US pre-open: Slow start expected, but Arm to rise again

US stock markets were expected to take a breather on Friday after strong gains made the previous session.

In pre-market trade, the Dow was up 0.2%, while the Nasdaq and S&P 500 rose just 0.1%.

The S&P 500 in particular, gained 0.8% on Thursday – its best daily performance since late August – after a raft of economic data did little to change investors' predictions that the Federal Reserve would hold rates steady when it meets next week.

Stocks across Europe were also still rising after the ECB hiked interest rates but assured markets that this would be the end of its current rate-rising cycle.

Sentiment was also lifted by a blockbuster IPO from British chip designer Arm, whose oversubscribed flotation saw the shares jump by a quarter on its first day of trading on the Nasdaq.

Overnight, newsflow from China was helping keep markets buoyant – for once – after retail sales and industrial output figures smashed expectations for August.

The Michigan US consumer confidence index is due out on Friday and expected to show a slight dip in the headline figure to 69.1 in August, from 69.5.

Arm and autos in focus

Arm looks set to begin its second day of trading in the green, with futures rising strongly. The stock finished 25% higher as it floated on Thursday, valuing the company at $65bn. The initial public offering, which was said to be 10 times oversubscribed, is the largest stock-market flotation since 2021.

“When a stock goes up 25% in a day, there will naturally be FOMO among investors," said Russ Mould, investment director at AJ Bell. "That might explain why its shares look like they will jump again today, with the stock up nearly 7% in pre-market trading."

Nevertheless, he said: “If Nvidia is capable of delivering mega returns, plenty of people will expect the same from Arm. However, investing is never that simple and there are plenty of risks to owning shares in Arm, including the fact it makes a quarter of revenues from China, which exposes it to geopolitical tensions between that country and the West.”

Futures of Ford and General Motors declined after the United Auto Workers went ahead with a strike against the Big Three automakers as workers demand better pay and benefits, along with clarity over how the industry transition to electric vehicles will affect staff. Chrysler owner Stellantis is also affected by the industrial action, but futures were higher early on.