Fed decision, Klaviyo IPO, government shutdown: 3 Things

Fed Day is upon us with investors and markets paying close attention to Federal Reserve Chair Jerome Powell's tone in his interest rates statement later today. A majority of experts expect regulators to hold rates where they are until the next FOMC meeting in 2023.

Klaviyo (KVYO) will be joining the 2023 IPO Club, alongside Arm Holdings (ARM) and Instacart (CART), pricing its initial offering at $30 per share. Lastly, Republican lawmakers are struggling to agree upon a new federal budget proposal in order to avoid a government shutdown.

Yahoo Finance's Seana Smith and Brad Smith detail several of this morning's leading news headlines. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

This post was written by Luke Carberry Mogan.

Video transcript

SEANA SMITH: Here are three things that you need to know this morning.

Expecting a hawkish hold, the Fed is widely expected to hold steady on rates at today's meeting, but the focus is going to be on those quarterly rate projections known as "dot plot."

The big question, are we still on course for one more quarter point hike this year?

Last week, the ECB surprised many with its move.

So investors will be on high alert, especially with oil hitting 10 month highs.

BRAD SMITH: And good things come in 3's apparently.

Could Klaviyo be the surprise winner from last week's IPO boom?

Instacart down in premarket after popping on its debut on Tuesday.

And then chip designer Arm facing downside pressure again.

Klaviyo is the lesser known of the three, but the marketing and data automation provider looks to have lured some big cornerstone investors as has priced its listing above the marketed range to raise $576 million.

SEANA SMITH: And paralysis is the word for the House GOP as leaders abandon a vote to avert a shutdown at the end of the month amid opposition from a conservative bloc.

You know it means that the risk of a US government shutdown rears its head again.

House Speaker Kevin McCarthy is trying to unite Republicans in his chamber to pass a funding bill amount despite knowing it's all but unlikely to die in the Senate.

The legislation, aiming to avoid a government shutdown by extending funding through the end of October.

BRAD SMITH: Well, today's backdrop, we've got another IPO from Klaviyo today.

That's along with a looming government shutdown.

All of this is as the Federal Reserve prepares to make their latest decision on interest rates here.

And of course, as we kind of kick off and start things off here on the show today, of course, all the focus is going to be on this afternoon, the Fed announcement and the press conference, the tone, the tenor of that Fed Chair Jay Powell strikes.

But perhaps we focus in at least for a hot second here as well on the IPO environment here.

Because one huge thing that's going to be continuously watched is the-- not just first day pop that we did see in the shares of-- the shares of as well Instacart, but then ultimately, how from their point-- from that point forward, we continue to see some of this trading moderation as we have seen some slippage in early trading days for both of those names too.

SEANA SMITH: Yeah, when it comes to Klaviyo and what we could see here, there's a lot going into this IPO specifically because many on the street are saying that maybe this is the best gauge of the three just in terms of whether or not we're going to see even more IPO activity down the line.

Now, this is the second VC-backed company, obviously, following Instacart yesterday that is going public today.

But when it comes-- there's an important distinction to make here, Brad, and that's the valuation that these two companies have attracted.

So Klaviyo priced at $30 a share last night, giving it a market value of just over $9 billion, $9.2 billion at that IPO price.

That's not a huge difference.

It's actually essentially in line for where the company was valued in the private market going back to 2021.

So that's a massive distinction when you compare it to Instacart and the huge reduction, huge hit that we saw in valuation for Instacart yesterday.

BRAD SMITH: The interesting thing here too is that for a lot of investors out there that are looking for more of a B2B type of enterprise software company they got it with Klaviyo.

But the larger question is the market place and the portfolio client-base that they can continue to sell investors that they're going to be able to attract in some of those net new customers and larger purchases or contracts here.

What's particularly noticeable here about the environment that they're entering into, at least the competitive landscape, this and marketing automation has already seen some of the major acquisitions in the form of Oracle acquiring Eloqua, or even some of the larger players that we've seen.

And even Marketo trying to make it into the public markets as well.

And so all of these things considered, you've already got Oracle, Adobe, some of those larger marketing automation plays out there.

Just a larger question of where Klaviyo, for their own right, can continue to sell investors that they're going to be able to grow out that larger client base going forward from here.

SEANA SMITH: Yeah, certainly.

They're up against some stiff competition.

Many of their competitors, much larger than they are.

So they could be at a disadvantage here, at least in the short term.

And when you come to take a look at some of these numbers, one, It's a profitable company.

They turn profitable during the first half of the year.

And also revenue was up 64% from a year ago, just shy of $250 million.