Morning Squawk: Economic Growth, Chip Tariff Delay, S&P 500 Hits New Record, and More

Here are five key takeaways for investors as the trading day begins:

## Economy Surges Beyond Expectations, Prompting Rate Cut Rethink

The U.S. economy demonstrated a remarkable surge in the third quarter, expanding at a significantly faster pace than anticipated. Preliminary data from the Commerce Department indicates a 4.3% growth rate, a robust figure that offers a stark contrast to more pessimistic consumer sentiment reports observed earlier. This economic resilience is largely attributed to sustained consumer spending, which climbed 3.5% in the third quarter, an acceleration from the 2.5% increase seen in the second quarter.

This strength in domestic demand, even as consumers increasingly rely on credit – with LendingTree reporting that 37% of Americans incurred holiday debt averaging $1,223, an increase from the previous year – has injected a new dynamic into market expectations. The delayed release of the Gross Domestic Product (GDP) report, a consequence of a government shutdown, has, however, raised concerns among investors. The robust growth figures are now seen as potentially diminishing the likelihood of the Federal Reserve initiating interest rate cuts in early 2026, as the central bank may opt to maintain a tighter monetary policy to curb inflationary pressures.

The holiday retail season also mirrored this consumer vigor. Preliminary data suggests a 4.2% rise in spending, with e-commerce and electronics leading the charge. This sustained spending power, despite rising debt levels, underscores a complex consumer landscape where immediate purchasing power is being maintained, albeit through increased leverage.

## Markets Navigate Growth Data with Tech Leading the Charge

Following the release of the stronger-than-expected GDP report, stock futures and Treasury yields remained relatively stable. The S&P 500, having recently touched a new record high, saw its upward momentum continue, with major technology stocks playing a pivotal role. Giants like Alphabet, Nvidia, Broadcom, and Amazon demonstrated significant strength, buoying the broader market and seemingly overriding immediate concerns about the potential impact of sustained economic growth on Federal Reserve rate cut timelines.

This market resilience in the face of potentially higher-for-longer interest rates highlights a growing investor confidence in the underlying technological innovation and long-term growth prospects of these companies. The ongoing rally in precious metals also continued, underscoring their appeal as a safe-haven asset amidst fluctuating economic outlooks.

In a separate development across the Atlantic, energy giant BP announced the sale of a 65% stake in its lubricants business, Castrol, to Stonepeak for $6 billion. This strategic divestiture follows earlier indications of the company seeking a buyer for the unit and represents a significant move in the energy sector’s ongoing portfolio adjustments. U.S. stock markets are scheduled for an early close at 1 p.m. ET on Christmas Eve, with bond markets following suit at 2 p.m.

## Student Loan Collections Set to Resume

The Trump administration has signaled a significant shift in its approach to delinquent federal student loans. Beginning the week of January 7th, the Department of Education will initiate administrative wage garnishment for borrowers who are in default. This marks the first time since the onset of the COVID-19 pandemic that federal student loan collections have been actively pursued, a policy shift that will place borrowers’ paychecks at risk.

The Education Department estimates that approximately 1,000 defaulted borrowers will receive wage garnishment notices initially. This action comes as more than 5 million student loan borrowers are currently in default, a substantial figure that underscores the ongoing challenges associated with student debt repayment. The resumption of collections aims to re-establish a pathway for borrowers to return to repayment status, though it presents immediate financial pressures for those affected.

## U.S. Delays Tariffs on Chinese Semiconductors

In a move signaling a potential de-escalation of trade tensions, the U.S. has announced a delay in implementing new tariffs on Chinese semiconductor imports. Initially slated for June 2027, the tariffs will now see an initial 18-month period with a zero tariff rate on these imports. This decision, communicated via a filing in the Federal Register by the Office of the U.S. Trade Representative, follows an investigation initiated a year prior, which concluded that China engages in unfair trade practices within the semiconductor industry.

The extended delay suggests a strategic effort by the Trump administration to temper trade hostilities with China, allowing for further dialogue and potentially seeking alternative resolutions to trade disputes. This measured approach to tariffs on a critical technology sector acknowledges the intricate global supply chains and the potential economic ramifications of immediate tariff impositions.

## ServiceNow Acquires Armis to Bolster Cybersecurity in AI Era

Enterprise software leader ServiceNow has announced its intention to acquire cybersecurity startup Armis in a cash transaction valued at $7.75 billion. This strategic acquisition is designed to significantly enhance ServiceNow’s cybersecurity capabilities, particularly in the rapidly evolving landscape shaped by artificial intelligence.

ServiceNow CEO Bill McDermott highlighted the transformative potential of the acquisition, stating that it will enable the company to offer “the only AI control tower that drives workflow, action and business outcomes across all of these environments.” This move positions ServiceNow to provide comprehensive AI-driven solutions that span across diverse operational environments, offering unparalleled visibility and control in an increasingly complex digital world. The integration of Armis’s technology is expected to be a cornerstone in ServiceNow’s strategy to address the burgeoning cybersecurity challenges brought on by widespread AI adoption.

## The Daily Dividend

Alphabet’s self-driving car division, Waymo, is implementing upgrades to its fleet following a recent blackout in San Francisco that led to a temporary suspension of its driverless car services. The company is enhancing its vehicles’ navigation systems to better respond to unforeseen power outages, underscoring the ongoing challenges and continuous improvements required in autonomous vehicle technology. This proactive measure aims to ensure greater reliability and safety as Waymo expands its operational footprint.