Dow rises over 300 points to book best day in 5 weeks after strong economic data; Arm climbs 25% in Nasdaq debut

What drove markets

U.S. stocks finished higher on Thursday as investors digested a spate of U.S. economic data and an interest-rate hike by the European Central Bank, while cheering Arm
ARM,
+24.69%
‘s IPO as the British semiconductor-design firm started trading on the Nasdaq on 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.

“Following last month’s [retail sales] report which was also stronger than anticipated, combined with yesterday’s and today’s inflation reports, we think the Fed will still be inclined to pause next week,” said George Mateyo, chief investment officer at Key Private Bank. “However, it will be a hawkish pause and likely include a warning that it may need to raise rates again if current economic momentum continues,” he said in emailed comments on Thursday.

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 32.4%, slightly lower from earlier this week, according to the CME Fed Watch Tool. 

Investors also kept 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. Shares of Arm finished nearly 25% higher on Thursday.

Investors hoped 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.”

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

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,
+0.01%
was off 0.8% at $1.06 in the afternoon trade.

Companies in focus

• Taiwan Semiconductor Manufacturing Co.
  TSM,
  +0.81%
  finished 0.8% higher on Thursday and Nvidia Corp.
  NVDA,
  +0.21%
  also edged higher as U.K.-based chip designer ARM Holdings PLC
  ARM,
  +24.69%
  started its Nasdaq trading. Both companies are among a host of companies investing in ARM at the IPO price.
• HP Inc. shares
  HPQ,
  -1.80%
  fell 1.8% after Berkshire Hathaway
  BRK.A,
  +0.68%

  BRK.B,
  +0.46%
  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,
  +10.10%
  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 10.1% on Thursday afternoon.
• AMC Entertainment Holdings Inc.
  AMC,
  -1.21%
  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.

Jamie Chisholm contributed