Market Preview: Holding Out for a 'Grand Bargain'

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Since the uncertainty is as thick as ever right now -- Monday's rally aside -- investors may want to see more evidence that a grand bargain might be in offing before ponying up.

As for Tuesday's scheduled news, the holiday-shortened trading week will still see its share of high-profile earnings reports. Best Buy's (BBY) numbers are slated to hit the tape in the a.m. and Wall Street is looking for third-quarter earnings of 12 cents a share from the Minneapolis-based consumer electronics retailer on revenue of $10.73 billion.

All the back-and-forth about a potential buyout by Best Buy founder Richard Schulze hasn't translated to any appreciation in the stock, which is down more than 40% so far this year, hitting a 52-week low of $13.52 on Friday. The company, which enacted significant layoffs over the summer, continues to struggle to shake its rep as "Amazon's showroom."

Most recently Best Buy announced a management shake-up and warned of weak results for the third quarter in late October so expectations are pretty low headed into the print.

UBS, which has a neutral rating on the stock, lowered its 12-month price target to $14.50 from $16.75 on Monday.

"A lot of the mystery has been taken out of BBY's 3Q given its preannouncement and recent investor meeting," the firm said. "The focus will be on how the company is positioned for the holidays and recent trends. We are forecasting a -2% domestic comp and -85 bps of domestic GM gross margin erosion in 4Q, but a wide range of outcomes is possible, especially with BBY's new price match policy in place."

UBS said it's expecting Best Buy to promote a smaller assortment of products on Black Friday this year but with higher discounts.

"Our detailed analysis of BBY's Black Friday shows that across Computers, HDTVs, Cameras and Appliances company reduced the number of featured products from 143 items last year to 61 items this year," the firm said. "However, the discounts are greater this year. Interestingly, only 3 HDTVs are discounted vs. 29 last year. As a reminder, BBY's domestic GM declined by 40 bps during last year's 4Q due to promotional small and mid-sized TVs increasing as a mix of sales."

UBS expects trading in Best Buy shares to be choppy until the market gets more clarity about whether Schulze will be able to attract investor support for his go-private bid and how the holiday season is shaping up.

"The volatility is likely to persist, but it appears the shares are approaching a near-term floor," the firm said. "Our new $14.50 PT equates to 5x our CY'13E EPS (based on DCF/multiple blend)."

The other big morning report is Dow component Hewlett-Packard(HPQ) , which is reporting its fiscal fourth-quarter results. The average estimate of analysts polled by Thomson Reuters is for a profit of $1.14 a share in the October-ended period on revenue of $30.43 billion.