Arm files for IPO, Microsoft alters Activision deal – what’s moving markets

Investing.com — Chip designer Arm announces plans for a much-anticipated initial public offering, although the Softbank-owned group stops short of specifying its valuation. Elsewhere, tech stocks remain resilient in the face of surging bond yields as excitement for Nvidia’s latest quarterly earnings report grows, while Microsoft restructures its mega-merger with Activision Blizzard to appease U.K. regulators.

1.  Arm files for Nasdaq IPO

Softbank-owned Arm released a preliminary prospectus for a Nasdaq listing, firing the starting gun on a long-awaited initial public offering that could be one of the biggest U.S. flotations in nearly two years.

Japan’s Softbank (TYO:) has only recently provided a timeline for the IPO, as the tech investor looks to take advantage of soaring enthusiasm for the development of generative artificial intelligence. Arm could prove to benefit from the AI boom, given that its processor designs are used in chips made by tech behemoths like Apple (NASDAQ:) and Nvidia (NASDAQ:). The firm receives royalties for every chip sold by its customers.

Cambridge, U.K.-based Arm estimated in the filing that about “70%” of the world’s population uses its products, noting that chips containing its technology constituted an almost 49% share of a total addressable market that was worth approximately $202.5 billion at the end of last year.

The company did not specify how many shares will be issued or their valuation in its filing with the U.S. Securities and Exchange Commission late Monday. However, it confirmed that SoftBank Group bought the 25% of Arm it did not already own from its Saudi-backed investment vehicle earlier this month at a valuation of roughly $64B.

At this level, Arm would become the most valuable business to IPO in the U.S. since electric vehicle maker Rivian (NASDAQ:) in 2021. But Arm stressed that the purchase price of the transaction may not be “and should not be treated as” indicative of the offering’s potential trading price.

2. Futures higher despite Treasury yield surge

U.S. stock futures edged up on Tuesday after mixed returns on Wall Street in the prior session in the wake of a spike in bond yields.

By 05:22 ET (09:22 GMT), the contract had climbed by 50 points or 0.1%, added 13 points or 0.3%, and rose by 61 points or 0.4%.

Fears that the Federal Reserve may keep elevated for longer to tamp down inflation sparked a renewed sell-off in U.S. bond markets on Monday. The benchmark jumped to its highest level since November 2007, while the yield also increased. Bond prices typically fall as yields rise.

But the tech-heavy still registered its biggest gain so far this month, moving up by 1.6%. Excitement over Nvidia’s upcoming earnings on Wednesday helped offset the impact of the higher yields on tech stocks, which tend to rely heavily on debt to finance their growth plans.

The broad-based also eked out a gain of 0.7%, although the 30-stock dipped slightly by 0.1%.

Anticipation is now intensifying around an annual symposium at later this week, where traders hope Fed Chair Jerome Powell will deliver remarks on the central bank’s inflation outlook.

3. Microsoft and Activision submit new merger proposal

Microsoft (NASDAQ:) has proposed a revised version of its merger with “Call of Duty”-maker Activision Blizzard (NASDAQ:) in a bid to receive approval from U.K. competition authorities for the video-gaming industry’s largest-ever tie-up.

Under the terms of the new deal, Microsoft said Activision would sell its cloud streaming rights outside the European Economic Area to French rival Ubisoft.

The restructured transaction aims to appease Britain’s Competition and Markets Authority (CMA), which has become the final regulatory body to stand in the way of the $69B merger. On Tuesday, the CMA unveiled a final order blocking the original form of the deal, citing worries over innovation in the lucrative cloud gaming market.

Microsoft argued that the fresh proposal was “substantially different” than its predecessor. But the CMA stressed that the altered merger does not yet have a “green light,” adding that it will still assess the deal “carefully and objectively.”

4. Lowe’s and Macy’s highlight earnings day

Lowe’s (NYSE:) and Macy’s (NYSE:) are scheduled to announce quarterly results on Tuesday, with investors keen to see how the consumer retail chains have fared during a recent pull-back in consumer spending on nonessential items.

Earlier this year, DIY group Lowe’s lowered its full-year sales and earnings outlook, warning of a near-term slowdown in expenditures on big-ticket home improvement items.

But Chief Executive Marvin Ellison described the medium- and long-term strength of the business as strong, thanks in part to more customers choosing to shell out cash to make repairs on an aging U.S. housing stock. Meanwhile, if recent comments from Lowe’s rival Home Depot (NYSE:) are any indication, input cost pressures are showing signs of easing.

Department store operator Macy’s has also slashed its annual sales and income forecast in recent months, saying it needed to take a conservative approach to a spring slowdown in shopper spending. The company also predicted that it would likely need to roll out more discounts to spur demand in an uncertain economic picture marked by higher, albeit cooling, inflation.

The main event in the earnings calendar this week is still to come. On Wednesday, chipmaker Nvidia will announce returns that will likely provide a look into the extent of surging hype around generative AI.

5. Crude mixed ahead of fresh U.S. inventory data

Oil prices hovered around the flatline Tuesday, as traders warily weighed the prospect of a faltering economic recovery in top crude importer China and awaited more signals on U.S. monetary policy at the Jackson Hole symposium at the end of the week.

Demand for oil is expected to be driven by China over the rest of 2023, but concerns are rising that Beijing may not be providing strong enough support for a sputtering post-pandemic recovery in the world’s second-largest economy.

Meanwhile, U.S. crude oil and gasoline inventories are also due later in the session from the American Petroleum Institute industry group, while the Energy Information Administration, the statistical arm of the U.S. Department of Energy, will release its own data on Wednesday.

By 05:23 ET, futures were mostly unchanged at $80.14 a barrel, while the contract inched down by 0.1% to $84.42.

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