U.S. stocks are moving higher Tuesday while traders gauge the impacts of COVID-19 restrictions in China and await Wednesday’s minutes from the most recent Federal Reserve meeting.
How are stocks are trading
- The S&P 500 SPX, +0.74% was up 27 points, or 0.7%, at 3,978.
- The Dow Jones Industrial Average DJIA, +0.83% gained 293 points, almost 0.9%, to trade at 33,988.
- The Nasdaq Composite COMP, +0.19% is up 57 points, more than 0.5%, to 11,081.
Following the Nasdaq’s quick slip and rebound to positive territory, Tuesday is bucking a recent trend. Stocks have fallen in three of the past four trading sessions. On Monday, the Dow fell 45 points, or 0.1%, while the S&P 500 lost 0.4% and the Nasdaq Composite shed 1.1%. The S&P 500 is up 10.4% from its 2022 closing low hit on Oct. 12, but remains down 17.1% for the year to date.
What’s driving markets
Stock markets were firming up but traders seemed reluctant to place bold bets as they weighed concerns about fresh COVID-19 restrictions in China and the prospects for tighter Federal Reserve policy.
Adding to the caution was a holiday-shortened week for Wall Street, where volumes traditionally tend to thin notably in the run-up to Thanksgiving on Thursday and Black Friday.
The implications of thin trading are important to remember from here out this week, said Art Hogan, chief market strategist at B. Riley Wealth Management. It’s been a “predominantly constructive market thus far this morning,” he said. But it’s “a week that will have ultra light volume.” Those conditions “tend to accentuate the moves in either direction,” he said.
The good news is that might be accentuating the positive, at least during early session trading. “On balance, what we are looking at is a lot of things stabilizing today,” Hogan said. That includes oil prices and late third quarter earnings that were coming in “more good news than bad news,” Hogan noted.
Best Buy and Dick’s Sporting Goods were two retailers moving higher Tuesday after beating analyst expectations. Oil prices increased after Saudi Arabia and the Organization of the Petroleum Exporting Countries said they were sticking with plans to reduce production.
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“The irony is that the China reopening story has been a big positive driver of China-related risk and overall markets over the last couple of weeks, so we are trading between feast and famine on this story,” wrote Jim Reid, strategist at Deutsche Bank, in a morning note.
“Both could of course be ultimately right. There might be many more restrictions in the near term but stronger more durable re-openings by the spring. Markets are struggling to price this at the moment though,” Reid added.
The lackluster action in stocks also reflects a market that has stalled following a rally off 2022 lows, and as investors look to the next catalyst to help push the S&P 500 out of its recent relatively tight range of roughly 50 points, on a closing basis, held over the past two weeks.
The ceiling of that range is 4,000, and unfortunately for equity bulls, it is unlikely the S&P 500 will finish much above it even in a year’s time, according to Goldman Sachs.
In a note published late on Monday, the Goldman strategy research team led by David Kostin, said that assuming the U.S. economy manages a soft landing then the stock market will experience “less pain but also no gain” in 2023.
“The performance of U.S. stocks in 2022 was all about a painful valuation derating but the equity story for 2023 will be about the lack of EPS growth. Zero earnings growth will match zero appreciation in the S&P 500. Our valuation model implies an unchanged P/E multiple of 17x and a year-end index level of 4000,” said Kostin.
Emblematic of the market’s travails over the past year or so are the share price collapses of former lockdown-linked work-from-home darlings, such as Zoom Video Communications Inc. ZM, -5.98%. Stock in the videoconferencing group was off about 9% in Tuesday morning trading, having delivered soft fourth-quarter guidance after Monday’s closing bell.
Kansas City Fed President Esther George is due to speak at 2:15 p.m. ET.
There are no U.S. economic updates of note set for release on Tuesday, while a raft of data is due Wednesday, including minutes of the Fed’s November policy meeting.
Companies in focus
- Dick’s Sporting Goods Inc. DKS, +6.43% stock initially dipped but rebounded in premarket trading Tuesday after releasing its third-quarter earnings. In Tuesday morning trading, shares in the retailer were up nearly 6%, after the company beat estimates with positive same-store sales and offered a rosy outlook.
- Just as the holiday shopping season gears up, Best Buy Co. Inc. BBYshares are up after third-quarter profit, revenue and same-stores sales all exceeded estimates. Stock in the consumer electronics and appliance retailer are up 9.5%.
- Dell Technologies Inc. DELL shares clawed back early losses and were up more than 3.8% Tuesday, following quarterly earnings released after Monday’s trading session. While earnings beat estimates, the company’s fourth-quarter revenue expectations were lower than analyst expectations.