S&P 500 Record, GDP Surge, AI Deal Focus

U.S. equities pushed into year-end with the S&P 500 closing at a fresh record of 6,909.79, as AI-linked megacaps led in a holiday-thinned tape. The Nasdaq finished at 23,561.84, while futures into Christmas Eve were only fractionally softer, a sign investors are still leaning into the seasonal “Santa Claus rally” window rather than de-risking.

The catalyst was a shutdown-delayed growth surprise that briefly revived the “higher-for-longer” narrative. The Commerce Department’s initial Q3 read showed real GDP up 4.3% versus a 3.2% consensus estimate, a jolt that initially pushed traders to trim early-2026 cut expectations, according to the same session’s market coverage. Markets ultimately shrugged it off, helped by the idea that a strong economy can coexist with lower inflation if productivity is rising.

Rates pricing did soften at the margin. Reuters noted traders still expect two 25-bp cuts by end-2026 but cut the odds of a January move to 13%, down from 18%, a subtle rebalancing rather than a regime shift in expectations, per Christmas Eve futures coverage. Meanwhile, safe-haven demand stayed lively. CNBC reported gold futures touched an intraday record of $4,530.80/oz, underscoring that not everyone is fully comfortable with risk-on exuberance, per the metals update.

Next, watch whether breadth can improve beyond the same AI and mega-cap complex. If the rally widens while rates expectations stay anchored, it supports a cleaner risk-on setup into early January. Position for thinner liquidity and bigger-than-usual moves on small catalysts during the shortened holiday sessions.

New, shutdown-delayed data shows the U.S. economy accelerated sharply over the summer. The Commerce Department’s initial estimate put Q3 real GDP growth at 4.3%, with consumer spending rising 3.5%, according to the Q3 GDP release recap. That’s a faster clip than most forecasters expected, and it helps explain why markets keep flirting with new highs even as many households say the economy feels rough.

The “why” behind the disconnect is affordability and uneven gains. CNN notes inflation has cooled but remains sticky for essentials, with items like ground beef up 15% year over year and electricity up 7%, even as gasoline recently fell to about $2.86 per gallon, per its affordability analysis. Paychecks are not keeping pace for everyone. Bank of America deposit data cited by CNN shows middle-income wage growth around 2.3% and lower-income around 1.4% in November. Meanwhile, confidence is sliding. Reuters reported consumer confidence deteriorated in December, reinforcing that strong backward-looking GDP doesn’t necessarily translate into forward-looking comfort, per the data roundup.

The labor market is the other tension point. CNN highlighted unemployment at 4.6%, a four-year high, and growing worries about job security as openings cool and hiring slows, per job-security concerns. Business Insider adds color on how that slowdown feels on the ground. Job openings have cooled 37% from 2022 highs, while the quits rate fell to 1.8% in October, signaling workers feel stuck, per its job-market chart pack. That’s a sharp turn from the Great Resignation era’s confidence.

Likely next steps hinge on whether Q4 data confirms a softening labor market alongside still-solid demand. Keep your lens on real-time signals like claims, hiring intentions, and category-level inflation. For planning, treat the economy as strong but uneven. It’s a setup where spending can hold up even as sentiment stays sour, which complicates both Fed timing and corporate guidance.

Corporate and political decision-makers are leaning hard into artificial intelligence as a growth engine, even as skeptics warn of labor dislocation and valuation risk. ServiceNow agreed to acquire cybersecurity startup Armis in a cash deal valued at $7.75 billion, aiming to expand its security and risk opportunity, per the deal announcement. The message is clear. AI-era software spending is shifting from experimentation toward control, governance, and defense.

In Washington, the Trump White House is signaling it wants fewer constraints and more speed. The New York Times reports the administration has downplayed A.I. risks, including concerns about a potential bubble and job losses, while celebrating soaring tech stocks as a barometer of success. Politico adds the administration is also operationalizing AI internally, describing a communications strategy that relies on AI-generated content to move faster and dominate attention, per its White House AI profile.

Still, the “how” matters because AI’s economic gains are not evenly distributed, and the labor market is already cooling. CNBC cited Bespoke’s estimate that AI-related spending drove about 15% of growth over the last two quarters but is less than 5% of GDP overall, a useful reminder that narratives can run ahead of reality, per Bespoke’s AI share. Meanwhile, Business Insider describes a “frozen” market where job openings per unemployed person slipped from 2 in 2022 to about 1 this September, per its openings ratio. That’s the tension. AI is pitched as productivity magic, but it’s also a visible contributor to slower hiring, especially in white-collar entry roles.

Next, expect a surge of AI-adjacent M&A and product launches focused on security, compliance, and workflow automation, alongside louder debates over job impacts and governance. For operators and investors, prioritize signals that separate hype from durable demand: security budgets, renewal rates, and whether automation is showing up in margins without triggering demand destruction.

• Weekly jobless claims. A surprise jump would reinforce the cooling-jobs narrative even if GDP looks hot.
• Whether the S&P 500 can clear the 7,000 level during the Santa rally window. Thin volume can exaggerate breakouts and reversals.
• Rate-cut pricing after the 4.3% GDP surprise. Watch if “two cuts by end-2026” holds or begins to slip.
• Gold’s record run. A sustained bid near $4,530/oz would signal persistent hedging demand despite equity euphoria.
• Student-loan collections restarting. The Education Department expects about 1,000 notices starting the week of Jan. 7, a small start that could grow into a consumer-spending headwind.