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U.S. stocks opened slightly higher on Tuesday, but the Nasdaq soon fell into negative territory as traders gauged impacts of COVID-19 restrictions in China and waited for Wednesday’s minutes from the most recent Federal Reserve meeting.
How are stocks are trading
-
The S&P 500
SPX,
+0.44%
was up 12 points, or 0.3%, at 3,962. -
The Dow Jones Industrial Average
DJIA,
+0.70%
gained 199 points, almost 0.6%, to trade at 33,899. -
The Nasdaq Composite
COMP,
-0.10%
dipped 30 points, more than 0.2%, to 10,994.
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. Stocks have fallen in three of the past four trading sessions.
What’s driving markets
Stock markets were a touch firmer 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.
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,
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 are due Wednesday, including minutes of the Fed’s November policy meeting.
Companies in focus
-
Dick’s Sporting Goods Inc.
DKS,
+1.06%
stock initially dipped but rebounded in premarket trading Tuesday after releasing its third quarter earnings. In Tuesday morning trading, shares in the retailer are up 1.73, or 1.62%, after the company beat estimates with positive same-store sales and offered a rosy outlook. -
Dell Technologies Inc.
DELL,
+3.77%
shares were off 1% 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.
