Major US stock indices opened higher on Thursday as market sentiment improved following President Trump's decision to dial back tariff threats on European nations over Greenland acquisition concerns. The positive momentum was further strengthened by robust third-quarter economic data that exceeded expectations.

Strong GDP Performance Drives Market Optimism

The US economy demonstrated remarkable resilience in the third quarter, with inflation-adjusted gross domestic product rising at a revised 4.4% annualized rate. This figure represents the fastest economic growth pace recorded in two years, providing substantial support for investor confidence.

Market Response and Opening Performance

The combination of geopolitical tension relief and strong economic fundamentals translated into broad-based gains across major indices at the opening bell. All three primary stock benchmarks posted solid advances as trading commenced.

Labor Market Stability

Official data revealed that US initial jobless claims remained steady at 200,000 last week, demonstrating labor market resilience following the volatile holiday season. This stability in employment metrics provided additional reassurance to investors about the underlying strength of the US economy.

Geopolitical Developments

Beyond the tariff relief, President Trump indicated he had a "good" meeting with Ukrainian President Volodymyr Zelenskyy, expressing renewed optimism about ending the conflict that Russia initiated four years ago. These diplomatic developments contributed to the overall positive market sentiment as investors welcomed reduced geopolitical uncertainty.

Major Wall Street banks are actively engaging with the Trump administration to influence proposed affordability measures, expressing concerns about certain policy ideas while offering alternative solutions. The discussions come as economic issues, particularly the high cost of living for Americans, remain a central political concern following Trump's 2024 presidential election victory.

Banking Industry Pushback on Key Proposals

Wall Street institutions have voiced significant doubts about the effectiveness of some of Trump's affordability proposals, particularly the plan to cap credit card interest rates. This proposal has already impacted major bank shares, reflecting investor concerns about potential regulatory constraints on banking operations.

Citigroup CEO Jane Fraser publicly stated her expectation that Congress would not approve caps on credit card interest rates, emphasizing that while "the President is right in focusing on affordability," rate caps "would not be good for the U.S. economy."

Alternative Solutions Proposed by Banks

Instead of the administration's initial proposals, banks are suggesting several alternative approaches to address affordability concerns:

• Enhanced retirement savings incentives to build long-term financial security
• Earlier wealth transfer mechanisms from parents to children
• Modified retirement fund access allowing parents and grandparents to use their 401K savings for children's housing down payments
• Tax-free home sales for older Americans to increase housing supply

Banking executives argue these alternatives could be more effective than direct rate caps. One source noted that parents and grandparents would likely have more substantial pension funds compared to career-starting individuals, making this approach more practical for housing assistance.

Market Context and Political Implications

The affordability debate has gained prominence as inflation concerns persist despite improvements since the COVID-19 pandemic peak. Housing and grocery prices remain elevated, creating political pressure ahead of mid-term elections. Economic issues significantly contributed to Trump's 2024 electoral success, making affordability measures a key policy priority.

Industry Response and Implementation Challenges

Sources familiar with the discussions, speaking anonymously from the World Economic Forum in Davos, indicate that banks are taking a collaborative approach. "We're saying, 'What are you trying to achieve? Let's figure out ways to help you,'" explained a top U.S. banking executive.

However, implementation faces significant challenges. Banks warn that credit card rate caps could lead to substantially reduced credit lines to limit losses. Additionally, allowing retirement fund access for housing down payments could increase demand without addressing supply constraints, potentially driving prices higher.

U.S. Treasury Secretary Scott Bessent acknowledged that discussing credit card company practices is "not unreasonable," indicating the administration's openness to various policy considerations. The ongoing engagement between banks and administration officials suggests continued dialogue as policies develop, with industry sources noting that officials "listen" and have "smart people working hard at this stuff."