Friday's Final Takeaways: Firmus Delays IPO, Affordability Hits Households

Marley Kayden (0:01)

Welcome back to Market On Close. I'm Marley Kayden here in Chicago alongside Sam Vadas at the New York Stock Exchange. We will close out this week with our final thoughts on this session. We got consumer sentiment this morning, falling to a five month low in October. As frustration over the rising cost of living continues to weigh on Americans. The University of Michigan's preliminary consumer sentiment index dropped to 46.3, down from 48.1 in September, coming in below economist expectations. While its measure of current economic conditions plunged to 44.7, that's the lowest reading on record. Inflation expectations are also moving higher. Consumers now expecting prices to rise 4.7% over the next year and 3.5% over the next five to 10 years, as gas prices and borrowing costs remain elevated. The growing pessimism raises concerns about the consumer outlook as we head into the holiday shopping season, particularly for lower-income household, even as spending has remained relatively resilient. Staying with the consumer here, Americans are facing mounting financial pressure as debt burdens and missed payments rise. This is according to new Federal Reserve data. The Fed survey of consumer finances shows that the share of households, spending more than 40% of their income on debt payments, climbed to 8.6% by the end of last year. That's the highest level we've seen since 2013

While loan delinquencies rose from 12% to nearly 20%.

That marks the highest number of families falling behind on their payments since 2010, when we were of course recovering from the Great Recession. The strain particularly concerning for that same category in consumer sentiment, lower income households, as persistent inflation and elevated borrowing costs make it harder to keep up with monthly bills, even as inflation adjusted medium household income did increase from 27% to $82,200.

Pair this with the New York Fed Survey released earlier this week that showed that households are reporting their financial situations had worsened from a year ago, and they feel they are likely to be weaker in the year ahead. And what we're left with is a picture of a consumer who is under mounting pressure. But then Sam, we get the results from Delta, and they say the consumer is still flying and spending and traveling. So, you know, always a mixed picture when it comes to the consumer. But what caught your eye today?

Sam Vadas (2:16)

I suppose you still need to go on vacation. A bit of a tech theme. NVIDIA backed Australian AI company Firmus now reportedly exploring private funding, as I mentioned earlier, after pulling its IPO, citing market volatility. The Aussie data center operator is now looking for other sources of funding. According to Bloomberg, the company is in talks with investors to raise $2 to $3 billion in a private round. It had been looking to raise roughly $5 billion from its public offering. It would have been one of the biggest new share sales in Australian history. And SoftBank is reportedly looking to raise up to $100 billion from golf investors to further fund its AI investments. According to the FT, CEO Masayoshi San has been in talks with people, including in the UAE, about potential backing. Tokyo listed shares got hit hard overnight, down as much as 7% after that open AI scare, but managed to pare losses after Bloomberg reported that it could have helped ease concerns. SoftBank is particularly exposed to the news around open AI, as we know, given it's a major investor. But as I just mentioned to my last guest, it tells us a lot about the shifts in sourcing capital for this massive AI build out via sovereign wealth and the private sector rather than the public equity markets. But heading into next week, Marley, what are you going to be looking out for?

Marley Kayden (3:33)

Inflation front and center next week. Sam will get the September CPI report, expected to show that headline inflation is higher month over month, and 3.6 percent year over year. Core inflation should be about 2.5 percent. We'll also get producer prices, retail sales, and weekly jobless claims, giving investors a broader read on business costs, consumer resilience, and the health of the labor market. These are some of the last key data releases before the Federal Reserve meets at the end of October to decide whether to raise rates again. For the Fed, it is a delicate and closely watched balancing act. The FedWatch tool currently has about a 20 percent chance of a hike in October. What will you be watching for, Sam?

Sam Vadas (4:12)

As we've been talking about, the earnings season really kicking off in earnest with the banks. Obviously, some of the key financials will be JP Morgan, Goldman, Citi on Tuesday, then of course on Wednesday we'll have Morgan Stanley, Bank of America, BlackRock as well. We've got a couple of key tech names as well coming out, TSMC and ASML, so no doubt we'll be pouring over all those reports next week, Marley.