5 Things to Watch Before Thursday’s Stock Market Open

Here are five key developments investors need to monitor as trading commences:

The Supreme Court heard oral arguments Wednesday regarding the legality of President Donald Trump’s tariffs, with several justices voicing concerns, potentially jeopardizing the levies’ future. The core of the debate revolves around whether the International Emergency Economic Powers Act (IEEPA) provides the President with the authority to unilaterally impose tariffs. Legal analysts suggest the justices’ apparent skepticism could force the administration to roll back existing tariffs, shaking up international trade dynamics.

Key takeaways:

• Justices across the political spectrum questioned the Solicitor General’s interpretation of the IEEPA, hinting at a possible challenge to executive power in trade policy.
• Critics argue the President’s actions infringe on Congress’s constitutional mandate to regulate trade and taxation. Justice Sotomayor directly challenged the administration’s stance by stating tariffs are “exactly” taxes, regardless of the administration’s legal posturing.
• Justice Gorsuch cautioned against the executive branch’s accumulation of power, emphasizing the importance of Congressional oversight in economic policy.
• Markets reacted positively to the hearing, pricing in a higher probability of a ruling against the White House. The anticipation of reduced tariffs spurred gains in sectors heavily impacted by import costs.
• Despite the potential setback, Treasury Secretary Scott Bessent indicated the administration has alternative legal avenues to pursue tariffs if the Supreme Court rules unfavorably, suggesting a continued commitment to its trade agenda. This suggests the administration might leverage national security arguments or reinterpret existing trade laws.

Tesla shareholders are voting today on a compensation package for CEO Elon Musk that could reach nearly $1 trillion, contingent upon achieving ambitious company milestones. This landmark proposal, granting Musk 12 tranches of shares over a decade, has ignited controversy, prompting scrutiny from proxy advisors and some major investors. The vote’s outcome will not only affect Musk’s personal wealth but also impact investor confidence and corporate governance precedents. Investors will be watching closely for the signal this vote sends about the balance of power between management and shareholders at high-growth, visionary companies.

While many analysts expect the package to be approved, significant opposition has emerged. Institutional Shareholder Services (ISS) and Glass Lewis, influential proxy advisory firms, have recommended against the compensation plan. The Norwegian sovereign wealth fund, a substantial Tesla shareholder, has also announced its opposition, citing concerns about its size and potential dilution of shareholder value. The package is valued at approximately $975 billion.

The ongoing government shutdown is now directly impacting air travel. Transportation Secretary Sean Duffy announced a 10% reduction in flight capacity at 40 major airports, set to begin Friday, citing concerns over air traffic control staffing. The action translates to approximately 3,500 to 4,000 flight cancellations daily, adding pressure on an already strained travel system. The slowdown highlights the ripple effects of political gridlock on critical infrastructure.

The FAA’s measure is intended to be “proactive,” according to Duffy, but the impact on travelers and the airline industry is unavoidable. The President of the National Air Traffic Controllers Association warns that even after the shutdown ends, it may take weeks for the aviation system to fully recover, suggesting a prolonged period of disruption. The air travel disruption could have broader economic consequences, impacting business travel, tourism, and supply chains.

The social media landscape continues experiencing volatile swings, underscored by Snap’s impressive surge following its third-quarter earnings release and Pinterest’s dramatic fall. Snap shares jumped nearly 20% after beating revenue expectations and announcing a $400 million partnership with Perplexity AI, integrating conversational search into the Snapchat platform. The move signals Snap’s effort to enhance user engagement through AI-powered functionalities, potentially appealing to a broader demographic.

In contrast, Pinterest experienced its second-worst trading day, with shares plummeting over 20% due to disappointing earnings and weak guidance. The divergent performances highlight the intense competition in the social media space, where user growth and revenue are heavily reliant on innovative strategies and effective monetization models. This divergence illustrates the importance of diversifying revenue streams and effectively adapting to evolving consumer preferences for sustainable growth in social media.

Warner Bros. Discovery (WBD) announced third-quarter earnings that fell short of Wall Street’s expectations, reporting an adjusted loss of 6 cents per share on revenue of $9.05 billion. These results amplify the challenging strategic decisions facing the media conglomerate, with possibilities including a corporate split, asset sales, or a complete sale of the company. The pressure is mounting for WBD to streamline operations and unlock shareholder value amid rapidly changing consumer behavior and the emergence of new streaming competitors.

Adding to the complexity, Paramount Skydance has reportedly submitted letters to WBD’s board, reiterating its acquisition offer of $23.50 per share as being in the best interests of its shareholders. Sources indicate that WBD is aiming to announce its strategic direction before Christmas, setting the stage for significant activity in the media industry. The potential consolidation could reshape the media landscape, influencing content creation, distribution, and competition within the streaming market.

Tariffs continue to impact retailers, with some raising prices more aggressively than others. Analysis reveals that prices on Amazon are climbing at a faster rate than other major retailers, highlighting the complex interplay between trade policy and consumer spending habits. This divergence underscores the need for investors to closely monitor the impact of tariffs on various sectors and individual companies.