Dow up over 300 points after strong economic data; Arm climbs 20% in Nasdaq debut

What’s driving markets

Thursday was shaping up to be a busy session for markets, as investors digested a spate of U.S. economic data and an interest-rate hike by the European Central Bank, while Arm
ARM,
+16.31%
‘s IPO after its shares jumped over 18% after the British semiconductor-design firm started trading on the Nasdaq midday Thursday.

Sales at U.S. retailers rose 0.6% in August, climbing for a fifth straight month, despite worries about a potential hangover for internet sellers following Amazon’s Prime Day sales event in July.

U.S. wholesale prices jumped 0.7% in August, according to the PPI index. The gain was largely because of rising energy costs, surpassing the 0.4% increase expected by economists polled by The Wall Street Journal.

The latest batch of data helped assuage investors’ concerns about the strength of the U.S. consumer, but inflation data from August may also force the Federal Reserve to raise interest rates again.

“With higher inflation and robust spending, the Fed is in a difficult spot,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in emailed commentary.

Fed funds futures traders continued to see a 97% probability of no interest-rate hikes by the Federal Reserve at its policy meeting next week, while the chance of a 25-basis-point hike at its November meeting was seen at 32.2%, slightly lower from earlier this week, according to the CME Fed Watch Tool. 

Investors were also keeping an eye on the opening trading of Arm Holdings which happened at 12:08 p.m. Eastern. The company priced shares at $51, toward the top of the expected range that gives the U.K.-based group a $52 billion valuation.

Investors were hoping that a well-received Arm listing may help revive the U.S. IPO market and boost bullish sentiment in the stock market more broadly.

Dave Sekera, chief U.S. market strategist at Morningstar Research Services, thinks the markets are seeing a number of indications that the IPO market is starting to open back up as the equity market is “well up of” its 2022 lows and valuations are rising more broadly.

“Of course, no one wants to buy an IPO immediately ahead of a recession, so as people get more comfortable with the economic outlook, that helps,” Sekera said in emailed comments. “Many venture-capital funds are looking to go public to cash out some of these portfolio investments and realize some gains for their portfolios. And there are also some companies that are starting to run out of cash; they need capital.”

Meanwhile, the euro fell alongside German government bond yields
BX:TMBMKDE-02Y
after the European Central Bank raised interest rates, but implied further hikes would be unlikely. The shared currency
EURUSD,
-0.86%
was off 0.9% at $1.06 in the afternoon trade.

See: European Central Bank lifts rates to record, signals 10th straight hike may be its last

“U. S. stocks are higher after another round of impressive U.S. economic data suggests the consumer is still doing just fine,” said Edward Moya, senior market analysts at Oanda in a note. “Wall Street seems content with the risk of one more Fed rate hike as consumer resilience is expected to gradually weaken. While the U.S. growth story is still alive, the outlook for Europe remains uninspiring as stagflation risks grow.”

Companies in focus

• Taiwan Semiconductor Manufacturing Co.
  TSM,
  +0.75%
  rose 1% on Thursday and Nvidia Corp.
  NVDA,
  -0.50%
  was edging lower as U.K.-based chip designer ARM Holdings PLC
  ARM,
  +16.31%
  started its Nasdaq trading. Both companies are among a host of companies investing in ARM at the IPO price.

• HP Inc. shares
  HPQ,
  -2.45%
  fell 2.6% after Berkshire Hathaway
  BRK.A,
  +0.38%

  BRK.B,
  +0.45%
  sold 5.5 million shares of the PC and printer maker, according to a Securities and Exchange Commission filing late Wednesday.

• Semtech Corp. shares
  SMTC,
  +8.31%
  fell as much as 6.3% in the morning after the analog and mixed-signal chip maker forecast a loss for the current quarter while Wall Street had expected a profit. The stock then rallied, rising 45.7% at midday Thursday.

• AMC Entertainment Holdings Inc.
  AMC,
  -0.18%
  stock dropped 1.2% after the movie theater chain and meme stock darling announced the completion of its at-the-market equity offering, raising approximately $325.5 million.

• Arm Holdings PLC’s stock
  ARM,
  +16.31%
  soared nearly 18% Thursday as the U.K.-based semiconductor design company made its eagerly-anticipated Wall Street debut. Late Wednesday, Arm priced shares at $51 each, towards the top end of the expected range.