Day Traders Diary

11/22/22

The major averages rose sharply on 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 points, or 1.18%, at 34,098. The S&P 500 rose 51 points or 1.36% to close at 4,003, its first close above the 4,000 level since September. The Nasdaq Composite also gained 149 points or 1.36% to 11.174.

Mixed earnings results led to a few big stock moves - Best Buy popped 12.8% after the electronics retailer hiked its 2023 fiscal outlook and beat earnings expectations, while Abercrombie & Fitch and American Eagle Outfitters rose 19% and 16% respectively on their own earnings beats. On the flip side, Zoom fell 5.4% and Dollar Tree slipped about 9% after reporting disappointing earnings and a lower-than-expected outlook, respectively.

Stocks were helped by easing bond yields as investor attention turned toward 2023.

China saw its first deaths in the mainland from Covid since May over the weekend. It prompted fears among investors that the country could bring back restrictions meant to slow virus spread, which would hurt business. Just a week ago the country began to ease some of its tight covid measures, on its way to a looser policy.

China 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.

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.

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, and economic reports on Wednesday including initial jobless claims and purchasing manager index numbers.

The stock market will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.

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.