Tariffs in doubt, Musk's pay plan, shutdown flight reductions and more in Morning Squawk

The Supreme Court expressed skepticism over the legality of President Trump's tariffs, potentially signaling a future rollback and prompting a positive market reaction, despite the administration's assertion of alternative authorities. Tesla shareholders are set to vote on a controversial $975 billion pay package for CEO Elon Musk, facing opposition from proxy advisors and a major sovereign wealth fund. Concurrently, a government shutdown-induced air traffic control shortage will lead to a 10% reduction in flight capacity at 40 major airports. In corporate earnings, Snap shares surged nearly 20% on strong Q3 results and an AI partnership, while Pinterest shares plummeted over 20% due to disappointing earnings and weak guidance. Warner Bros. Discovery also missed Q3 expectations and is exploring strategic alternatives, including a potential $23.50 per share acquisition offer from Paramount Skydance.

Analysis

The Supreme Court's apparent skepticism regarding the legality of President Trump's tariffs, particularly concerning the International Emergency Economic Powers Act, suggests a potential future rollback of these levies. This judicial scrutiny, highlighted by concerns from Justices Sotomayor and Gorsuch about executive overreach, led to a positive market reaction on Wednesday, despite the Treasury Secretary's assertion of alternative authorities for imposing duties.

In corporate earnings, Snap (SNAP) shares surged nearly 20% overnight after beating Q3 revenue expectations and announcing a $400 million partnership with Perplexity AI for conversational search integration. Conversely, Pinterest (PINS) experienced its second-worst day, with shares plummeting over 20% following a disappointing earnings report and weak guidance for the current quarter.

Tesla (TSLA) faces a contentious shareholder vote on CEO Elon Musk's $975 billion pay package, with proxy advisors Glass Lewis and ISS, along with Norway's sovereign wealth fund (1.14% stake), recommending rejection. Meanwhile, Warner Bros. Discovery (WBD) missed Q3 top- and bottom-line expectations, reporting an adjusted loss of 6 cents per share and $9.05 billion in revenue, as it evaluates strategic options including a $23.50 per share acquisition offer from Paramount Skydance (PARA).

Key Decisions for Investors

• Monitor Supreme Court tariff rulings for potential broad market and sector-specific impacts, especially on import-reliant industries and consumer goods.
• Evaluate social media holdings (SNAP, PINS) based on Q3 performance and AI integration potential versus guidance, considering the divergent market reactions.
• Assess governance risks and potential M&A catalysts for Tesla (TSLA) and Warner Bros. Discovery (WBD), particularly regarding the shareholder vote and strategic review.
• Consider potential negative impacts on airline and travel-related stocks due to the announced 10% flight capacity reduction and prolonged recovery from the government shutdown.