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Briefing.com Summary:
*Anthropic's IPO filing helped put a buzz back in the AI trade.
*Broadcom engineered a $63 billion debt deal.
*Strength in business spending was evident in the September Durable Goods Orders report.
Yesterday's focus was on the AI trade and Anthropic's S-1 filing. In some respects, that is still the case today, as both have been woven into market narratives offering perspective on the stock market's rebound bias.
Currently, the S&P 500 futures are up 23 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 143 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 72 points and are trading 0.1% above fair value.
There is a lot of talk about what Anthropic's IPO could ultimately mean for the market, and the viewpoints range from good to bad, with the caveat that a lot will be riding on how the IPO performs when that day finally arrives.
For now, there is an excitable buzz around the planned IPO that has catalyzed some improvement in the AI trade in the wake of last week's struggles. There is also a buzz around this morning's news of a Broadcom-backed (AVGO) $63 billion AI compute financing structure formed for Anthropic with Bank of America (BAC), Blackstone (BX), Citi (C), and Morgan Stanley (MS).
That is the biggest AI debt deal ever, according to The Wall Street Journal, which also reported that Broadcom CEO Hock Tan agreed to higher interest rates on the loans so that some banks would feel more comfortable taking on the lending risk.
It is an interesting development in that it suggests debt financing is there for the right companies, but even for some of the right companies, it will cost them more these days to get the financing. However, if a company like Broadcom has to fight to get the lending, one can understand why Hock Tan also recently suggested that one of the biggest risks to the AI buildout is a scarcity of capital.
This is a good day for Broadcom, it seems, but the reporting surrounding this deal implies that it isn't a great development for other companies looking to scale AI projects that aren't in as good financial shape as Broadcom is.
In terms of the AI trade, then, we are inclined to slot this piece of financing news into the "one hand clapping" column.
In related developments, NVIDIA (NVDA) is investing $3 billion in Meta Platforms' (META) equity offering; meanwhile, Bloomberg reported yesterday that Microsoft (MSFT) is offering voluntary buyouts to 60,000 employees as it works to "retool" its workforce for the AI era.
It isn't all AI today, however. Coca-Cola (KO), United Parcel Service (UPS), Sherwin-Williams (SHW), Royal Caribbean (RCL), Hilton (HLT), Whirlpool (WHR), HCA Healthcare (HCA), and American Tower (AMT) are among the other non-AI luminaries offering some earnings reporting diversions.
The reactions to these reports span from good (Coca-Cola) to bad (UPS) to ugly (Whirlpool). In aggregate, though, they haven't silenced the AI buzz.
The same can be said for the September Durable Goods Order report, which was mostly better than expected.
Durable goods orders increased 1.8% month-over-month (Brieifng.com consensus: 1.0%) following an upwardly revised 0.1% increase (from 0.0%) for August. Excluding transportation, durable goods orders rose 0.5% month-over-month (Briefing.com consensus: 0.6%) following a 0.3% increase in August.
The key takeaway from the report is the ongoing strength in business spending, captured in the 0.5% increase in new orders for nondefense capital goods excluding aircraft, which came on top of a 1.6% increase in August and a 0.6% increase in July.
The September New Home Sales and October Consumer Confidence reports will be released at 10:00 a.m. ET, ahead of the results of the $70 billion 5-yr note auction, which will be out at 1:00 p.m. ET.
