth quarter.
Jaffery maintained his forecast for two interest rate cuts in the first half of next year, arguing that the GDP data is both lagged and less influential for policy decisions.
Equity markets continued to find some support from last week’s softer-than-expected U.S. inflation data, which reinforced expectations that price pressures are easing more decisively. The weaker consumer price index reading encouraged traders to bring forward bets on rate cuts, increasing expectations for faster easing by the Fed in 2026.
Investors are also closely monitoring developments surrounding the Federal Reserve’s leadership transition. With Fed Chair Jerome Powell set to see his term expire in May and Donald Trump interviewing potential successors, markets are looking for clues on how future leadership could shape monetary policy.
