4.10pm: US markets power ahead
US markets staged a strong rally on Tuesday as a rebound in the oil price and an upbeat sales forecast from Best Buy provided support.
At the close the Dow Jones Industrial Average was up 398 points, or 1.18%, to 34,098, the S&P 500 advanced 54 points, or 1.36%, to 4,004 and the Nasdaq Composite jumped 150 points, or 1.36%, to 11,174.
Volumes were a touch lighter in the shortened holiday week and investors are also eyeing the release of FOMC minutes tomorrow.
Best Buy Co Inc (NYSE:BBY) jumped 12% after the retailer forecast a smaller drop in annual sales than previously announced and expressed confidence a ramp up in deals and discounts will entice more customers.
Also providing support was the energy sector, which jumped after two sessions of declines as Saudi Arabia said OPEC+ was sticking with outputs cuts, shooting down a report on Monday in the Wall Street Journal that said the alliance was considering increasing output which sent crude prices sharply lower.
Other stocks on the move included Agilent Technologies (NYSE:A) Inc which jumped 6.55% after the application-focused solutions company posted upbeat fourth-quarter revenue.
On the downside, Zoom fell 4.6% and Dollar Tree slipped 8.7% after reporting disappointing earnings and a lower-than-expected outlook, respectively.
12:05pm: Equity markets more resilient
The major US indices continued to move higher at midday on the news that Saudi Arabia has denied plans to boost oil production, helping oil prices rebound.
At midday, the S&P 500 was up by 0.7% at 3,977, the Nasdaq Composite was up by 0.4% at 11,068, while the Dow Jones was up by 0.8% to 33,982 points.
Michael Hewson, chief market analyst at CMC Markets, said the markets are relatively quiet today, ahead of the publication of the US Federal Reserve interest rate setting minutes tomorrow and a shortened US Thanksgiving week.
“The US dollar has slipped back a touch today, which also helps explain the slightly more resilient tone in equity markets,” Hewson wrote in a report.
“The weakness appears to be driven by an expectation that the Federal Reserve will, more likely than not, start slowing the pace of rate rises as more and more data shows that inflation is slowing.”
Among the biggest decliners yesterday, oil companies such as Enphase Energy and Chevron saw their share prices rebound today.
The major movers included Best Buy, up over 12% on a 3Q earnings surprise, followed by natural gas producer EQT, up by 6.3%, while laboratory tech company Agilent rose by 6%.
On the downside, Dollar Tree dropped by almost 10%, despite beating earnings and revenue forecasts, while Zoom Video fell by 6.4%, and pest and wildlife control company Rollins slid by 6.7%.
9.35am: Retail earnings, Fed speakers in spotlight
US stocks started the day on a positive note as retail earnings and a less hawkish stance from the Fed have overshadowed concerns over rising COVID cases in China which saw the major indexes turn red yesterday.
Just after the market opened, the Dow Jones Industrial Average had added 205 points or 0.6% at 33,905 points, the S&P 500 was up 18 points or 0.5% at 3,968 points, and the Nasdaq Composite was up 24 points or 0.2% at 11,046 points.
Forex.com market analyst Fiona Cincotta said that retailers Best Buy Co and Urban Outfitters Inc had beat earnings forecasts bringing cautious optimism to the sector ahead of Black Friday.
Just after the market opened, Best Buy stock had jumped 8.4% and Urban Outfitters had added 5.1%.
“Broadly speaking, US retailers have performed better than expected, suggesting that the US consumer is resilient heading into the crucial holiday quarter,” Cincotta said.
She added that investors would be paying attention to a number of Fed speakers who are due to speak later, including Cleveland Fed President Loretta Mester and known hawk James Bullard.
“The majority of speakers have hinted towards slower rate hikes from December, although hikes could continue higher for longer. Any less hawkish comments could lift stocks higher,” Cincotta said.
“According to CME Fed watch tool, the market is pricing in a 75% probability of a 50 basis point hike and a 25% likelihood of a 75 basis point hike.”
6.30am: China in focus
US stocks are expected to open modestly higher on Tuesday, with investors continuing to worry about China’s stance on COVID-19 infections, the ensuing lockdowns, and the effect on global economic growth.
Futures for the Dow Jones Industrial Average were up 0.1% in pre-market trading, while those for the S&P 500 were 0.2% higher, and contracts for the Nasdaq-100 rose 0.1%.
“Market sentiment is fragile on uncertainty regarding whether China would make a U-turn on its COVID reopening plans,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
A rise in the number of COVID-19 infections in China and the threat of lockdowns in the world’s most populous country are leading to market fears of an economic slowdown. Outbreaks in the capital Beijing and in the southern hub of Guangzhou and the resulting lockdowns are expected to crimp economic activity.
“The widening spread between the US 2- and 10-year yields, which hit the widest inversion since the middle of 80s, and between the US 3-month and 10-year yields warn that recession will be inevitable,” said Ozkardeskaya. “In the past decades, when we had such sustainable inversions - and they are sustainable, a recession followed the next year.”
San Francisco Federal Reserve President Mary Daly’s warning on Monday that too many interest rate hikes could be “unnecessarily painful” for the economy did not help stocks higher but tied in with the overall worries about a recession.
US rate-setters have delivered four consecutive interest rate increases of 75 basis points this year as they try to rein in runaway inflation. The minutes of their most recent rate-setting deliberations are due on Wednesday and will be closely watched.
With the Thanksgiving holiday on Thursday and the so-called Black Friday shopping period close at hand, investors and retailers will be watching how sales pan out especially after a set of mixed earnings from retailers, including gloomy guidance from the likes of Target last week.
Contact the author at jon.hopkins@proactiveinvestors.com