Markets News, Sept. 14, 2023: Dow Jumps 300 Points; S&P 500 Rises as Arm Debut Awakens Markets

Dow Jumps as Arm IPO Jolts Markets

Energized by the initial public offering of chip designer Arm, the Dow Jones Industrial Average surged about 1%, or 331 points, to break a two-session losing streak. It was the index’s best day since August 7, and all but four of the Dow 30 stocks closed in the green. 

Goldman Sachs (GS) shares had their best day since July, jumping 2.9% after Arm Holdings (ARM) stock surged 26% in its IPO, of which Goldman was a lead underwriter. The firm also reportedly fired several executives in its transaction banking division, including its head Hari Moorthy, over compliance lapses.

JPMorgan Chase & Co. (JPM), also an Arm underwriter, climbed 1.9%.

Walgreens Boots Alliance (WBA) shares moved up 2.7%, rising for a third straight session after announcing a strategic partnership with technology company Pearl Health. 

Caterpillar (CAT) shares rose by 2.4% while Dow Inc. (DOW) gained 2.3%.

Shares of Walt Disney (DIS) gained 1.2% on reports it was in talks to sell ABC to local broadcaster Nexstar Media Group (NXST), which gained 5.5% on the news. 

Visa (V) was the laggard of the Dow 30, falling 2.6% after the credit card company said it’s talking to shareholders about a plan to allow several large banks, which owned Visa before its IPO, to sell the shares they’ve been required to hold until the full settlement of pre-IPO litigation. More than 90% of those settlements are now paid out. 

Johnson & Johnson (JNJ), Intel (INTC), and Salesforce (CRM), the only other Dow components to close in the red, all fell slightly.

-Terry Lane

Oil Is Red Hot... Again

Oil futures rose again Thursday, climbing over 2% to trade above $90 a barrel for the first time since last November.

Oil has been on a tear ever since Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC)—and its sister organization OPEC+—cut production in April. Prices have risen 32% in the last three months and are up 12% this calendar year.

Rising oil prices have trickled down to gas prices. Higher prices at the pump have, in the process, boosted inflation and retail spending, both of which exceeded economists' expectations in August.

Midday Market Movers

Arm Holdings Plc (ARM): Shares of the semiconductor designer jumped almost 20% on its much-anticipated first day of trading. 

Norwegian Cruise Lines Holdings (NCLH): The cruise operator’s shares gained more than 5% after analysts at Redburn Partners upgraded the stock to buy from neutral, saying about the cruise industry “the fundamental investment case of strong secular growth and margin opportunity is clear.”

Netflix Inc. (NFLX): Shares fell more than 2% after CFO Spencer Neumann said at a Bank of America conference he expected current-quarter operating margins of between 18% and 20%, below Wall Street’s consensus estimate of 22%. The stock dropped more than 5% yesterday on the comments.

HP Inc. (HPQ): Shares of the personal computer maker fell 2% after Berkshire Hathaway cut its stake in the company, selling 5.5 million of the more than 120 million it bought in early 2022.

The World's First 0DTE Options-Based ETF Is Here

Exchange-traded fund (ETF) originator Defiance has launched the world's first 0DTE, or "zero days to expiration," options-based ETF, capitalizing on a growing market that's become increasingly popular with investors.

Defiance, a Miami-based registered investment advisor (RIA) and ETF originator, today launched the Defiance Nasdaq-100 Enhanced Option Income ETF, or QQQY—the world's first ETF to use one-day options for advanced traders.

Defiance's new ETF will track the performance of the Nasdaq 100 index and aim to generate income for investors by selling put options "that are priced either at-the-money or up to five percent in-the-money" every day.

QQQY isn't the only new investment product tapping into the demand for exposure to options. Launched in 2020, JPMorgan Chase's (JPM) Equity Premium Income ETF (JEPI), an options-oriented fund, outperformed the S&P 500 by 15 percentage points last year, amid 2022's bear market. The JPMorgan Chase fund has attracted inflows of nearly $30 billion since its inception three years ago.

-Mack Wilowski

Today's Biggest Analyst Calls

Etsy Inc. (ETSY): The digital marketplace was upgraded to outperform from peer perform by Wolfe Research, which said the company would benefit from a recovery in discretionary spending next year.

First Solar (FSLR): Analysts at BMO Capital upgraded the solar stock to outperform from market perform, saying shares have been oversold since its analyst day last week.

MetLife Inc. (MET): Jefferies upgraded the insurer to buy from hold and raised its price target to $72 from $58. Analysts are more optimistic about the life insurance industry in general, also upgrading Prudential Financial Inc. (PRU) to hold from underperform. 

J.M. Smucker Co. (SJM): BofA Securities downgraded the maker of packaged foods to neutral from buy and lowered its price target to $145 from $170, citing Smucker’s proposed acquisition of Twinkie-maker Hostess Brands Inc. (TWNK). 

RTX Corp. (RTX): BofA also downgraded the stock to underperform from neutral after the aerospace and defense company said it would take a $3 billion hit from the recall of hundreds of its Pratt jet engines. 

AMC Shores Up its Finances by Raising More Than $325 Million in a Stock Sale

AMC Entertainment Holdings (AMC) said it raised more than $325 million after successfully completing a stock sale aimed at shoring up the financially struggling theater chain operator.

AMC said it sold 40 million shares at an average price of approximately $8.14 each in the at-the-market offering, which was launched Sept. 6.

The company explained the money “significantly boosts AMC’s cash reserves, addresses current liquidity concerns, and fortifies its balance sheet.” CEO Adam Aron added that the sale “has bolstered our ability to survive and thrive.”

Shares of AMC Entertainment Holdings rose in early trading on Thursday for the fourth consecutive day and were up 1.7% midday after falling to an all-time low last Friday.

-Bill McColl

Retail Sales, Mainly Gas, Jumped in August

U.S. consumers still have enough buying power to keep on spending—at least on gasoline.

Retail sales rose 0.6% in August from July, according to data released by the Census Bureau Thursday. That was the fastest pace of growth since May and up from the 0.5% increase in July.

The report beat expectations of economists polled by Dow Jones Newswires and the Wall Street Journal, who had anticipated only 0.1% growth. However, the uptick was mainly because people spent more money at gas stations amid rising prices, with gas receipts rising 5.2% over the month.

Take away gas sales, however, and consumers looked a little less spend-happy. Excluding gas, sales rose 0.2% over the month, the slowest growth since March. A separate report this week on spending from Visa showed that rising gas prices forced people to shift where they spent their money in August.

-Diccon Hyatt

Wholesale Prices Rise at Fastest Rate in Over a Year

The Producer Price Index (PPI), a measure of price increases seen by manufacturers and wholesalers, rose 0.7% in August, its highest reading since June 2022. Wholesale prices have risen 1.6% in the last year, up from 0.8% in July.

The culprit for accelerating inflation: oil. About 80% of the rise in wholesale prices stemmed from a 2% increase in the PPI goods index. And more than half of that index’s rise was caused by a 20% jump in gas prices.?

The index for services rose just 0.2% last month, down from 0.5% in July, good news for the Federal Reserve, which has indicated it’s most concerned now with services inflation, especially labor costs.

European Central Bank Raises Rates to All-Time High

The European Central Bank on Thursday raised interest rates for the tenth consecutive time, bringing the deposit rate to 4%, the highest it has ever been.

The ECB’s latest hike is widely expected to be its last.?

“Based on its current assessment,” the bank said in a statement, “the Governing Council considers that?the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.”

The bank raised its forecast for inflation in 2023 and 2024, citing a higher path for energy prices than previously expected. Though it lowered its forecast for 2025, by which point the bank sees inflation running at 2.1%.

European equities and bonds rallied, with the U.K.’s FTSE 100 up more than 1% in afternoon trading and the German DAX rising 0.6%.

Stocks Making the Biggest Moves Premarket

Gainers:

• AMC Entertainment Holdings Inc. (AMC): Shares of the theater chain gained more than 5% after it said it had raised $325 million through the sale of 40 million Class A shares. The stock plummeted almost 40% to an all-time low earlier this month when the company announced the sale. 
• Etsy Inc. (ETSY): The online marketplace’s shares rose 4% after it was upgraded to outperform from peer-perform by Wolfe Research, which said the company should perform well as the economy improves.
• Taiwan Semiconductor Manufacturing Co. (TSM): The semiconductor maker’s shares gained 1%, along with peer Nvidia (NVDA), amid optimism in the sector ahead of British chipmaker Arm’s debut.

Losers:

• Vital Energy Inc. (VTLE): The oil and gas exploration company fell 5% after it said it would sell 2.5 million shares in a public offering.
• Visa Inc. (V): The credit card company fell more than 2% after it said it was discussing a plan with stockholders to amend its share structure to allow some of the biggest U.S. banks, which have been required to own some Visa stock since it went public in 2008, to start selling their shares.
• RTX Corp. (RTX): Shares of the defense and aerospace company fell nearly 2% after Bank of America downgraded the stock to underperform from neutral on concerns about the $3 billion hit RTX is expected to take from recalling hundreds of Pratt engines over the next few years.

5 Things to Know Before Markets Open

Here's what investors need to know to start their day:

1. The United Auto Workers (UAW) union said it is prepared to strike, in what would be its first simultaneous strike against the "Big Three" automakers, if agreements are not reached by today's 11:59 p.m. deadline.
2. British chip designer and Apple supplier Arm will start trading on the Nasdaq today under the symbol ARM, in what could be the biggest initial public offering (IPO) of the year.
3. AMC Entertainment (AMC) said it raised $325.5 million through the sale of 40 million shares it began offering on September 6, with the shares selling at an average price of $8.14.
4. Shares of computer maker HP Inc. (HPQ) fell more than 2% in pre-market trading after Berkshire Hathaway (BRK.B) sold 5.5 million shares, its first sale of the company's stock since accumulating a 12% stake in early 2022.
5. Wholesale prices, as measured by the Producer Price Index (PPI), rose 0.7% in August, their biggest monthly increase since June 2022. Soaring oil prices accounted for much of the increase.

-Terry Lane

Stock Futures Gain Ahead of Arm Debut

Futures contracts connected to the Dow Jones Industrial Average were up 0.2% in premarket trading.

S&P 500 contracts gained 0.3%.

Nasdaq 100 futures were up 0.4%.