Stock futures edge higher as treasury yields slip; Robinhood shares at center of FTX bankruptcy fight; Southwest extends slide as travel chaos draws government criticism; Tesla shares get rare pre-market bounce on Baird note and Apple held down by holiday iPhone sales concern.
Five things you need to know before the market opens on Wednesday December 28:
1. — Stock Futures Edge Higher As Treasury Yields Slip
U.S. equity edged higher Wednesday, while Treasury bond yields eased modestly in thin holiday trading as investors looked to close out the final few trading days of the year buoyed by China’s Covid reopening.
Hong Kong followed China’s lead in scrapping PCR tests for new arrivals Wednesday, while ending limits on public gatherings and other business restrictions put in place during this year’s surge in infections, after Beijing moved to eliminate quarantine requirements for foreign travelers earlier this week.
The gradual, yet definitive steps towards a reopened China economy have boosted commodities prices and lifted investor sentiment heading into the final trading days of the year, although concerns over the pace of new infections, and the ability of China’s health authorities to contain them continue to unsettle observers.
U.S. markets remain largely focused on movements in the bond market, however, with benchmark 2-year note yields holding at 2.345% following yesterday’s $42 billion auction of new paper that drew reasonably firm demand from dealers and international investors.
Benchmark 10-year Treasury note yields, meanwhile, slipped to 3.83% in overnight trading as the CBOE’s VIX volatility index rose 3.6% in the overnight session to 21.63 points.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a 9 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 90point advance. The tech-focused Nasdaq Composite is looking at a 25 point bump
2. — Robinhood Shares At Center of FTX Bankruptcy Fight
Robinhood Markets (HOOD) – Get Free Report shares slipped lower in pre-market trading amid a brewing legal dispute over a stake in the online trading group once held by FTX founder Sam Bankman-Fried.
Court papers filed Tuesday showed that Bankman-Fried and his FTX ally, Gary Wang, borrowed more than $546 million from Alameda Research, FTX’s wholly-owned hedge fund, to purchase around 56 million in Robinhood shares.
BlockFi, the bankrupt crypto lender, is seeking ownership of the shares, arguing they backed a loan it made to Emergent Fidelity Technologies, another entity owned by Bankman-Fried. The disgraced former FTX CEO, now living under strict bail conditions at his parents’ home in California, is seeking control of Emergent Fidelity Technologies from liquidators in Antigua.
Robinhood shares were marked 0.26% lower in pre-market trading to indicate an opening bell price of $7.68 each.
3. — Southwest Extends Slide As Travel Chaos Draws Government Criticism
Southwest Airline (LUV) – Get Free Report shares extended declines in pre-market trading after the carrier warned of more flight cancellations linked to the ‘bomb cyclone’ storm while drawing pointed criticism from Transportation Secretary Pepe Buttigieg.
Southwest CEO Bob Jordan apologized to customers following a chaotic Tuesday that saw nearly two-thirds of the carrier’s schedule cancelled — with many more flights delayed — as planes remained grounded in various cities following the holiday storms.
“Clearly we need to double down on our already existing plans to upgrade systems for these extreme circumstances so that we never again face what happening right now,” Jordan said in a video message.
Transportation Secretary Buttigieg, however, called the carrier’s handling of the storms a “meltdown” and pressed it offer refunds and meal and hotel vouchers for stranded passengers.
Southwest shares, which fell 6% on Tuesday, were marked 0.62% lower in pre-market trading to indicate an opening bell price of $33.73 each.
4. — Tesla Shares Get Rare Pre-Market Bounce On Baird Note
Tesla (TSLA) – Get Free Report shares moved higher in pre-market trading Wednesday in a rare early gain that comes amid the stock’s worst month on record.
Baird analyst Ben Kallo lowered his price target on Tesla shares by around 11.5%, to $252 per share, but noted the company remains one of its “best ideas” for 2023 and held on to its ‘outperform’ rating.
Kallo said Tesla has ““many demand levers to pull including an increase in vehicle leasing and additional supercharging incentives” that could offset weakness in China, where a weeklong shutdown in production at its Shanghai factory rattled investors and sent the stock 11.4% lower in Tuesday trading.
Tesla shares were marked 4.4% higher in pre-market trading to indicate an opening bell price of $113.88 each.
5. — Apple Held Down By Holiday iPhone Sales Concern
Apple (AAPL) – Get Free Report shares edged lower in pre-market trading as investors continued to worry that supply chain disruptions will hit the tech giant’s holiday iPhone sales.
JPMorgan analyst Samik Chatterjee cautioned earlier this month that hat supply chain challenges, linked to the ongoing Covid disruption in China, would take some 4 million from the tech giant’s December iPhone sales, which he now pegs at around 70 million. Last month, Bloomberg reported that Apple could see a 6 million shortfall in iPhone production from disruptions at its key China manufacturing plant, affecting mostly its high-end iPhone 14 Pro and Pro Max devices.
Apple shares were marked 0.1% lower in pre-market trading to indicate an opening bell price of $129.93 each.