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By Sinéad Carew and Lewis Krauskopf

(Reuters) -Shares of Arm Holdings closed down 4.9% on Tuesday, in their third daily decline out of the stock’s first four sessions as a listed company, as investor interest faded in the biggest initial public offering (IPO) for the year so far.

With short sellers looking to profit from the stock, it closed at $55.17 after touching a high of $69 on Friday. The chip designer, in which Softbank holds a roughly 90% stake, closed at $63.59 on Thursday, which was almost 25% higher than its IPO price of $51.

Arm shares underperformed the Philadelphia semiconductor index, which closed down 0.96% on Tuesday as rising bond yields weighed on growth sectors such as technology.

Investors were also monitoring grocery delivery service Instacart, another high-profile IPO, which ended its debut session at $33.70, roughly 12% above its $30 IPO price.

On Tuesday, Redburn Atlantic, an equity research and trading company, launched coverage of ARM with a “neutral” rating and a $50 price target, arguing that recommending ARM at current valuations would require “higher conviction in a multi-year earnings acceleration from a weak (full year 2023) base.”

While bullish investors are pinning their hopes for the stock on demand tied to a surge in interest in artificial intelligence (AI), Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, said he needed more proof.

“People are sobering up a little bit from the initial excitement,” said Morgan, whose company holds shares in Nvidia but has not invested in Arm.

“My biggest concern is valuation and the fact that everyone is buying ARM because it’s a huge AI play in the eyes of investors. It does benefit from AI but it’s not Nvidia,” said the money manager. “We don’t have any direct evidence at this point that ARM has been directly positively impacted by AI like we have from Nvidia.”

Thomas Martin, senior portfolio manager at GLOBALT Investments, Atlanta, said some initial volatility was to be expected with a new asset on the market.

But when the excitement dies down, he said, “it will go back to the metrics that are associated with its end markets and its end users.”

Data from analytics company Ortex on Tuesday suggested that short sellers had started taking bets against Arm stock, with slightly more than 5 million shares of the newly listed chip designer “on loan,” or 2.7% of the stock’s free float. Short sellers need to borrow a stock to short it, and the relationship between shares on loan and shorted is normally quite close, according to Ortex. Initially with a new stock “there is often a lot of data missing, so there is a reasonable expectation that the real number is higher,” Ortex co-founder Peter Hillerberg said in an email. Arm’s average cost to borrow, which is the interest rate for borrowing, is currently at 12.76%, according to Ortex. By comparison, Tesla, a stock with a similar percentage of shorted shares, has a cost to borrow at 0.48%, Ortex said. Arm’s higher cost to borrow “can be an indication that the demand to borrow, and short, the stock is high,” Hillerberg said.

Analysts from Bernstein and Needham in recent days had published less than optimistic notes about the chip technology company and options on the stock starting trading on Monday at a brisk pace, with many investors positioning for further downside.

Late on Monday, Arm announced that its underwriters had exercised their full over-allotment option to buy an additional 7 million American depository shares (ADSs), boosting the total raised from the IPO to approximately $5.2 billion.

Another IPO on the cards is marketing automation company Klaviyo Inc, which is considering pricing its offering at the top of its indicated price range or just above it, according to people familiar with the matter. That IPO is expected to be priced on Thursday evening.

(Reporting by Lewis Krauskopf, Sinéad Carew and Lisa Bernhard in New YorkEditing by Mark Potter and Matthew Lewis)

(Reuters) -Billionaire entrepreneur Elon Musk’s brain-chip startup Neuralink said on Tuesday it has received approval from an independent review board to begin recruitment for the first human trial of its brain implant for paralysis patients.

Those with paralysis due to cervical spinal cord injury or amyotrophic lateral sclerosis may qualify for the study, it said, but did not reveal how many participants would be enrolled in the trial, which will take about six years to complete.

The study will use a robot to surgically place a brain-computer interface (BCI) implant in a region of the brain that controls the intention to move, Neuralink said, adding that its initial goal is to enable people to control a computer cursor or keyboard using their thoughts alone.

The company, which had earlier hoped to receive approval to implant its device in 10 patients, was negotiating a lower number of patients with the U.S. Food and Drug Administration (FDA) after the agency raised safety concerns, according to current and former employees. It is not known how many patients the FDA ultimately approved.

Musk has grand ambitions for Neuralink, saying it would facilitate speedy surgical insertions of its chip devices to treat conditions like obesity, autism, depression and schizophrenia.

In May, the company said it had received clearance from the FDA for its first-in-human clinical trial, when it was already under federal scrutiny for its handling of animal testing.

Even if the BCI device proves to be safe for human use, it would still potentially take more than a decade for the startup to secure commercial use clearance for it, according to experts.

(Reporting by Mariam Sunny in Bengaluru; Editing by Pooja Desai)

By Stephanie Kelly

(Reuters) -Oil prices rose to 10-month highs on Tuesday before easing, as investors took profits following three sessions of gains that followed extended production cuts from Saudi Arabia and Russia.

Global benchmark Brent crude futures settled 9 cents lower at $94.34 a barrel. Earlier, it hit a session peak of $95.96 a barrel, their highest since November.

U.S. West Texas Intermediate crude futures dropped 28 cents to $91.20 after earlier reaching $93.74 a barrel, also the highest since November.

After Brent topped $95 a barrel on Tuesday, investment bank UBS said in a note it started taking profits. Still, strategists there expect Brent to trade in a range of $90-100 per barrel over the coming months, with a year-end target of $95 per barrel.

Feeding supply concerns, OPEC+ members Saudi Arabia and Russia this month extended combined supply cuts of 1.3 million barrels per day (bpd) to the end of the year.

Russia’s government is considering imposing export duties on all types of oil products of $250 per metric ton – much higher than current fees – from Oct. 1 until June 2024 to tackle fuel shortages, sources told Reuters on Tuesday.

Further, U.S. oil output from top shale-producing regions is on track to fall to 9.393 million bpd in October, the lowest since May 2023, the U.S. Energy Information Administration said on Monday. That would be a third consecutive monthly fall.

Industry data on Tuesday showed U.S. crude oil stockpiles fell last week by about 5.25 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts had expected a 2.7 million-barrel decline [API/S]

U.S. government data on inventories is due on Wednesday.

There are some demand uncertainties that could weigh on the market.

On Monday, Saudi Aramco CEO Amin Nasser lowered the company’s long-term outlook for global demand to 110 million bpd by 2030 from a previous estimate of 125 million bpd.

Saudi energy minister Prince Abdulaziz bin Salman defended OPEC+ supply cuts, saying international energy markets need light regulation to limit volatility, while warning of uncertainty over Chinese demand, European growth and central bank measures to tackle inflation.

Interest rate decisions are due this week from the central banks of the U.S., Britain, Japan, Sweden, Switzerland and Norway.

Wall Street’s main indexes dropped on Tuesday, with the Nasdaq and the S&P 500 hitting their lowest in over three weeks as Treasury yields rose ahead of the U.S. Federal Reserve’s policy meeting this week. [.N]

The central bank is expected to hold benchmark interest rates at the current 5.25%-5.50% range on Wednesday, as core inflation crawls toward the Fed’s 2% target.

(Reporting by Stephanie Kelly in New York, Andrew Hayley in Beijing and Paul CarstenEditing by Kirsten Donovan, Jason Neely, David Goodman, David Gregorio and Jan Harvey)

By Herbert Lash

NEW YORK (Reuters) -Global stocks eased and the 10-year Treasury yield almost hit levels last seen in 2007 as a plunge in U.S. homebuilding last month underscored the balancing act the Federal Reserve faces in presenting its outlook on inflation and the economy this week.

Traders and investors avoided big bets ahead of rate decisions by the Fed on Wednesday, the Bank of England on Thursday and the Bank of Japan on Friday, in a week with policy outlooks also expected from other central banks.

Oil prices rose for a fourth straight session, with futures for global benchmark Brent crude climbing past $95 a barrel, a surge that exacerbates concerns on whether rates need to go higher to quash inflation.

Futures suggest a 99% likelihood that the U.S. central bank will pause its aggressive rate hikes on Wednesday, when Fed Chairman Jerome Powell is expected to maintain a hawkish stance at a news conference.

“I expect a reprise of the Jackson Hole speech from Powell,” said Bill Sterling, global strategist at GW&K Investment Management LLC in Boston.

“They’re still very serious about getting back to 2% inflation, are prepared to raise rates more if necessary, with a nod to the idea that there’s a two-sided risk in the economy,” which pits strong economic growth versus declining incomes.

The impact of rising interest rates has crimped demand in U.S. housing as a resurgence in mortgage rates led homebuilding in August to plunge to more than a three year-low.

The market has adjusted its outlook and removed a significant amount of rate cutting by the Fed next year due to two factors, said Joe LaVorgna, chief U.S. economist at SMBC Nikko Securities America Inc in New York.

“One is fear that inflation, I think incorrectly, might remain sticky, especially with oil prices going higher. Now there’s another concern, the potential wage negotiations with the auto workers that might be inflationary,” he said.

But job openings are weakening sharply, a good sign for lower employment costs, he said.

The yield on benchmark 10-year Treasury notes rose to 4.365%, a notch below the almost 16-year high of 4.366% reached on Aug. 22. The two-year yield, which reflects interest rate expectations, rose 3 basis points to 5.094%.

A jump in the annual pace of Canadian inflation due to rising gasoline prices helped feed expectations interest rates will stay higher for longer. Futures show the Fed will keep its overnight lending rate above the 5% mark until late July 2024.

MSCI’s gauge of stocks across the globe closed down 0.17%, while the pan-regional STOXX 600 index in Europe edged 0.04% lower.

On Wall Street, the Dow Jones Industrial Average fell 0.31%, the S&P 500 lost 0.22% and the Nasdaq Composite dropped 0.23%. The dollar index, which gauges the currency against six major peers, was up 0.06% at 105.13, not far from Thursday’s six-month high of 105.43.

Investors and central bankers are contending with a more than 30% rise in oil prices since late June as Saudi Arabia and Russia limit supply and as demand has picked up, while weak U.S. shale output has also increased concerns.

Oil prices slid on Tuesday after hitting 10-month highs after investors took profits following three sessions of gains.

U.S. crude futures settled down 28 cents at $91.20 a barrel, while Brent futures fell 9 cents to settle at $94.34 after retreating from the day’s high of $95.96.

Samuel Zief, head of global FX strategy at JPMorgan Private Bank, said central banks should not be overly concerned by the run-up in crude, which he said should fade as economies slow.

“What the central banks are really, really focused on, it’s not really the supply-side energy shocks anymore, it’s really the sticky services part of the inflation basket,” he said.

The Bank of England sets policy on Thursday and is expected to hike rates by 25 basis points to 5.5%, in what many investors believe will be the last increase of the cycle.

The Bank of Japan is expected to leave rates on hold in negative territory on Friday, although it too will be scrutinized for clues about the outlook after Governor Kazuo Ueda hinted at a move away from ultra-loose policy.

Gold held near a two-week peak, though prices were stuck in a narrow range as the focus turned to the Fed’s policy meeting.

U.S. gold futures settled little changed at $1,953.70 an ounce.

(Reporting by Herbert Lash, additional reporting by Harry Robertson in London, Kevin Buckland in Tokyo and Lewis Jackson in Sydney; Editing by Marguerita Choy, Chizu Nomiyama and Deepa Babington)

Short Bets on Nasdaq 100 Soar as Investors Shun Tech Stocks

Investors are increasingly shunning tech stocks concerned by the high interest rate environment and premium valuation after an explosive run in 2023. Tech-heavy Nasdaq 100 has started seeing outflows depicted by the index pulling back from record highs. The index has been under pressure since July, signaling waning upward momentum.

Nasdaq Short Bets

According to strategists at Citigroup, investors are increasingly positioning for more losses on the tech-heavy Nasdaq 100. Fuelling the sentiments is the fact that the index is down by more than 5% from its all-time highs over the past two months. Likewise, the index attracts more bearish flows, leaving positioning heavier on short bets than longs.

The increased short bets contrast with the bullish momentum at the start of the year that saw the index attract strong buying pressure with every minor correction. According to strategist Chris Montagu of Citigroup, only some investors are comfortable maintaining a bullish view. The sentiments do not come as a surprise as most investors feel the index is overbought after a 37% plus rally since the start of the year.

The Nasdaq 100 has benefited from a strong buzz around artificial intelligence. Stocks exposed to revolutionary technology have been on an impressive run led by Nvidia, which has rallied by more than 200% year to become a trillion-dollar empire. The likes of Meta Platforms, Apple, Google, and Microsoft have also helped offer support to the index.

Nevertheless, there have been concerns that the impressive run in the Nasdaq 100 does not paint an accurate picture of the overall market. For starters, there have been concerns that the rally has been concentrated on a few cliques of tech stocks, which raise concerns about the sustainability of the upward momentum.

Client flows showing that tech stocks had the biggest redemptions from the week through September 15 could be an early warning sign of growing jitters in the sector. After an explosive start to the year, investors feel most tech plays are overstretched and need correction as valuations have skyrocketed significantly.

Fed Monetary Policy

In addition to valuation concerns, uncertainty over monetary policy also continues to send shockwaves in the investment community, forcing most investors to remain on the fence. The US Federal Reserve remaining hawkish about interest rate hikes is a tailwind that continues to fuel selling pressure among tech stocks.

The economy has remained resilient after increasing interest rates at the highest pace to above the 5% threshold, with inflation ticking lower. Nevertheless, the Fed is yet to achieve its recommended 2% inflation level, raising the prospects of another round of interest rate hikes. Focus shifts to Wednesday, where investors will want to see whether the Fed will hike interest rates and pencil in one more move before year-end.

The prospects of two more rate hikes before year-end should continue to send shockwaves as they come at a time when the economic situation has deteriorated significantly. Inflation concerns are starting to build up amid an uptick in fuel prices.

Likewise, borrowing costs have increased significantly, making it difficult for businesses and companies to access the cheap capital needed to support and accelerate economic activities. Tech stocks tend to perform poorly during aggressive interest rate hikes, which explain the Nasdaq 100 pullback.

By Stephen Culp

NEW YORK (Reuters) – Wall Street lost ground on Tuesday, with risk-off sentiment weighing as the U.S. Federal Reserve convened for its much-anticipated two-day monetary policy meeting.

All three indexes ended the session lower in a broad sell-off ahead of the Fed’s interest rate announcement on Wednesday, which is expected to culminate in a decision to leave key interest rates unchanged.

“It’s a big set up coming into tomorrow and markets are clearly focused on any change in communication from the Federal Reserve,” said Bill Northey, senior investment director at U.S. Bank Wealth Management, Helena Montana, who expects “intense focus on the Fed’s perspective on inflation in the post-meeting press conference.”

“Broad inflation readings have shown marked progress over the last year,” Northey added. “But the last mile of inflation is likely going to be more challenging, bringing it back toward the Federal Reserve’s target of 2%.”

The Fed is also due to release its Summary Economic Projections, including its dot plot, which should provide a glimpse into the Federal Open Markets Committee’s forecast trajectory of interest rates, inflation and economic growth.

“What’s being priced into the market is a pause but increased risk that rates will stay higher for longer,” said Michael Green, chief strategist at Simplify Asset Management in Philadelphia. “If (the Fed) announced that they are removing rate cuts in 2024 by raising the dot plot, it would generally be seen as a very hawkish pause.”

Financial markets have priced in an all-but-certain 99% probability that the central bank will leave its key Fed funds target rate at 5.25%-5.00% on Wednesday, and a growing 70.9% likelihood of standing pat at its next meeting in November, according to CME’s FedWatch tool.

On the economic front, a jump in Canada’s annual inflation rate due to rising gasoline prices, and a bigger-than-expected plunge in U.S. housing starts helped feed investor uncertainty.

The languid IPO market continues to show signs of life, with grocery delivery app Instacart’s parent Maplebear Inc making its Nasdaq debut, days after chipmaker Arm Holdings’ stellar entry to the public marketplace last week.

Maplebear shares surged, while Arm Holdings retreated.

According to preliminary data, the S&P 500 lost 9.84 points, or 0.22%, to end at 4,443.69 points, while the Nasdaq Composite lost 32.05 points, or 0.23%, to 13,677.80. The Dow Jones Industrial Average fell 106.46 points, or 0.31%, to 34,517.84.

Walt Disney slid after the company announced it would nearly double its capital expenditure for its parks business over the next 10 years.

Starbucks lost ground following TD Cowen’s decision to downgrade the coffee chain’s shares to “underperform.”

Automakers General Motors and Ford Motor Co advanced as the United Auto Workers union planned to announce more strikes on Friday if no serious progress is made in ongoing talks with automakers.

(Reporting by Stephen Culp; Additional reporting by Ankika Biswas and Shristi Achar A in Bengaluru; Editing by Aurora Ellis)

By Steve Scherer and David Ljunggren

OTTAWA (Reuters) -The Bank of Canada on Tuesday said recent volatility in headline inflation is not unusual but the underlying trend shown by core measures was inconsistent with bringing inflation down to the 2% target.

Earlier on Tuesday, August inflation figures showed a jump in the headline number to 4.0% from 3.3% in July – higher than most analysts had forecast – on rising gasoline prices.

“Ups and downs of the size we’ve seen in the past couple of months are not that unusual,” Deputy Governor Sharon Kozicki said in a speech at the University of Regina in Saskatchewan.

“(They) are one reason why we look at measures of core inflation – which exclude components with more volatile price movements – to get a sense of what underlying inflation is,” she said.

One of those core measures, CPI-trim – which leaves out spiking mortgage interest costs – has been between 3.5% and 4% in recent months.

“Underlying inflation is still well above the level that would be consistent with achieving our target of 2% CPI inflation,” Kozicki said.

After the August inflation data were released, money markets raised bets for a rate hike after the next policy meeting on Oct. 25, seeing a 42% chance of an increase compared with 23% before.

Inflation has exceeded the bank’s 2% target for more than two years.

“One of the big drivers in inflation this month was coming from energy and gasoline costs. … That’s one of those pieces that can be pretty volatile,” Kozicki said.

“It’s going to take a lot of time to sort through how to interpret (the August) data, given everything that’s going on underneath the data,” she said.

Bank of Canada Governor Tiff Macklem on Sept 7 said interest rates may not be high enough to bring inflation back down to target even after 10 hikes of a total of 475 basis points since March of last year.

The Bank of Canada kept its key rate at 5% on Sept 6, noting that the economy had entered a period of weaker growth, but said it could hike again should price pressures persist.

Kozicki also said that while there is evidence that previous rate hikes are slowing demand, inflation remains too high, “and that tends to mean that real interest rates need to remain high.”

(Reporting by David Ljunggren; Editing by Mark Porter)

By Niket Nishant and Noel Randewich

(Reuters) – Instacart’s shares soared as much as 43% in their Nasdaq bow on Tuesday, giving the grocery delivery app a valuation of more than $14 billion days after SoftBank’s Arm Holdings debuted on Wall Street with a bang.

The IPO of Maplebear Inc., the parent of San Francisco-based Instacart, was priced at the top end of its $28 to $30 price range, raising a total of $660 million in proceeds, of which $237 million will go to investors who sold their shares in the offering.

The IPO gave Instacart a valuation of nearly $9.9 billion, a fraction of the $39 billion it was worth in 2021, the company’s last funding round.

The stock was last up about 27% from its IPO price at $38.12 after hitting an earlier high of $42.95.

Several startups have seen their valuations shrink since 2022 as inflation, geopolitical tensions and the Federal Reserve’s rapid rate hikes soured the economic climate.

Instacart’s strong debut, along with those of chip designer Arm and RayzeBio last week, could encourage other startups to test the waters and potentially revive the IPO market after a near 18-month dry spell, albeit at lower valuations than during the exuberance of 2020 and 2021.

“One of the biggest headwinds to getting companies to come out was the founders coming around to the fact that they needed to get these things valued to reality and not to their last equity raise,” said Art Hogan, chief market strategist at B. Riley Wealth

A lukewarm reception to Neumora Therapeutics’ IPO last week hinted at limited investor enthusiasm for new listings.

Arm soared in its first day of trading but has dropped every day since then. Last down 4.7% on Tuesday, Arm has now declined over 8% from the closing price on its first day of trading, and remains about 8% above its $51 IPO price.

The 10 biggest U.S. IPOs of the past four years were down an average of 47% from the closing price on their first day of trading, a recent analysis of LSEG data showed.

Instacart is debuting almost three years after kicking off preparations for going public, with the company’s long slog to Nasdaq featuring some key moments.

Its core business turned profitable in 2022, and that trend has continued in the first six months of 2023, the company disclosed in its regulatory filing last month.

In 2021, its co-founder Apoorva Mehta stepped down after seven years at the helm and named Fidji Simo, the former head of Meta’s Facebook app, its CEO.

Goldman Sachs and J.P. Morgan are the lead underwriters for Instacart’s IPO.

(Reporting by Niket Nishant in Bengaluru and by Noel Randewich in Oakland, Calif.; Editing by Devika Syamnath, Anil D’Silva and Nick Zieminski)

By Michelle Nichols and Gabriela Baczynska

UNITED NATIONS (Reuters) – Ukrainian President Volodymyr Zelenskiy implored world leaders gathered at the U.N. General Assembly on Tuesday to stand united against Russia’s invasion and said Moscow had to be pushed back so the world could turn to solving pressing global challenges.

Zelenskiy drew applause as he took his place at the United Nations General Assembly lectern in New York for his first in-person appearance at the annual UNGA since Russia invaded his country in 2022.

“Ukraine is doing everything to ensure that after Russian aggression, no one in the world will dare to attack any nation,” he said. “Weaponization must be restrained, war crimes must be punished, deported people must come back home and the occupier must return to their own land.”

“We must be united to make it – and we’ll do it.”

He accused Russia of manipulating global food markets to seek international recognition of ownership of land it seized from Kyiv.

In a nod to the Global South, whose support he is seeking in his standoff with Russia, Zelenskiy spoke about the worsening climate crisis and natural disasters, mentioning the recent earthquake in Morocco and floods in Libya.

“We have to stop it. We must act united to defeat the aggressor and focus all our capabilities and energy on addressing these challenges,” he told the General Assembly.

Earlier on Tuesday, Ukrainian officials said nine people were killed in Russian attacks, including a drone strike that set ablaze industrial warehouses.

Zelenskiy accused Russia of kidnapping Ukrainian children.

In March, the International Criminal Court issued an arrest warrant for Russian President Vladimir Putin on suspicion of illegally deporting children from Ukraine. The Kremlin rejects the accusations and the court’s jurisdiction.

“Those children in Russia are taught to hate Ukraine and all ties with their families are broken. And this is clearly a genocide when hatred is weaponized against one nation,” Zelenskiy said.

Last year, Zelenskiy presented a 10-point plan that included restoring Ukraine’s territorial integrity, the withdrawal of Russian troops and cessation of hostilities, and the restoration of Ukraine’s state borders.

He said he was now working towards a peace summit based on that: “Tomorrow I will present the details at a special meeting of the U.N. Security Council.”

(Reporting by Gabriela Baczynska and Michelle Nichols; Editing by Howard Goller)

WASHINGTON (Reuters) – The U.S. Capitol Police headquarters was evacuated and surrounding streets closed off for more than two hours on Tuesday after a report of a suspicious vehicle nearby.

Capitol Police ordered the building evacuated shortly after 12:30 p.m. (1630 GMT) and directed staff and other personnel to avoid the area, near the U.S. Senate office buildings across the street from the Capitol grounds.

Capitol Police said a police dog had indicated interest in the vehicle, which was on the same block as the headquarters.

Streets and three parking lots around the building were closed for more than two hours while police investigated.

The area has periodic security scares, including in August 2022 when a 29-year-old Delaware man died in an apparent suicide after crashing his car into a barricade near the U.S. Capitol and firing shots into the air. In April 2021, a vehicle attack at the Capitol killed one Capitol Police officer and injured another.

(Reporting by Doina Chiacu; Editing by Matthew Lewis and Timothy Gardner)