Stock futures edge higher, treasury yields steady; Musk may use Tesla shares for margin loan – report; Carvana reportedly exploring bankruptcy options amid share price plunge; GameStop slides after seventh consecutive quarterly loss and Costco earnings in focus after slowing autumn sales.
Five things you need to know before the market opens on Thursday December 8:
1. — Stock Futures Edge Higher, Treasury Yields Steady
U.S. equity futures nudged modestly higher Thursday, while the dollar held firm against its global peers, as investors continue to worry that the Federal Reserve will fail to engineer the ‘soft landing‘ needed to tame inflation pressures will ensuring the economy avoids falling into recession.
With stocks riding a five-day losing streak, giving back most of the gains recorded since the softer-than-expected inflation reading in early November, markets appear to be setting up for a scenario in which the Fed’s rate tightening cycle — as well as the run off of its $8.6 trillion balance sheet — tips the economy into recession as labor markets crack, housing rolls over and corporate earnings turn negative.
Amid those concerns, Treasury bonds yields continue to show a severe inversion of the yields between benchmark 2-year and 10-year note yields — a classic recession signal — even as the latter rallied hard yesterday, and again overnight, to bring yields on the paper to 3.441%.
A defensive tone to the overnight session, which included data confirming an economic contraction in Japan and more concerns over the impact of ‘Covid zero’ policies in China, lifted the U.S. dollar index 0.2% to 105.137 against a basket of its global peers.
European stocks drifted lower, as well, extending the Stoxx 600’s recent slump to a fourth consecutive session, while oil prices bounced off their recent nine months lows to take WTI crude future for January delivery to $73.02 per barrel.
On Wall Street, futures contract tied to the S&P 500 are priced for a modest 4 point opening bell gain, while those linked to the Dow Jones Industrial Average are indicating a modest 5 point bump. Futures tied to the tech-focused Nasdaq are indicating a 20 point advance.
2. — Musk May Use Tesla Shares For Margin Loan – Report
Tesla (TSLA) – Get Free Report shares bumped higher in pre-market trading amid reports that bankers are preparing to ask Elon Musk to pledge more of his stock in the clean-energy carmaker against loans linked to his $44 billion purchase of Twitter.
Bloomberg reported that Musk may need to provide margin loans as a way to replace the existing high-rate paper he arranged to fund the purchase earlier this year, given that debt servicing costs forecast for 2023 are likely to be much higher than the social media platform’s projected earnings.
Musk, who is financing part of the $44 billion required to buy Twitter through his personal stock holdings, has sold around $19.35 billion in Tesla shares so far this year. Musk told Tesla investors in October that he and his investor group were “obviously overpaying” for the social media group, with overall costs pegged at $46.5 billion.
Tesla shares were marked 0.55% higher in pre-market trading at $175.00 each.
3. — Carvana Reportedly Exploring Bankruptcy Options Amid Share Price Plunge
Carvana (CVNA) – Get Free Report shares bounced from their record-low closing price in pre-market trading amid reports that the struggling used car dealer is exploring bankruptcy options.
Bloomberg Law said Carvana has initiated talks with at least two bankruptcy advisers following a 42% plunge in its share price yesterday trigged by concerns that it could default of some of its near-term debt. Carvana, which carried a peak market cap of around $60 billion last year, was valued at just $723 million based on last night’s closing price.
The group slashed around 8% of its workforce last month as it looks to control costs amid an extended slump in used car demand and a surge in car financing costs linked to the Federal Reserve’s rate hike cycle.
Carvana shares were marked 2.6% higher in pre-market trading to indicate an opening bell price of $3.93 each.
4. — GameStop Slides After Seventh Consecutive Quarterly Loss
GameStop (GME) – Get Free Report shares slipped lower in pre-market trading after the video game retailer posted its seventh consecutive quarterly loss after the closing bell last night.
GameStop said its adjusted loss for the three months ending in October was pegged at 31 cents per share, just outside the Street consensus forecast, as overall revenues fell 8.5% to $1.186 billion. Expenses were on the rise, with SG&A pegged at $387.9 million, or 32.7% of third quarter sales – a 20 basis point increase from the same period last year.
We’re seeking to transform a legacy brick-and-mortar business that was on the brink of bankruptcy into a retailer that meets customers’ needs through our stores, e-commerce properties, and emerging sales channels,” CEO Mike Furlong told investors on a conference call late Wednesday. “This path carries risk and is taking time, but it is the path we are on.”
GameStop shares were marked 1.62% lower in pre-market trading to indicate an opening bell price of $21.90 each.
5. — Costco Earnings In Focus After Slowing Autumn Sales
Costco Wholesale (COST) – Get Free Report shares edged lower in pre-market trading ahead of the bulk discount retailer’s first quarter earnings after the close of trading.
Costco is expected to post a bottom line of $3.11 per share on revenues of $54.64 billion, an 8.5% increase from the same period last year. Same store sales are forecast to rise by around 5%, according to data from Refinitiv.
Those estimates may be tested however, by a weaker-than-expected November sales tally of $19.17, a 5.7% increase from last year that was notably lower than the 7.7% pace recorded over the month of October and the 10.1% advance the group booked in September.
The late autumn slowing echoes comments Brian Cornell, CEO of big box rival Target (TGT) – Get Free Report, who told investors on November 16 that the group saw a “change in shopping behavior in the back half of October leading into November” amid elevated inflation and a modest pullback in the job market.
Costco shares were marked 0.15% lower in pre-market trading to indicate an opening bell price of $481.25 each.
