Market Snapshot: Dow ends nearly 400 points higher as investors await Fed minutes

What’s driving markets

Stocks were looking to build on earlier gains, 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 in 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
BBY,
+11.86%
and Dick’s Sporting Goods
DKS,
+8.32%
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.

Read also: Is the stock market open on Black Friday? Thanksgiving week trading hours for major assets.

“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,
-4.81%.
Stock in the videoconferencing group was off about 6% Tuesday, 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,
+8.32%
 stock initially dipped but rebounded Tuesday after releasing its third-quarter earnings. Shares of the retailer were up nearly 7%, 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.
BBY,
+11.86%
shares are up 11.5% after third-quarter profit, revenue and same-stores sales all exceeded estimates.

Dell Technologies Inc.
DELL,
+5.75%
shares clawed back early losses and were up more than 4% 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.