Stocks rose Tuesday as Wall Street looked past tightening Covid policies in China to instead focus on a host of strong earnings reports and the potential for smaller future rate hikes during a holiday-shortened trading week.
The Dow Jones Industrial Average closed 397.82 points, or 1.18%, higher at 34,098.10. The S&P 500 rose 1.36% to close at 4,003.58, its first close above the 4,000 level since September. The Nasdaq Composite also gained 1.36% to 11,174.41.
Mixed earnings results led to a few big stock moves. Best Buy popped about 12.8% after the electronics retailer hiked its 2023 fiscal outlook and beat earnings expectations, while Abercrombie & Fitch and American Eagle Outfitters rose 21.4% and nearly 18.2% respectively on their own earnings beats. On the flip side, Zoom fell roughly 3.9% and Dollar Tree slipped 7.8% after reporting disappointing earnings and a lower-than-expected outlook, respectively.
China saw its first deaths in the mainland from Covid since May over the weekend, prompting officials to ramp back up on protocols to curb the spread of the virus. Just a week ago the country began to ease some of its tight Covid measures, on its way to a looser policy.
China's reopening would be "extremely growth positive," according to Seema Shah, chief global strategist at Principal Asset Management.
"As ever though, investors should cautiously monitor developments as faithful execution of the reopening plan will be key to the investment outlook," she said in a Tuesday note.
Stocks were helped by easing bond yields as investors' attention turned toward 2023. Investors also weighed comments from Federal Reserve leaders. On Monday, Cleveland Fed President Loretta Mester said recent inflation data is promising and that she'd support reduced interest rate hikes going forward. That could mean that the Fed gets to its terminal rate, between 4% and 5%, soon.
"That's a huge weight off the shoulders of investors that have had absolutely nowhere to hide this year," said Phil Camporeale, managing director and portfolio manager at JPMorgan Asset Management on CNBC's "Squawk on the Street."
Oil prices rose after Saudi Arabia said that OPEC+ would stick with the output cuts it previously announced.
Investors will be watching for earnings reports from HP Inc and Nordstrom after the bell. They will also eye economic reports on Wednesday, including initial jobless claims and consumer sentiment.
The stock market will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.
Stocks rose Tuesday with all three major averages gaining more than 1% as Wall Street bet that interest rate hikes and inflation will ease heading into the end of the year. The S&P 500 also closed at a level not seen since September.
The Dow Jones Industrial Average closed 397.82 points, or 1.18%, higher at 34,098.10. The Nasdaq Composite also gained 1.36% to 11.174.41.
The S&P 500 rose 1.36% to close at 4,003.58, its first close above the 4,000 level since September.
—Carmen Reinicke
Trading volumes were light again Tuesday as traders were off for the holiday-shortened week.
The S&P 500 key SPDR ETF has traded 38.6M shares so far today, below its 30-day average volume of 93.3M shares.
At the same time, the Invesco QQQ ETF has traded 33.2M shares so far today, also below its 30-day average volume of 64.4M shares.
—Carmen Reinicke, Chris Hayes
Demand for new iPhones persists despite lockdowns in China, with plans to purchase the latest gadget picking up steam in smaller markets, according to data gathered by UBS' Evidence Lab.
The firm found that purchase intent for the iPhone ticked lower year over year in China and the U.S., but rose in smaller markets like the United Kingdom and Germany. Those adjustments should help offset flattish unit growth in the U.S. and China, wrote analyst David Vogt in a note to clients Tuesday.
"12-month iPhone purchase intent in China was down ~100 YoY but near all-time highs suggesting consumers in this market continue to prefer high-end Apple devices like the 14 Pro and 14 Pro Max despite lockdowns," he said.
The data is "supportive of our view that 5G iPhone demand will be less of a super cycle and more elongated in duration driven by a steady replacement cadence, consistent with our iPhone forecast the next several years," Vogt added.
The findings also indicated that the average device age is now at a six-year high, or up a month from the previous model to 20 months on average.
— Samantha Subin
Even though stocks are looking up on Tuesday, it is likely due to a lack of macro news and low volume during the short holiday week, according to Goldman Sachs.
"Investors are assuming a somewhat pro-cylical stance on Tuesday, the penultimate trading day before Thanksgiving, leaning into Energy, Materials, and Tech," the firm wrote in a Tuesday note. "On the other hand, yields on 10-year US treasuries are pulling back, falling ~6bps to 3.76%."
Still, investors are closely watching earnings reports for signs of a soft landing.
"Peeking under the hood of the S&P 500 reveals that markets are focused on results, leaning into companies that reported better than expected earnings like BBY, DKS, A, WMG, and ADI, and away from those that disappointed, including DLTR, MDT," Goldman said. "A preference for companies delivering on earnings and margins is perhaps to be expected, as investors focus on quality."
Stocks aren't out of the woods yet, though.
"Our strategists believe the path forward could be a bumpy one, as the bear market is not over, and neither is the rate hiking cycle. Looking ahead, focus on the FOMC meeting minutes that are being released tomorrow."
—Carmen Reinicke
Shares of Manchester United, the professional football club, surged more than 12% Tuesday after a Sky News report said that the owners of the team are set to explore financial options including a potential sale.
The news comes the same day that the club announced that it had ended the contract of player Cristiano Ronaldo by mutual agreement and with immediate effect. Ronaldo's departure comes about a week after he gave an interview criticizing the club.
—Carmen Reinicke
Savita Subramanian, Bank of America's head of U.S. equity and quantitative strategy, said a recession in 2023 will look different than those seen in the past.
"Some of the biggest risks that we see over the next 12 months are driven by the fact that things are different this time," she said in a note to clients. She said it's "not your mom and dad's recession."
Tech will continue to get hit, she said. But there's a whole list of other factors that could impact how the market performs.
CNBC Pro subscribers can see those variables and what her forecasts are for the year here.
— Alex Harring
These are some of the stocks making the biggest moves midday:
Abercrombie & Fitch – Shares of the retail stock jumped 19% after the apparel retailer beat Wall Street's revenue forecasts for the third quarter and posted unexpected quarterly profit. The company said demand rose for clothing as consumers returned to work and had increasing social obligations.
Zoom Video - Shares of the pandemic darling fell more than 4% after the firm issued weaker-than-expected revenue guidance for its full fiscal year. Meanwhile, the video-conferencing company's quarterly earnings topped estimates, while revenue met expectations.
Best Buy – The stock surged 11% after the consumer electronics retailer beat Wall Street's estimates and maintained its outlook for the holiday period. Demand remains below its pandemic high, but Best Buy indicated it is faring well even as inflation weighs on consumers' pockets.
Dollar Tree – The discount retailer saw shares slide amore than 8% after the company projected full-year earnings in the lower half of its prior guidance range while beating top and bottom line estimates for its latest quarter and on comparable store sales.
— Alex Harring
Hurt most by a sharp drawdown in Zoom Video, the WisdomTree Cloud Computing ETF (WCLD) has recovered from an early morning loss of some 6.6% and was lower by a little less than 1% in early afternoon trading.
Zoom (ZM) remains 4.9% lower — but earlier was off by 10.4%. Similarly, Paypal (PYPL) is down about 2% after sliding as much as 5.7%.
RingCentral (RNG) hasn't rebounded as much, but has recovered a bit, dropping 4% after earlier falling 5.7%.
Zoom brought on much of the sector's latest woes. Late Monday, the pandemic/work-from-home darling gave investors a light forward earnings forecast and CEO Eric Yuan said on the conference call it's seeing "heightened deal scrutiny for new business."
— Scott Schnipper, Gina Francolla
Saudi Arabia's equities exchange will close Wednesday after it was named a national holiday recognizing the country's win in a match against Argentina during the World Cup.
King Salman bin Abdulaziz Al Saud issued the decree announcing the holiday for employees in the public and private sector after the country's team upset Argentina with a 2-1 win.
Argentina's team is ranked third in the world by FIFA and includes Lionel Messi, who many consider to be one of the best players in the world. Saudi Arabia is ranked 51st.
The exchange will reopen Thursday.
— Alex Harring
Tuesday was a big day for retail earnings and the main takeaway is that there are surprisingly few big misses in the bunch.
On the whole, performance has been helped by better-than-expected sales and margins that have held up well. A look through Refinitiv's same-store sales summary also shows there really weren't many significant misses for this important retail sales metric. Although the environment certainly is promotional, it doesn't seem like retailers are offering massive fire-sale price cuts.
With Q3 just about in the books, the attention turns to the holiday season and how Q4 estimates will fare in the weeks to come. Retailers have been cautious in their outlooks, but they're refraining from entirely downbeat forecasts. The message seems to be that despite lingering macro concerns, shopping patterns should be somewhat normal this holiday season, with the biggest activity concentrated during Black Friday and Cyber Monday weekend and then peaking again in the days leading up to Christmas.
Big stock moves today from American Eagle Outfitters (up 17.9%), Burlington Stores (up 17.5%), Best Buy (up 11.7%), Dick's Sporting Goods (up 9%) and Urban Outfitters (up 4.9%)
On the downside is Dollar Tree (down 9%), which is seeing some pressure on its margins, prompting it to guide to the low end of its earlier forecast.
—Robert Hum, Christina Cheddar Berk
Oil prices have been whipsawed this week ahead of OPEC+ Dec. 4 meeting, where it will give a further update on output. Prices slipped 5% Monday after a Wall Street Journal report said the group had considered a production hike of 500,000 barrels, which Saudi Arabia later denied.
In addition, Saudi Arabia said the group may further cut output.
"While there are a host of reasons weighing on oil prices, trading December crude oil futures was this week, and ended on November 21, which added to volatility," wrote Quincy Krosby, chief global strategist for LPL Financial. "As in any trading session involving contract expirations and futures, especially when holiday-related volume decreases, volatility is typically heightened."
There is also worry that interest rates, ticking up globally, will lead to recession and hurt demand. The recent uptick of covid cases in China hasn't helped, as it's likely set back a reopening of the country that would've boosted demand.
There are more hurdles to come.
"Following the December 4 meeting, a European Union ban on Russian crude imports will begin. In addition, a G7 plan to limit Russia's gains from oil exports, is due to go into effect," said Krosby. "The plan has placed a price cap on the exports, and there are growing worries that Russia could soon retaliate because oil revenue is the major funding source for its military campaign against Ukraine."
—Carmen Reinicke
Nineteen stocks in the S&P 500 hit 52-week highs so far Tuesday and, of those, 16 (84%) also touched all-time highs. Three of the 19 (TRV, MRK, IBM) are also in the Dow Jones Industrial Average, and two of those are among the all-time highs:
There were two 52-week lows in the S&P 500 early Tuesday:
No comment.
— Scott Schnipper and Christopher Hayes
Goldman Sachs is expecting zero earnings growth in 2023 and a flat year for stocks, with the S&P 500 ending the year at 4,000. That price target is just over 1% from Monday's close.
While the firm currently expects a soft landing from the Federal Reserve, there is a risk of a hard landing and recession, said David Kostin, Goldman's chief U.S. equity strategist.
"The combination of a flat return under our base case and large downside in a recession means investors should remain cautious," he wrote in a note Monday.
Therefore he recommends tilting portfolios toward defensive sectors with low interest-rate risk, like consumer staples, and looking at stocks that are leveraged to decelerating inflation.
To see his stock picks and other sectors he likes, read this CNBC Pro story.
— Michelle Fox
Honeywell has underappreciated technology angles and growth potential, according to JPMorgan.
There are a number of reasons for the call, including a management presentation that goes "against the narrative that this $2.3 B business is merely commodity 'fossil' exposure," analyst Stephen Tusa Jr. wrote in a note Monday.
That presentation showed the company's performance materials and technologies business group, UOP, is not a static refining-based technology, he said. A majority of the catalyst business is petrochem, which is higher margin and more differentiated, he added.
The most underappreciated is its sustainability technology solutions (STS) unit, which is growing and is a "prime example" of highly unique niches in which Honeywell should maintain differentiation over the long term, Tusa said.
"For the stock, it's true that on FCF it's already re-rated, but the favorable end market exposure, HON-specific drivers set to sustain, and a balance sheet that lends safety on defense and growth and transformation on offense are all key to justifying the multiple," he wrote.
Shares of Honeywell are up about 4% year to date.
— Michelle Fox
The S&P 500 energy sector jumped more than 2%, on pace for its biggest one-day gain since Nov. 11, to lead the broader market index higher. Materials also rose more than 1%.
Real estate was the laggard, sliding about 0.1%.
— Fred Imbert
Bank of America names Costco a top pick because of rising food inflation, and expects shares have further upside from here.
"We expect high food inflation to drive continued share gains for the warehouse club channel (including Costco) given the strong value proposition and price positioning on overlapping SKUs vs. mass and traditional grocery," analyst Robert Ohmes wrote in a Tuesday note.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Amazon stock may soon be set up for some reprieve after slumping more than 44% year to date, according to Thomas Champion at Piper Sandler.
"First, the company has embarked on a headcount reduction," Champion wrote in a Tuesday note. "he peer signal is clear: on average, the companies in our coverage who have cut headcount this year are up ~8% since the announcement, handily outperforming the S&P."
The stock's underperformance this year may have put it in a solid position for a rebound as well.
"As of mid-November, AMZN's 1YR return in the stock is a ~50% decline," he said. "Prior periods of significant dislocation in the stock have yielded compelling F12M returns."
Even though the company's latest earnings report showed slowing AWS growth, it appears to be an industry-wide trend, according to Champion. AWS remains an industry leader in cloud and is well-positioned to withstand a potential recession.
The firm lowered some of its earnings estimates slightly but reiterated its overweight rating and bullish outlook on Amazon.
—Carmen Reinicke
Cathie Wood's Ark Next Generation Internet ETF (ARKW) added 176,945 shares of the Grayscale Bitcoin Trust on Monday. The investors started buying the dip in crypto-related shares last week even as the fallout from the FTX collapse is creating new stresses in the industry. She also bought Coinbase and Silvergate Capital recently.
The Grayscale trust is viewed by many as a proxy for the price of bitcoin, but it is currently trading well below the market value of the coins it holds.
Earlier Tuesday, bitcoin fell to $15,480 , its lowest level since Nov. 11, 2020.
— Yun Li
U.S.-listed shares of BP gained more than 4% in the premarket Tuesday after Citi upgraded shares of the oil stock to a buy from a neutral rating.
"Growth is one aspect that we believe BP can start to differentiate around versus large-cap European peers; we forecast underlying growth almost 2x that of closest peer SHEL," wrote analyst Alastair Syme in a note to clients, highlighting the company's favorable valuation to its European peers.
CNBC Pro subscribers can check out the full story here.
— Samantha Subin
The S&P 500 recently rallied more than 11% off of its mid-October lows as very low positioning got squeezed on positive catalysts. Deutsche Bank says the squeeze could have further to go based on equity positioning, flows and buybacks.
"A combination of positioning returning to neutral and continued buybacks argues for a rally in the S&P 500 back to 4,200 by year-end and to 4,500 by the end of Q1 2023," Deutsche's Binky Chadha said in a note to investors Monday. "We see aggregate equity positioning moving up to near neutral by the end of Q1 2023, driving the S&P 500 higher by 6% to 7%, and for buybacks to add 3 to 4% over the quarter."
Flows into U.S. equities have been "resilient" and are in a seasonally strong period through March now and buybacks remain supportive, Chadha said. Macro data surprises have ben positive but the key question is whether volatility will subside, especially with extreme market focus around the last two CPI days.
"Looking ahead, implied vol for CPI and FOMC days in December is significantly lower than over the last 2 months, but rising," Chadha said.
— Tanaya Macheel