US growth below expectations, Wall Street pulls back: GDP at 1.4% in the fourth quarter

The U.S. economy slowed more than expected in the fourth quarter, and markets reacted cautiously. According to the government’s preliminary estimate, real GDP grew at an annualized rate of 1.4%, a sharp slowdown from the +4.4% recorded in the previous quarter. On an annual basis, growth for 2025 stands at 2.2%, but the final reading for the year fell short of analysts’ expectations. “The Democrat Shutdown cost the U.S.A. at least two points in GDP. That’s why they are doing it, in mini form, again. No Shutdowns!” the Tycoon thundered.

On Wall Street, S&P 500 futures slipped 0.3% in early trading, heading toward erasing weekly gains. In the bond market, the yield on the 10-year Treasury rose to 4.08%, while the dollar is on track to post its best week since November.

Price pressures are also weighing on sentiment. The core Personal Consumption Expenditures (PCE) index, a key gauge for the Federal Reserve, increased by 0.4% in December, the strongest rise in nearly a year. On a year-over-year basis, core inflation remains at 3%, still well above the 2% target.

The combination of slowing growth and persistent inflation complicates the monetary policy outlook. Markets are pricing in a first rate cut in July and at least two reductions in 2026, but minutes from the Fed’s latest meeting show caution: some members do not rule out further hikes if price pressures remain elevated.

Andrea Pelucchi