Markets Mull Strong GDP On Shortened Trading Day

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Wednesday, December 24th. Markets head into a quiet holiday-shortened trading session with stocks at record highs after a fourth straight day of gains. With few earnings or economic reports on the calendar today, investors will continue to mull the strongest quarterly gross domestic product or GDP report in two years and assess the durability of a relatively modest Santa Claus rally. On Tuesday, the Bureau of Economic Analysis revealed that GDP grew by 4.3 % in the third quarter, well ahead of consensus estimates for 3 % growth from Briefing.com.

0:55The GDP report, which was delayed nearly two months by the government shutdown, showed consumers spent at an impressive clip in the late summer and early fall. Personal consumption rose by 3.5 % during the period, well above the consensus forecast and the 2.5 % growth seen in the second quarter. The consumer continues to drive the economy despite concerns about the cooling labor market, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. Strong growth like this should prevent the Fed from cutting much more than one to two times next year and is one more reason that long-term yields should stay elevated.

1:36Trading conditions will likely be thin around the holidays, keeping the focus on GDP and a short list of earnings and economic updates. The Netherlands-based JBSNV, the world's largest meat processor, is the sole major company that will release earnings today. Meanwhile, mortgage applications and initial jobless claims are the only economic reports on the calendar. For the latter, consensus expects 225 ,000 claims, roughly in line with last week's 224 ,000. Investors will be looking for more signs of labor market weakness in the report after the recent rise in the unemployment rate, particularly with a stronger-than-expected GDP report reducing rate-cut expectations.

2:18The futures market prices in just 13.3 percent chances of a January rate cut as of Tuesday afternoon, according to the CME FedWatch tool. That was down sharply from the roughly 20 percent odds seen on Monday. Treasury yields rose across much of the curve as well, with the 10-year yield briefly touching 4.19 percent, its highest level since early September. Digging deeper into the GDP report, corporate profits jumped more than 4 % in the third quarter, reaching a new record high of$4.1 trillion. This should bode well for credit worthiness going forward, Martin said, adding that most corporate bonds, like those with investment-grade ratings, should continue to perform well.

3:00The Fed's favorite inflation gauge came in equally hot. The Personal Consumption Expenditures, or PCE, price index rose 2.8 % in the third quarter, while Core PCE, which excludes food and energy, advanced 2.9 percent. Both were above the second quarter figures of 2.1 percent and 2.6 percent, and well ahead of the Fed's 2 percent target inflation rate. However, these backward-looking readings could be overlooked by markets, with more recent Consumer Price Index or CPI data providing a better view of current inflationary pressures. Concerns about inflation certainly didn't manifest in the SIBO Volatility Index, or VIX, which fell for the fourth consecutive day on Tuesday.

3:42The market's so-called fear index has plummeted 48 percent since November 20, hitting lows not seen since late 2024. Investors may be sanguine, but consumer confidence fell for the fifth straight month in December, according to the Conference Board data released Tuesday. Consumers' perception of current business and labor market conditions was particularly gloomy this month, with the present situation index dipping to four-year lows. Looking at market action Tuesday, gold and silver prices continued their rise, once again touching new record highs. Copper followed suit, surging as much as 2 % to hit an all-time high above$12 ,000 per ton before pairing some of those gains.

4:25While metals rose, cryptocurrencies largely went in the other direction. Bitcoin was down 0.7 % as of Tuesday afternoon, while Ether had dropped 1.2%. The two largest cryptocurrencies, which are often seen as monetary inflation hedges, were likely weighed down by shifting rate-cut expectations after the hot GDP report. As far as individual stock movers, Novo Nordisk shares surged 7.3 % after the Food and Drug Administration approved the company's first-ever GLP-1 pill. The popular obesity treatment Wigovi is normally administered through injection, but Novo Nordisk's pill version will be available in the U.S.

5:06in early January. This could give the Danish pharmaceutical giant a leg up on its competition, including Eli Lilly in the growing obesity treatment sector. Freeport-McMoran stock also jumped 2.5 % after getting a price target upgrade from Wells Fargo and a boost from surging copper prices, which will likely benefit the mining company. NVIDIA stock, meanwhile, extended its rally to four days, rising 3%. Shares were once again buoyed by optimism over a Monday Reuters report that claimed the company aims to begin shipping its H200 AI chips to China early next year. Renewed China sales could serve as a catalyst for sales growth at the semiconductor leader if both Beijing and Washington approve.

5:52ServiceNow shares, on the other hand, sank 1.5 % after the enterprise software company agreed to buy the cybersecurity startup Armus in a$7.75 billion cash deal. It's the latest in a string of deals for ServiceNow that have some investors concerned that the company is relying on costly acquisitions to fuel its growth. Coinbase and MicroStrategy also saw their shares drop 2.3 % and 3.9 % respectively, amid an off day for crypto markets. Coinbase agreed to acquire the startup The Clearing Company on Monday in a bid to accelerate its move into regulated on-chain prediction markets, but that wasn't enough to spark a rally in its stock.

6:36From a sector perspective, communications services, energy, and infotech led the pack. Investors continue to show signs they're willing to bet on these cyclical and risk-on sectors in recent trading sessions. Health care, consumer staples, and real estate underperformed, with many investors moving away from defensive sectors and penciling in fewer rate cuts in 2026. Overall, seven out of the 11 S &P 500 sectors closed higher as markets experienced a fairly broad-based rally.

7:09The Dow Jones Industrial Average rose 79.73 points Tuesday or 0.16 % to 48 ,442.41. The S &P 500 Index advanced 31.3 points or 0.46 % to 6 ,909.79. And the Nasdaq Composite jumped 133.02 points or 0.57 % to 23 ,561.84. This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. Join us for another update tomorrow.

8:05For important disclosures, see the show notes and schwab.com slash market update podcast.