---
title: "As the economy heats up and \"scares away\" interest rate cut expectations, technology stocks \"lead the way,\" and the S&P 500 index achieves four consecutive days of gains"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/270665822.md"
description: "On Tuesday, technology stocks rose, offsetting concerns about the potential delay in interest rate cuts due to strong economic growth in the United States. The S&P 500 index rose for the fourth consecutive day, reaching a new all-time high. Technology stocks such as NVIDIA, Broadcom, and Alphabet increased, countering weakness in the healthcare and consumer staples sectors. The Nasdaq 100 index rose by 0.5%, while the Dow Jones Industrial Average increased by 0.2%. The U.S. GDP grew by 4.3% in the third quarter, exceeding expectations, raising market concerns about the reduced likelihood of Federal Reserve interest rate cuts"
datetime: "2025-12-24T01:19:03.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/270665822.md)
  - [en](https://longbridge.com/en/news/270665822.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/270665822.md)
---

# As the economy heats up and "scares away" interest rate cut expectations, technology stocks "lead the way," and the S&P 500 index achieves four consecutive days of gains

According to the Zhitong Finance APP, on Tuesday, the S&P 500 index rose 0.5% to 6909.79 points, marking its fourth consecutive trading day of gains and setting a new historical closing high, as gains in technology stocks offset investors' concerns that strong economic growth in the U.S. could delay interest rate cuts.

The rise of large tech stocks such as NVIDIA (NVDA.US), Broadcom (AVGO.US), and Google (GOOGL.US) offset weakness in the healthcare and consumer staples sectors. However, the breadth of the gains was relatively narrow, with the equal-weighted S&P 500 index actually falling 0.3%. The tech-heavy Nasdaq 100 index rose 0.5%, while the Dow Jones Industrial Average closed up 0.2%. The Chicago Board Options Exchange Volatility Index (VIX) hovered below 14.

Data showed that the U.S. Gross Domestic Product (GDP) grew at an annualized rate of 4.3% in the third quarter of 2025, up from 3.8% in the second quarter and above market expectations of 3.3%. The U.S. Department of Commerce stated that the acceleration in economic growth in the third quarter was mainly due to a faster increase in consumer spending, as well as increases in exports and government spending. Data indicated that personal consumption expenditures, which account for about 70% of the U.S. economy, grew by 3.5% in the quarter, while government consumption expenditures and investments increased by 2.2%, and exports rose by 8.8%. Non-residential fixed investment, which reflects corporate investment conditions, grew by only 2.8% in the quarter, significantly lower than the previous quarter's 7.3%.

This data far exceeded the market expectation of 3.2%, raising concerns that the likelihood of the Federal Reserve cutting interest rates in early 2026 has diminished. According to the Chicago Mercantile Exchange's FedWatch tool, following the report's release, federal funds futures traders slightly increased their bets that the Fed would keep interest rates unchanged at its meetings in January and March next year.

Due to negative growth in the U.S. economy in the first quarter of this year, economic growth in the fourth quarter is expected to slow significantly due to factors such as the federal government "shutdown." Multiple research institutions predict that the U.S. economic growth rate will be 2% or lower in 2025.

Chris Zaccarelli, Chief Investment Officer of Northlight Asset Management, stated, "Trading volume may be relatively light, but the path of least resistance remains upward before the end of the year." He described the GDP data released on Tuesday as "very impressive."

Peter Williams, an economist at 22V Research, stated, "This data, which is slightly better than our optimistic baseline expectations, somewhat weakens the rationale for recent interest rate cuts."

Currently, the market has priced in expectations for two interest rate cuts in 2026, but the Federal Reserve is expected to face greater political pressure next year to ease monetary policy. U.S. President Trump stated that if the economy performs well, he expects the next Federal Reserve Chair to cut interest rates. Treasury Secretary Scott Bessent indicated that whether the central bank's 2% inflation target should be rephrased as a range is worth discussing.

After a prolonged government shutdown, the market finds it difficult to assess the Federal Reserve's interest rate path—especially in the context of its recent three meetings where interest rates were cut, traders are closely monitoring the latest economic reports Mona Mahajan, Chief Investment Strategist at Edward Jones, stated: "For the market to continue performing well at current levels, it does not necessarily require another rate cut."

Market volatility has significantly decreased, with the VIX index nearing a 12-month low, but Citigroup strategists led by Chris Montagu pointed out that investors increased short positions across the U.S. stock market last week.

## Cyclical Stocks May Take Over from Tech Stocks to Lead U.S. Stocks in 2026

As expectations for economic growth accelerate, traders have begun to view cyclical stocks as potential winners for 2026. Strategists and analysts expect that banks like JPMorgan (JPM.US), equipment manufacturers like Caterpillar (CAT.US), and retailers like Gap (GAP.US) and Dollar Tree (DLTR.US) will perform exceptionally well in 2026.

Michael Kantrowitz, Chief Investment Strategist and Head of Portfolio Strategy at Piper Sandler, stated: "Investors have begun to sense the initial signs of a rebound in the cyclical sectors of the economy."

This means that financials, industrials, and non-essential consumer goods suppliers are expected to be the leading forces behind another strong year for the U.S. stock market, as anticipated by Wall Street. About 60 economists surveyed predict an average growth target of 2% for the U.S. economy next year—this growth rate, while not robust, is sufficient to drive gains in areas outside of the tech sector.

Michael Kantrowitz added: "As cyclical data improves, value stocks may outperform the market for the first time in a long while in 2026. We should position ourselves in advance for those stocks expected to see marginal improvements in earnings next year."

In fact, the trend of style switching in the market has quietly emerged. The performance of the cyclical stock basket compiled by Goldman Sachs has been largely in sync with the S&P 500 index throughout the year, but in the past month, it has accumulated a gain of 9.3%, which is double the S&P 500's 4.2% increase.

![11.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251224/1766533326905869.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

Cyclical Stocks Outperform the Market

Moreover, the performance of cyclical stocks has also surpassed that of defensive stocks. Previously, during the small style switch triggered by the tech sector's pullback in October-November, defensive stocks were the biggest beneficiaries. Another trading strategy from Goldman Sachs—going long on non-commodity cyclical stocks and shorting defensive stocks—has also yielded a return of 10% in the past month.

Sam Stovall, Chief Investment Strategist at CFRA, noted in a report to clients: "The influx of funds into non-tech cyclical stocks highlights the market's optimistic expectations for economic expansion." The firm predicts that the U.S. real GDP will grow by 2.5% in 2026, "a growth that will benefit from a 4.1% increase in retail sales and a decline in the core Personal Consumption Expenditures (PCE) price index to 2.4%."

Many institutions on Wall Street believe that the strong performance of cyclical stocks has long-term sustainability. Dennis DeBusschere, Founder and Chief Market Strategist at 22V Research LLC, stated: "The window for pro-cyclical trading will not be limited to just one or two quarters." "His core investment strategy is to go long on banks and retail stocks, short on consumer staples, while being optimistic about transportation stocks outside of the airline sector.

Tom Hainlin, Chief Investment Strategist at US Bank NA, advises clients to increase their exposure to cyclical stocks in their equity portfolios. He stated, 'We want to enhance our allocation to cyclical stocks, but we will not achieve this by selling off technology stocks.' He expects the technology sector to continue leading earnings growth in 2026, with materials and industrial sectors following closely behind.

The Citigroup strategist team led by Adam Pickett noted in their report on December 15 that cyclical stocks are expected to outperform defensive stocks, recommending investors to overweight the financial sector—this is the bank's preferred target within the cyclical sector—while underweighting the consumer staples sector. The report also mentioned, 'The industrial sector also has the potential for rating upgrades.' However, Adam Pickett also cautioned that the path for cyclical stocks to rise in 2026 is not without obstacles. If the U.S. economy overheats, it could lead to a delay in the anticipated interest rate cuts, or even a policy shift. He emphasized, 'Whether the Federal Reserve can continue to cut rates before the end of 2026 is far from certain.'

### Related Stocks

- [AVGO.US](https://longbridge.com/en/quote/AVGO.US.md)
- [GOOG.US](https://longbridge.com/en/quote/GOOG.US.md)
- [GOOGL.US](https://longbridge.com/en/quote/GOOGL.US.md)
- [.DJI.US](https://longbridge.com/en/quote/.DJI.US.md)
- [NVDA.US](https://longbridge.com/en/quote/NVDA.US.md)

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