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

Stocks rose for a second day on Wednesday following upbeat earnings results from Nike and FedEx.

The Dow Jones Industrial Average gained 526.74 points, or 1.6%, to finish at 33,376.48. The S&P 500 surged 1.49% to settle at 3,878.44, while the Nasdaq Composite jumped 1.54% to end at 10,709.37.

— Samantha Subin

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…