Tuesday's Final Takeaways: Housing Market Still Frozen, Elice IPO Plunges

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'll close out the show the same way we always do, with some thoughts on this session today. Mine is very data focused and on the housing market. The US housing market's showing renewed signs of weakness with high mortgage rates and affordability pressures weighing on both buyers and builders. Housing starts fell 5.2% in September to an annualized pace of 1.22 million units. That was down almost 7.5% from a year ago, and below the economist's expectations. Single-family starts dropped 4.6% to 859,000, while permits for them fell 4%, suggesting that construction could remain under pressure. The National Association of Home Builders saying, September's single-family data aligns with our forecast of lower production in 2026, with further declines expected in 2027, as rates stay elevated and material costs rise. Pending home sales didn't do any better, they plunged 7.3% in September, were down 11.3% year-over-year. That's the lowest level in the index's history, which dates back to 2001 Builder sentiment deteriorated as well, falling 3 points to 29 in the month of October. That's its lowest reading since June of 2012, while the index for prospective buyer traffic dropped 5 points down to 18

During the month of September, the average 30-year mortgage rate reached 7.6% by the end of the month, adding to the pressure from rising construction, labor and material cost, taking this all together. The data points to a housing market that is struggling to regain momentum. Sam, I'm just not sure what it's going to take to get some wind behind those sales in the housing market, but what caught your eye today?

Sam Vadas (1:42)

Yeah, it certainly seems to be frozen at this point right now. I mean, looking at these AI fears, they seem to be further fueled today, Marley, by shares in data center company, Elice, which got hammered in its trading debut over in South Korea. I mentioned this earlier, the Neo Cloud firm, which has a similar business to CoreWeave, saw shares drop nearly 40% before finishing the day just over 30% lower. According to Bloomberg, it was the worst opening day for a big Korean IPO in history. The company had raised just over $150 million and was oversubscribed by more than 400 times. It really highlights how demanding valuations are becoming right now amid concerns about long-term returns of this capital-intensive AI infrastructure buildout. What's important is the bad news from South Korea. I spoke about this earlier with our guest, appeared to have an impact at the open here in the US this morning. But I heard one trader here today say that the fact it didn't roll over into the rest of the session, perhaps suggests that some of the deliveraging in this sector is done. But it doesn't necessarily mean the fears have gone away. It comes after a number of IPO setbacks, including NVIDIA-backed Aussie Data Center company, that's Firmus, and further highlighting the AI funding worries. Today, SoftBank's five-year credit default swaps have rallied to a four-year high. So the view is, it's now over to the big AI spenders for evidence that these massive investments are paying off. Hashtag no pressure. Just heading into tomorrow though, Marley, what are you going to be looking out for?

Marley Kayden (3:13)

One of those big spenders has earnings, Sam and Meta. We've also got Tesla coming our way. Tesla in the wake of SpaceX and then whatever Elon Musk is going to say on that conference call that's happening here in just about five minutes. Revenue expected for Tesla to be roughly flat year over year while adjusted EPS is forecast to fall about 10 percent. Free cash flow, of course, a big focus after they went negative in Q2 and any updates on their autonomous driving ambitions. RoboTaxi, CyberCab also closely watched Meta. The street looking for revenue growth about 25 percent. Mews barely included in this quarter, so all eyes will be on that big spending number that you just mentioned there. Sam, heavily scrutinized in previous reports, so will be interesting to see how it's received in this quarter. But what will you be watching?

Sam Vadas (3:57)

Yeah, absolutely. I mean, obviously, we have got the reaction to some of the big names that we've just reported. I mean, certainly market move is SpaceX, Netflix and United Airlines, but we do have some fresh earnings reports tomorrow as well coming from the likes of IBM, Lamrie Search and Texas. But that's obviously interesting because we have had that chip sell-off just recently given we've had that eight-day decline. Some recovery right now, but no doubt this is going to be the next test for the chip trade moving forward. What do these companies that are more in the business of the legacy stuff and in the equipment making go to say about some of that demand moving forward?