Dow ends nearly 400 points higher as investors await Fed minutes

Concerns about renewed COVID restrictions in China were blamed for market weakness on Monday and may continue to weigh on equities after investors had previously raised hopes for a loosening of curbs.

“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.

It’s 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.

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

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” so far, 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.

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Best Buy Co. Inc.
BBY,
+12.78%
and Dick’s Sporting Goods Inc.
DKS,
+10.12%
gained ground Tuesday after beating analyst expectations. Oil prices increased after Saudi Arabia denied a report they were weighing a potential production increase.

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.

There were 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. shares initially dipped but rebounded Tuesday after releasing its third-quarter earnings. Shares of the retailer rose 10.1%, after the company beat estimates with positive same-store sales and offered a rosy outlook.

• Best Buy Co. Inc. shares advanced 12.8% after third-quarter profit, revenue and same-stores sales all exceeded estimates.

• Dell Technologies Inc.
  DELL,
  +6.77%
  shares advanced 6.8%, 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.

—Jamie Chisholm contributed to this article.