© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid
By Amruta Khandekar and Ankika Biswas
(Reuters) – U.S. stock indexes were set to open higher on Tuesday after China further relaxed its COVID-19 curbs by scrapping quarantine rule for inbound travelers, while a slump in Tesla (NASDAQ:) shares was set to pressure the Nasdaq.
Beijing’s move comes after three years of zero-tolerance measures have battered the country’s economy and follows an abrupt policy U-turn this month of dropping nearly all domestic COVID-19 restrictions.
“With China opening up and being less restrictive, the hope is that China will show an increase in GDP growth in 2023 – one of the few countries to actually show an increase in economic activity for the year ahead,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
China said it would stop requiring inbound travelers to go into quarantine starting Jan. 8, adding it would also downgrade the seriousness of COVID-19 as it has become less virulent.
U.S.-listed shares of Chinese firms such as JD (NASDAQ:).Com Inc, Alibaba (NYSE:) Group Holding Ltd and Pinduoduo (NASDAQ:) Inc climbed around 2% each in premarket trading.
The development also lifted shares of casino operators Las Vegas Sands (NYSE:) Corp, MGM Resorts (NYSE:) International, Wynn Resorts (NASDAQ:) Ltd and Melco Resorts & Entertainment (NASDAQ:) Ltd between 0.7% and 4.1%.
With a handful of trading sessions left this year, investors are hoping for a so-called “Santa rally” at the end of what has been a largely disappointing month for U.S. equities.
“There is a good chance for a Santa Claus rally, 77% of the years since World War Two, we have seen a Santa Claus rally with the average price change for the S&P being a gain of 1.3%,” Stovall said.
The benchmark and the tech-heavy Nasdaq have lost 5.8% and 8.5%, respectively, so far in December and are on track for their biggest yearly loss since the financial crisis of 2008.
Investors have been worried that the Federal Reserve’s aggressive monetary policy tightening to tame decades-high inflation could tip the U.S. economy into a recession.
Economic data so far has offered little hope that the Fed could hit the brakes on its interest rate hikes.
A report last week showed inflation has cooled further but not enough to discourage the U.S. central bank from driving rates to higher levels next year.
Money markets are pricing in 61% odds of a 25-basis-point interest rate hike at the Fed’s next meeting in February and expect rates peaking at 4.94% in May..
Trading volumes remain thin as investors return from a long weekend, while the economic data schedule is also light this week with some home sales and jobs reports on tap.
At 8:07 a.m. ET, were up 147 points, or 0.44%, were up 12.5 points, or 0.32%, and were up 5 points, or 0.05%.
Shares of Tesla slumped 5.2% after Reuters reported the electric vehicle maker plans to run a reduced production schedule at its Shanghai plant in January.
Southwest Airlines (NYSE:) Co shed 3.8% after cancelling thousands of flights, while AMC Entertainment (NYSE:) Holdings Inc slipped 5.7%, extending declines after the cinema chain disclosed plans for a capital raise last week.
(This story has been refiled to correct syntax in first paragraph)
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