What happened

Shares of Nike (NKE 0.45%) were gaining last month as the sportswear giant benefited from good news out of China, and a cooler-than-expected inflation report gave it a boost as well.

The stock had gotten slammed in its most recent earnings report back in September as its earnings fell due to excess inventory, but the improving economic outlook in the U.S. and the relaxation of China's Zero COVID-19 policy should help its recovery.

According to S&P Global Market Intelligence, the stock finished the month up 18%. As the chart below shows, much of its growth came during the second week of the month when the cooler-than-expected inflation report came out.

NKE Chart

NKE data by YCharts

So what

Most of Nike's gains last month came on two consecutive days in November.

First, shares jumped 8% on Nov. 10, in line with a 5% surge in the S&P 500 as the market responded enthusiastically to the October inflation report, which showed consumer prices rising 7.7%, the lowest rate since January.

The stock market has fallen this year in large part because of high inflation, which has prompted the Federal Reserve to aggressively raise interest rates in order to bring it under control. That's increased fears of a recession, which has weighed on consumer stocks like Nike.

The following day, Nike stock jumped again, this time in response to good news out of China. Chinese officials said they were shortening the mandatory quarantine time for travelers and taking other steps to relax Covid restrictions, which sent Chinese stocks higher. China is a key growth market for Nike, and its performance there has been significantly impaired by the Covid lockdowns. Therefore, Nike's business should see a nice bump in sales and profits as China reopens.

Finally, Nike also announced a dividend hike, raising its dividend by 11% to $0.34 a share, showing confidence in its long-term growth potential at a time when earnings are falling. The dividend increase also marks the company's 21st consecutive year of raising its dividend, bringing it one step closer to being a Dividend Aristocrat.

Now what

If inflation continues to cool and China stays on track to reopen, Nike stock looks well positioned for a recovery, especially as its inventory levels should steadily come down.

Investors will get an update later this month when Nike reports fiscal second-quarter earnings. Analysts are expecting revenue to grow 10.4% to $12.5 billion but see earnings per share falling from $0.93 to $0.63.