CNBC Daily Open: Arm’s spectacular day lends helping hand to banks

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

The long reach of Arm
Arm shares surged almost 25% on its first day of trading on New York’s Nasdaq, and a further 6% in extended trading. The chip designer priced its shares at $51 a piece in its initial public offering. Shares of Arm began trading at $56.10 a share and ended the day at $63.59. That gives the company a fully diluted market cap of about $68 billion, and a price-to-earnings multiple higher than Nvidia’s.

Markets rebound
U.S. stocks rose Thursday, aided by Arm’s electrifying showing and promising economic data from the U.S. The Dow Jones Industrial Average, in particular, rallied 0.96% for its best day since August. European markets traded higher, with the regional Stoxx 600 index climbing 1.52% and other major bourses adding at least 1% following the European Central Bank’s rate decision.

Record rates in the EU
The ECB raised rates by 25 basis points to 4%, a record high reached after 10^th consecutive hikes since June 2022 when rates were -0.5%. The good news is that the ECB indicated it may be holding off further hikes. “ECB interest rates have reached levels that … will make a substantial contribution to the timely return of inflation to the target,” the bank’s council said.

Focus on the core
The U.S. producer price index, which measures wholesale prices, rose a seasonally adjusted 0.7% in August — far more than the 0.4% estimate — and 1.6% from a year earlier. August was the biggest monthly jump in more than a year. However, when stripping out food and energy prices, the month-over-month PPI was 0.2%, in line with expectations, and 2.1% on an annual basis, the lowest since January 2021.

[PRO] No secret sauce for HP
Warren Buffett’s Berkshire Hathaway sold a portion of its stake in HP. This year hasn’t been kind to the computer and printer maker, as its fiscal third-quarter earnings missed Wall Street’s expectations. CNBC Pro’s Yun Li breaks down what Berkshire’s play in HP initially was, and whether it’ll change going forward — based on another bet the company has made in the past.

When you have a toothache, your whole body feels the pain. In the same vein, when Arm experienced a flush of wellbeing, it radiated through markets’ entire body, giving them their best day in weeks.

“The successful IPO of Arm … instills some confidence that perhaps the capital markets window is going to open again after virtually being closed for the last 18 months,” said Art Hogan, chief market strategist at B. Riley Financial.

Big banks rallied on excitement that the sleepy IPO market for tech companies might finally be stirring. (More IPOs means more dealmaking — and higher revenue — for banks.) Shares of JPMorgan Chase rose almost 2%, Morgan Stanley gained 2.09% and Goldman Sachs popped 2.86%. Tech IPOs are particularly important to Goldman as the bank relies on investment banking more than its rivals. With Instacart and marketing firm Klaviyo set to list soon, Goldman — which has been struggling of late — might see a change in its fortunes.

Goldman and JPMorgan are big components of the Dow. That helped the blue-chip index rise 0.96%, its best day since Aug. 7, giving it a closing level above its 50-day moving average for the first time since Sept. 1. The S&P 500 advanced 0.84%, its best showing in around two weeks, and the Nasdaq Composite gained 0.81%.

Meanwhile, a tame core PPI reading for August assuaged worries — somewhat — after core consumer price index was higher than expected. As PPI is considered a leading indicator, that is, it predicts the future state of the economy, while CPI is a lagging indicator, markets found solace in the idea that things aren’t as bad as the CPI appeared to portray.

And August retail sales jumped 0.6% against the 0.1% expected. Taken together with the PPI report, that suggests the U.S. economy, supported by an indefatigable consumer, might skirt a recession even as inflation gradually cools.

“You’ve got the perfect framework of inflation heading in the right direction, but the economy not falling apart,” Hogan said. “And that really paints the picture that the Fed has done the right thing and we may well be orchestrating that elusive soft landing.”

But the economy is infamously volatile. Hence Hogan’s all-important caveat: “At least that’s the impression we get this week.” Still, after markets ended in the red last week, any reprieve, however temporary, will be welcome.