Broad Rally On Wall Street Lifted Market Indexes, Arm IPO Raised $4.9 B

Barry Adams
14 Sep, 2023
New York City

Broad rally on Wall Street gathered steam after Arm successfully priced its initial public offering and investors digested news on the economy. 

The UK-based chip design company Arm priced its initial public offering at the top end of its pricing range between $47 and $51. 

Arm sold 95.5 million shares and raised $4.9 billion at $51 billion market capitalization. 

August retail sales rose suggesting that consumer spending is resilient despite higher prices and higher rates and wholesale prices accelerated but not fast enough so that economy slows too fast. 

Investors have been divided over the future direction and terminal level of interest rate as economy keeps sending mixed signals. 

Despite elevated prices and borrowing costs, consumer spending is resilient and housing market continues to report transactions levels that are above Covid-19 levels. 

The Federal Reserve is expected pause rate hike after it policy meeting next week, but the European Central Bank lifted its policy rates to record levels after hiking rates by 25 basis points. 

However, the ECB noted that inflation is easing and policymakers may be ready to pause rates after lifting rates for ten times in a row. 

 

Retail Sales Inched Higher In August 

Retail sales increased 0.6% from the previous month in August, faster increase than the downwardly revised 0.5% rise in July.  

Retail sales are adjusted for seasonal factors but not for prices. 

Despite higher prices and rising costs, consumer spending continues to rise supported by higher wages. 

Sales at gasoline stations increased 6.2% after gasoline prices rose 10%. 

Retail sales excluding fuel, food services, automobiles and building materials, increased 0.1% in August. 

On a yearly basis, retail sales to 2.47% in August, slower than 2.67% in the previous month. 

 

Producer Prices Index Accelerated In August 

Producer price index in August rose 0.7% from the previous month, faster than 0.4% in July, the U.S. Bureau of Labor Statistics reported Thursday. 

Goods prices increased 2%, driven by a 10.5% rise in energy costs and prices for services edged up 0.2%, largely because of rising transportation and warehousing costs by 1.4%.

Core wholesale inflation, which excludes energy and food, rose 0.2%, following a rise of 0.4% in July. 

From a year ago, producer price index increased a four-month high of 1.6% and core index rose 2.2%, the weakest level since January 2021.  

 

U.S. Indexes & Yields 

The S&P 500 index inched up 0.4% to 4,483.21 and the Nasdaq Composite added 0.2% to 13,834.97. 

The yield on 2-year Treasury notes hovered near 5.01%, 10-year Treasury notes inched slightly higher to 4.28% and 30-year Treasury bonds edged up to 4.38%. 

Crude oil increased $1.13 to $89.65 a barrel and natural gas prices increased 10 cents to $2.78 a thermal unit. 

The dollar index edged higher to  105.22, the level last seen in March but higher than the low of 99.85 on July 13. 

Last week, the dollar index, which tracks the price of the U.S. dollar against major currencies, halted a five-day rally Friday but extended gains to the eight week in a row and rose to a six-month high on the expectations of higher interest rates. 

 

U.S. Stock Movers 

AMC Entertainment Holdings Inc gained 3.3% to $8.52 after the company said it completed said it completed secondary stock offering announced few weeks ago. 

AMC raised $325.5 million through the sale of 40 million shares at an average price of $8.14. 

Yum China Holdings Inc 5.2% to $56.0 after the company forecasted 20,000 restaurants in China by 2026 at a gathering of investors. 

Semtech Corp jumped 4.6% to $23.90 after the company reported better-than-expected quarterly results and current quarter forecast. 

The company estimated fiscal third quarter revenue in the range between $190 million and $210 million and loss per share between 9 cents and 22 cents. 

Energy stocks traded higher after crude oil traded at a 2023 high on supply worries after Saudi Arabia and Russia announced to extend voluntary production cuts till the end of 2023. 

West Texas Intermediate crude oil price jumped to $89.98 and Brent crude advanced to $93.27 a barrel. 

Chevron, ExxonMobil, Murphy Oil, Occidental Petroleum rose between 1% and 2%. 

Delta Air Lines, Inc decreased 0.8% to $39.22 after the company joined other airlines and lowered its profit estimate citing higher operating and fuel costs. 

The airline said third quarter adjusted earnings per share to fall between $1.86 and $2.05 compared to the previous estimate between $2.20 and $2.50. 

The airline however raised its revenue growth estimate to be closer to its upper end of the range between 11% and 14%, because of the strong demand for transatlantic travel. 

The company also reiterated its full-year adjusted earnings per share to fall between $6 and $7. 

 

ECB Lifted Rates to Record High and Signaled May Pause

European markets traded sideways ahead of the rate decisions and inflation data. 

The European Central Bank raised rates by 25 basis points for its three key lending services as widely expected. 

The central bank policymakers lifted rates for the 10th time in a row and added inflation is likely to stay too high for too long. 

After the increase, the ECB's main refinancing rate rose to a 22-year high to 4.5% and deposit rate to a new record high of 4.0%. Marginal lending facility rate was revised higher by the same amount to 4.75%.   

Despite multiple rate hikes by the central bank inflation has hovered near 5% and significantly ahead of the central bank's target rate of 2%. 

The ECB has raised rates at the end of every policy meeting held since July and cumulatively increased 450 basis points since July 2022. 

The ECB also revised higher its 2023 inflation projection to 5.6% and 3.2% for 2024, reflecting a rebound in energy prices. 

The central bank also revised down its estimate of annual core inflation in 2023 to 5.1%, in 2024 to 2.9% and in 2025 to 2.2%. 

The central bank also confirmed that its asset purchase program portfolio is declining at a "measured and predictable pace" and the bank is no longer reinvesting principal payments from maturing securities.  

 

Europe Indexes & Yields

The DAX index increased 1.0% to 15,805.29, the CAC-40 index increased 1.2% to 7,308.67 and the FTSE 100 index inched up 1.85% to 7,673.08.

The yield on 10-year German bonds increased to 2.64%, French bonds traded higher to 3.19%, the UK gilts edged up to 4.33% and Italian bonds rose to 4.44%.

The euro edged lower to a three-month low to $1.076, the British pound to $1.246 and the U.S. dollar fetched 89.34 Swiss cents.

Brent crude decreased $1.76 to $93.64 a barrel and the Dutch TTF natural gas decreased €1.35 to €35.62 per MWh.

 

Europe Stock Movers

Air Liquide SA declined 0.4% to €163.66 and the company announced to invest €400 million to build 200 MW Normad'Hy electrolyzer.

Trainline Plc soared 11.2% to 275.40 pence after the online rail ticketing service provider announced a £50 million stock repurchase plan after reporting better-than-expected first-half results. 

IG Group Holdings plc inched higher 1.4% to 677.0 pence after the online trading platform reported a marginal increase in its fiscal first quarter revenue. 

LondonMetric Property plc decreased 0.9% to 173.60 pence after the company announced the sale of a portfolio of industrial estates to Hines for £40.5 million. 

Nordex SE jumped 4.8% to €11.92 after the wind turbine maker won orders in Spain to supply and install 24 N163 turbines to the renewable energy company BayWa r.e. 

Automakers across Europe declined after Beijing blasted the European Commission's investigation into Chinese subsidies to electric vehicle makers. 

BMW, Renault, Volkswagen and Mercedes Benz declined between 2% and 3% on the worries of a Chinese retaliation against the European automakers. 

ThyssenKrupp AG decreased 2.3% to €7.0 after the company said it plans to reorganize its businesses around key technologies that promote decarbonization.