Dow closes up 500 points, lifted by upbeat earnings, strong consumer confidence data

Citi’s Scott Chronert is expecting a 5% to 8% drawdown in the market at the start of 2023, and that should create a solid stock-picking environment for investors.

“That’s a buying opportunity because then, as you go into the spring timeframe, you get some lessening of the Fed overhang, and on that alone, you begin to get some valuation relief,” the U.S. equity strategist told CNBC’s “Closing Bell” on Wednesday.

Chronert’s base case for 2023 accounts for a mild recession, likely to occur during the first half of the year.

Given this outlook, Chronert recommends that investors find opportunities in areas of the market with earnings resilience, pointing to sectors like healthcare, real estate, energy and industrials, which Citi is overweight on.

“We’re looking for a combination of defensive characteristics, where we can also benefit from the risk-on attribute,” he said. “In our setup, it kind of dials you into the energy and industrials sectors.”

— Samantha Subin

Stocks surged as the final hour of trading kicked off.

The Dow Jones Industrial Average gained 515 points, or 1.57%. The S&P 500 and Nasdaq Composite jumped 1.5% and 1.6%, respectively.

— Samantha Subin

Despite the volatile times, retail investors flocked toward shares of battered technology names in 2022, according to data compiled by Vanda Research.

Investors bought a net $15.4 billion worth of Tesla in 2022, a 424% increase over 2021. That allowed the electric vehicle stock to outrank Apple as the most popular name among retail investors.

Net retail purchases totaled about $15.2 billion for Apple, up 18% over the previous year. Advanced Micro Devices followed behind as the third most popular standalone stock, with investors buying a net $10.6 billion worth.

But it wasn’t individual stocks that investors bought the most of in 2022. The SPDR S&P 500 ETF Trust and Invesco QQQ Trust were the most bought securities, data suggests.

The top three least popular names bought this year were AMC, Palantir Technologies and Micron Technology, Vanda said. A slew of meme stocks also experienced year-over-year declines in purchases, despite a jump in inflows during the first quarter.

“We believe that large portfolio losses accumulated at the aggregate level are behind this drop in speculative behavior,” Vanda wrote.

The firm’s data also suggests that the average retail portfolio is on pace to end the year down 35% from all-time highs.

— Samantha Subin

Investors Intelligence weekly survey of financial newsletter writers showed bullishness declining to 37.5% from 42.9% last week and 43.3% two weeks ago (the highest since mid-August’s 45%).

Opinion remains higher than the recent six-year low in bullishness of 25% reached at the market bottom in early October, and 25.6% at the earlier low in mid-June.

Bearishness edged up to 33.3% in the latest survey from 31.4% last week, still far below the 44.1% reached in both mid-October and mid-June. (Or, for comparison’s sake, 41.7% in March 2020 at the start of the lockdown.)

The “correction” camp grew to 29.2% from 25.7% the week before, also below the recent high of 40.3% reached in late September.

The so-called “bull-bear spread” fell to +4.2% from +11.5% last week, and has been positive for six weeks. The higher the positive spread, the greater the risk, from the perspective of contrarian investors, while negative readings imply less risk. For example, the spread was -19.1% in early October 2022 and -17.6% in June 2022, while the March 2020 spread got to -11.6%, Investors Intelligence said.

The American Association of Individual Investors weekly sentiment survey is released Thursday.

— Scott Schnipper

Analysts and investors recently told CNBC Pro that they were optimistic about the outlook for several travel stocks in 2023, and comments from Carnival’s latest earnings call seem to back that up.

The cruise line said November and December have been strong for advance cruise bookings.

“Booking volumes strengthened following the relaxation in protocols, cancellation trends are improving globally, and we have seen a measurable lengthening in the booking curve, across all brands,” CEO Josh Weinstein said. “The momentum has continued into December, which bodes well for 2023 overall.”

According to Carnival, fourth-quarter booking volumes for 2023 sailings are comparable with the 2019 pace, and bookings in November actually topped November 2019.

Travelers are favoring North America and Australia sailings, which are above pre-pandemic levels. Bookings for Europe and Asia sailings still lag.

Carnival shares are up more than 5% in trading Wednesday.

For those worried about a recession, the outlook for Norwegian Cruise Lines and Royal Caribbean might be more favorable, CNBC Pro reports, as those cruise lines tend to appeal to a premium market. Shares of both stocks were trading higher Wednesday.

—Robert Hum, Christina Cheddar Berk

Stifel has trimmed its earnings forecasts for Target and Walmart for fiscal 2023 and 2024 as its consumer surveys suggest shoppers are rethinking their holiday gift lists and pulling back even more on spending.

“Our survey shows spending intentions continuing to worsen since early fall, with overall results below averages since May,” Stifel analyst Mark Astrachan wrote in a research note Wednesday.

Its mid-December survey suggests consumers will spend 4% less during the holiday season than they did last year. That’s down from an average forecast of 3% year-over-year growth over the past three months.

The souring mood is most pronounced among consumers who earn more than $100,000 per year, Astrachan said. This is significant because these higher-income shoppers account for an outsized portion of consumer spending. Still, lower-income consumers are suffering the most from higher prices.

“We think heightened macroeconomic uncertainty, market volatility, and increased spending on staples/shelter as a percentage of household income have contributed to worsening trends,” he said.

With the lower estimates for Target comes a reduced price target for the discount retailer of $175, which is about 22% above where shares are currently trading. Stifel maintains its hold rating on both Target and Walmart.

— Christina Cheddar Berk

Nike’s more than 13% pop Wednesday is a good reminder of just how laser-focused investors will be on inventory levels as retailers report results.

With less than four shopping days left to go, a lot of the chatter about how the season is shaping up hasn’t been good. Foot traffic has been weak and the post-Black Friday lull appears to have been unnervingly quiet. That means a lot is riding on the final shopping days of the season.

Wells Fargo analyst Ike Boruchow said, “Taking a step back, as of today we’d say most companies appear in line to slightly below holiday plan with many crucial selling days still ahead.”

Boruchow said Capri, Lululemon and Ulta Beauty are the names under his coverage that seem to be showing healthy trends. He thinks off-price retailers are likely on plan or slightly ahead.

According to Wells Fargo, the bull case for retailers in 2023 hinges on companies coming out of the season with just the right balance of inventory so they can protect their profit margins. How do they achieve that? Cue the last-minute shoppers.

— Christina Cheddar Berk

These are the stocks making the biggest moves in midday trading:

• Rite Aid — Shares of Rite Aid dropped nearly 14% in midday trading after the pharmacy operator reported a quarterly loss and lowered its full-year financial guidance citing seasonal markdowns among other issues.
• Nike — Nike shares jumped more than 13% after the company easily topped earnings and revenue estimates for its most recent quarter.
• Six Flags — Shares of the amusement park operator were up nearly 12% following news that activist shareholder Land & Buildings Investment Management has accumulated a 3% stake in the company.

For more big movers check out our full list here.

— Tanaya Macheel

Wolfe Research downgraded shares of Palantir Technologies to underperform from peer perform, saying investors should sell before it becomes a sub-$5 stock. The analyst’s $4.50 price target implies more than 28% downside from Tuesday’s closing price of $6.31.

“We have watched PLTR decelerate its top line by 30 points while operating margins have contracted from the mid-30% range to the midteens over the past few years with FCF on the same trajectory,” Analyst Alex Zukin wrote in a Tuesday note.

CNBC Pro subscribers can read the full story here.

— Sarah Min

Goldman Sachs’ Jan Hatzius isn’t counting on the Federal Reserve cutting rates next year, and that’s because the economy will most likely avoid a recession in 2023, he told CNBC’s “Squawk on the Street” on Wednesday.

“We’re not looking for cuts, because we’re not looking for a recession,” the chief economist said, pegging the recession odds at 35% and below consensus estimates. “Our expectation, or baseline, is that the economy continues to grow and the adjustment process in the labor market continues, but without a recession.”

He pointed to two pockets of strength in the economy supporting this view. Real household disposable income, despite declining earlier this year, is growing as headline inflation moves lower.

Financial conditions have already tightened significantly, and the lags from those rate hikes are likely already underway, Hatzius said. To be sure, the impact on activity could take a few quarters, but the effect on growth is relatively short, he added.

In 2023, Hatzius expects a deflation in goods, with service inflation likely taking longer to decelerate. Markets have already begun to see relief in the housing and rental market, although those signs have yet to make their way into the consumer price index, he said.

“If GDP is still growing at a 1% pace, which is kind of our forecast over the next few quarters, then payroll growth slows substantially further but still stays positive,” he said. “Obviously, month to month, there is going to be more volatility around that, but we don’t have trend declines.”

— Samantha Subin

Shares of Nike are higher by almost 14 points Wednesday, meaning it’s adding almost 90 points to the Dow Jones Industrial Average all by itself. That’s also nearly 20% of the average’s entire gain.

The Dow, unlike the S&P 500, is a price-weighted average and every $1 move in any stock in the Dow moves the average higher or lower by 6.358 points. The current divisor of the Dow is 0.15728 (1/0.15728=6.358).

— Scott Schnipper

The S&P 500 tech sector jumped 2% to lead a broad market rally Wednesday. AMD, Broadcom and Apple were the best performers in the sector, rising more than 3% each. Consumer discretionary and financials also gained roughly 2%, while the other S&P 500 sectors each gained at least 1%.

— Fred Imbert

Shares of Caterpillar and Conagra Brands rose Wednesday to trade near levels not seen since June 2021.

Arch Capital Group also traded near all-time high levels last seen when it began trading on the Nasdaq in 2000.

Three S&P 500 stocks notched fresh lows during Wednesday’s trading session, including Tesla, which hit a low dating back to November 2020.

These stocks also hit fresh lows:

• Generac trading at lows not seen since April 2020
• Salesforce.com trading at lows not seen since March 2020

— Samantha Subin

Existing home sales in November were weaker than expected, falling for a tenth straight month.

Existing home sales fell 7.7% to a seasonally adjusted annual rate of 4.09 million units in November, according to the National Association of Realtors. That’s lower than expectations for a 5.9% decline to 4.17 million units last month, according to economists polled by the Dow Jones.

That’s down from a 5.9% decline to 4.43 million units in October.

— Sarah Min

The Conference Board’s consumer confidence index jumped to 108.3 in December from 101.4 in November, topping a StreetAccount consensus estimate of 100.5. The number was also the index’s highest since April.

“Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus. Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement.

“This shift in consumers’ preference from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes,” Franco added.

— Fred Imbert

Nike shares jumped 15.3% on the back of stronger-than-expected quarterly results, putting them on pace for their biggest one-day gain since June 25, 2021. That day, the stock surged 15.53%.

— Fred Imbert

Stocks opened higher Wednesday.

The Dow Jones Industrial Average gained 303 points, or 0.92%. The S&P 500 jumped 0.66% and the Nasdaq Composite rose 0.35%.

— Samantha Subin

Jefferies downgraded shares of Starbucks to hold from buy, saying a recession could hurt consumer spending in 2023.

“With SBUX stock up +40% since the YTD low in May (S&P -2.8%), we move to the sidelines, with our Buy rating going to Hold, as the risk/reward now appears balanced following investments into the biz and growth concerns earlier this year,” Analyst Andy Barish wrote in a Wednesday note.

CNBC Pro subscribers can read the full story here.

— Sarah Min

Retail stocks gained before the bell Wednesday, led by shares of Nike, which surged more than 11%.

The sports apparel company reported earnings that came in above expectations and a quarterly decline in inventories. If it holds those gains, the stock will post its best daily performance since June 25, 2021, when it soared 15.5%.

With the overnight moves, the stock’s up 6% for December, putting it on track for three consecutive months of gains for the first time since July 2021. Shares of Nike are down about 30% this year, after five straight years of gains.

Other retail stocks traded higher before the bell. Lululemon gained 3%, Under Armour jumped 4.6% and VF Corp added 2.4%.

— Samantha Subin, Nick Wells

Along with Nike and FedEx, these are some of the other stocks moving before the bell:

Rite Aid – Rite Aid jumped 4% in the premarket after reporting a smaller-than-expected loss and revenue that beat Wall Street forecasts, helped by accelerated sales growth at its retail operations. However, the drugstore operator lowered its full-year guidance due to various issues, including seasonal markdowns.

Six Flags – Six Flags gained 7% in premarket action on news that activist shareholder Land & Buildings Investment Management has accumulated a 3% stake in the theme park operator. Land & Buildings has suggested changes to management, including selling or spinning off the company’s real estate holdings.

Starbucks – Starbucks lost 1% following a downgrade to hold from buy at Jefferies, which said the coffee chain may be impacted by a pullback in consumer discretionary spending.

Read the full list of stocks moving before the bell here.

— Peter Schacknow, Sam Subin

Energy stocks rose before the bell Wednesday as oil prices gained.

Occidental, APA Corp, Marathon Oil and Antero Resources traded up more than 1%.

The Energy Select Sector SPDR Fund, or XLE, was last up 1.8%. The SPDR S&P Oil and Gas Exploration and Production ETF gained 1.9% and traded up for the week. The gain put it on pace for back-to-back weekly gains for the first time since early November.

The VanEck Oil Services ETF gained 1.5% in the premarket.

— Samantha Subin, Nick Wells

Mortgage applications to refinance rose 6% last week as interest rates dropped to their lowest level since September, according to the Mortgage Bankers Association’s seasonally adjusted index.

Volume, meanwhile, was 85% lower than the same week last year.

At the same time, applications to buy a home declined 0.1% for the week and were 36% lower than during the same period a year ago.

— Samantha Subin

Wall Street analysts are growing more confident on Nike after the apparel giant’s latest quarterly results release.

UBS’ analyst Jay Sole called Nike his top pick for 2023, saying that the company’s growth potential is underestimated. He reiterated a buy rating on the stock.

“Nike’s investments in product innovation, supply chain speed, and digital are unlocking what is likely a multi-year period of above average growth. Plus, we believe Nike has the brand strength, strategy, skills, and resources to outperform peers through a recession,” Sole wrote.

CNBC Pro subscribers can read the full story here.

— Sarah Min

European markets advanced on Wednesday, reversing a negative trend seen in the previous trading session.

The Stoxx 600 index was up 0.6% in early trade with almost all sectors and major bourses in the green. Retail stocks led gains, up 2.2%, followed by financial services, which climbed 1.2%.

– Elliot Smith

Many investors’ hopes for an end-of-year rally were at least briefly dashed ahead of Tuesday’s rally, but there’s still time, according to Carson Group’s chief market strategist Ryan Detrick.

One point about so-called “Santa Claus rallies” that’s been misunderstood is that they take place in the last five days of the year and the first two days of the new year, he pointed out on CNBC’s “Closing Bell: Overtime” Tuesday.

The average return over those seven days is 1.33%, and finish higher almost 80% of the time, he added.

“No seven days of the year are more likely to finish higher,” he said. “Anything could happen with this weakness we’ve had and the oversold sentiment we’ve had. We still believe there’s a chance that Santa could come to town and could come this Friday.”

— Tanaya Macheel

Nike and FedEx were among the top movers after hours following their quarterly results.

Nike shares surged more than 12% after the athletic apparel and footwear maker easily topped earnings and revenue estimates for its most recent quarter. That gave a boost to other athleisure stocks. Under Armour gained more than 2% after hours, Skechers rose 2% and Lululemon added 1.75%.

Meanwhile, performance at FedEx was less impressive but investors cheered the package delivery giant’s “aggressive” cost-cutting measures. Earnings beat expectations, but fell from the same period last year. Revenue for the quarter missed estimates. FedEx shares rose almost 4% after hours.

— Tanaya Macheel

Stock futures opened higher on Tuesday evening, helped by Nike and FedEx earnings.

Dow Jones Industrial Average futures rose 110 points, or 0.33%. S&P 500 futures added 0.23%, and Nasdaq 100 futures climbed 0.31%.

— Tanaya Macheel