Live from Studio two here at Bloomberg's
headquarters in New York. I'm Shonali Bassett.
And I'm Gina martin Adams. We're kicking you off to the closing
bell here in the U.S. Let's get a check on where markets
stand. As you can see, the S&P 500, the NASDAQ,
not so bad. We're flying our way back from those and
those lows earlier this today when the GDP report certainly took out stocks,
Treasuries certainly selling off quite a lot and the dollar not doing much.
Something abnormal with the Treasury, selling off on the dollar, not doing
much as stocks are really where all the action is.
As we're going into earnings finale, we're looking at those treasuries
selling off. As you've been saying, we have the two
year yield hanging out just under 5%. And today's GDP and inflation numbers
fueling stagflation jitters, leaving investors with even more uncertainty to
the path of Federal Reserve policy. And speaking of the Fed, Chicago Fed
Austan Goolsbee saying in an interview that the central bank has to recalibrate
after the latest string of higher than hoped for inflation.
Data traders today paring back expectations for a rate cut now fully
pricing in the first cut in December. But there's big tech here in focus.
The stakes are high for Microsoft and Alphabet results after the bell today.
Those results coming just a day after Metro revealed it will spend billions
more dollars than expected this year and it's been triggering gina a stock
selloff. Let's take to kick things off on the
tech earnings expectations with stuart Keiser, head of equity trading strategy
over at citi. Stuart, tell us where are we in the
cycle right now because clearly the tech stocks have been struggling a little
bit. We got that news yesterday, met a beat
expectations and yet the outlook wasn't as good as investors were expecting.
What are you doing in your equity portfolio and how does that relate to
where we are in the cycle? I mean, I think you hit on the key point
here, which is the results haven't been that bad, but you need to separate that
from what the stock price reaction has been.
And clearly, a lot of these companies that have put up decent numbers but
either guided a little soft or maybe not hit on a few kind of key metrics and
have traded off pretty hard. And I think that says if you're
overweight these tech stocks, you need to be a little careful.
We've been recommending using, you know, triple Q's triple Qs perch to kind of
hedge that long tech portfolio as we go into earnings just for this reason.
Not that we're negative on the fundamentals, but the crowding and the
positioning does seem pretty full right now.
Right. Speaking of, there's some volatility
you're seeing in the names. You see it in Meta today.
How much more downside risk is there now that we're getting some of these numbers
out of the gate? I mean, downside of the market, I think
there's a little bit I think, you know, as you and I mentioned earlier, the GDP
print this morning probably opened up a little more space to the downside than
we thought you would had. You know, our view coming into earnings
was a combination of strong GDP and a strong EPS growth set a very high floor
for us equity markets, you know, getting higher inflation and lower growth and
you would have wanted probably opens up a little more space there.
And you have key stocks, whether that's metal, whether it's ASML, whether it's
Taiwan, Sony, whether it's Netflix, you know, some of these key high flying
stocks kind of coming under pressure, I think hurt your risk reward.
It probably opens up a little more space to the downside than I would have
thought we had a couple of days ago. What has surprised you so far in this
earnings season? I know it's early.
You were sort of positioned for a rockier period, given expectations in
tech, anything outside of tech that's been interesting or that we should keep
an eye on? Yeah, I mean, look, tech has gotten all
the focus. I think, you know, the financials
earnings I think to start were interesting because we did start to see
a little bit of that deal calendar coming back.
And obviously Goldman and Morgan Stanley responded a little bit more positively
to that. So that's a positive if you're looking
for the rest of the year. But, you know, there's three themes that
we were really looking for in earnings. One was A.I., which I think everybody's
focused on, right? You're number two is what happens to
margins and the margin outlook a couple of quarters out and tech is going to be
a key aspect of that. And then the third topic is going to be
later in the quarter. What are retailers saying?
You know, is there any evidence of this really strong consumer spending pattern,
you know, kind of seeing some weakness? So, you know, the biggest surprise, I
guess, is going to be we came in pretty bullishly positioned, pretty small and
part moves option set up very positive stocks that are putting up what I would
consider decent numbers missing on sort of a KPI or something are really getting
hurt. So that's probably the the number one,
you know, surprise so far. You know, it's interesting, speaking of
outside of technology, you look at some of the best sectors this year, the
energy sector in the S&P 500 still up more than 15% on the year.
Some of these stocks are still reporting pretty gangbusters profits and seeing a
sell off after that, too. I mean, are these sectors overbought?
And if that's the case, and what does it mean for the S&P?
Yeah, I mean, overbought stuff, I think I think stock by stock basis should
probably need to go, you know, about that from an S&P level.
We actually triggered what we would call oversold the middle of last week on the
sell off. So the equity market itself doesn't feel
overbought. But I think there are pockets that are
we've seen a tremendous amount of demand for energy stocks, for copper and sort
of that commodities exposure. So that stuff's probably gotten a little
bit more ahead of itself than it was last quarter.
I would have argued coming in that positioning in tech actually looks a
little bit less overbought than it did last quarter.
So, look, when you have valuation where it is, we think the ERP is probably in
its 15th percentile in the last 30 years.
I mean, you're at an extended valuation spot right now.
So any blemishes are going to be treated, I think, more harshly in that
situation than they otherwise would of our view on valuation.
That's potential energy, not kinetic energy.
What releases potential energy. In this case, it seems to be good, but
not great results, essentially. I'm curious how you're incorporating
movements in the bond market into your strategies.
Clearly, the bond market has been a new animal in the post-pandemic cycle
relative to the pre-pandemic cycle. How do you think about that in the midst
of earnings season when you have these really big bond market moves, how do you
incorporate that on a day to day? Look, it's a it's a big important part
of the macro macro landscape. From our perspective, we tend to focus
more on the size of the moves and the volatility in the bond market than
necessarily the absolute level. Like, even if we got to 5%, that's not a
forecast. But even at those levels, if bond market
volatility sort of pegged itself there, I think equities can do just fine in
that environment. What's tricky here is we went from
nearly 5% down to four and now we're kind of on our way back up to five.
So I think we're considering that two ways.
One is the velocity of the move and then to which stocks have the most
sensitivity to that. You know, most of the equity market is
basically long growth and and has a negative impact for higher yields.
So it eats into your valuation. But again, for us, it's much more about
volatility in the bond market than it is about the absolute level.
I think it's worth kind of doubling down here on what gets impacted if you still
have a two year closer to 5% and for how long.
At what point does that pain start to multiply?
It's a great question. I mean, it's funny because people have
been calling for this credit event now for a while, Right.
But the fact is, most of corporate America is actually pretty well situated
from a credit perspective. Even the companies that need to refi
don't need to refine now because people were smart enough to lock stuff in.
So I think my view is if you're higher for longer, yes, eventually that starts
to get into your weaker credit type stocks.
But for most of the first quarter, you were higher because of better growth.
And if you're getting better growth and that's pushing yields higher, I think
equity markets could deal with that just fine.
What's really been disruptive the last 4 to 6 weeks is you've had higher yields
and that's becoming know be coming from the inflationary side.
So, look, if we get into the second half of next year and we're still pushing out
cuts, then yet people are going to take a second look.
But we actually had a lot of trouble finding companies that actually have to
refine the next 24 months. So it's one of these things, yes, it's
an issue, but it's hard to sort of identify the specific stocks that might
be impacted. Sticking with the macro, how are you
incorporating currency and sort of the divergences that we see globally?
You know, we lived in a world for so long where everybody moved together and
now it seems to be quite divergent activity between the U.S., China,
Europe, Canada, the name your country. How do you incorporate currency?
Is that a part of your thought process? It is.
I think my experience in general has been you need the dollar to move pretty
big and then stay persistently at that level to really get into earnings.
Right. So that this is you know, a lot of these
companies hedge their their currency risk on a waterfall fashion, right.
You need big moves that are persistent. I think the question here is if you
start to get currency volatility, and that's because you're either getting
growth divergence or central bank policy divergence, well, now you're talking
about risk sentiment and that can kind of get into your valuation.
So similar to rates that give the dollar is grinding one way or the other, a
little bit less concern. But if we do start to see central bank
policy divergence and that gets into your risk and I think that's what we'd
be the most concerned about, you know, gold is a perfect example.
This obviously, you know, gold has been moving almost of its own volition.
And I think equity folks are thinking, I don't really understand what's going on
over there. Maybe I need to be more careful just
because I don't understand. And I almost put the dollar in the same
category right now. So we have to leave it there.
Thanks for joining us on what's been a tough tape and a very busy day of
earnings and a very busy week ahead still, Stuart Kaiser, head of equity
trading over at Citigroup. Coming up, Chipotle's strong earnings
beat sending shares surging today, extending a nearly six month rally
that's seen the stock climb nearly 66%. And the CEO, Brian Nichols, joins us to
discuss what's fueling that growth. Plus, Hertz driving in the opposite
direction. Shares hitting an all time low after
reporting a loss that was nearly three times worse than analysts expected.
And it's our stock of the hour. And Southwest is considering ditching a
classic hallmark of its business model. We'll discuss the airline's potential
move as it grapples with slowing growth. All that and more coming up.
This is a close on Bloomberg. Stay with us. And.
Earnings season is here. I think we're all asking the same
question just how much earnings growth you're expecting.
Bloomberg is first to break the numbers. Iliad just coming out right now, we have
take two numbers shares of pinterest lucid group coming out with its earnings
all eyes right now on nvidia a loss still to come with the smartest insights
how much better could profit and revenue have been better than what the street
was expecting? Bang in line with estimates, we will
have full and instant analysis. Continuing coverage on Bloomberg Context
changes everything. Shares of Southwest are sliding today,
and that's as the airline ends service at four airports and offers voluntary
leaves to address challenges that are stemming in part from reduced deliveries
of Boeing planes. Bloomberg Intelligence senior analyst
George Ferguson joins us on the airlines all over them really this week.
George, when you think about the problems that Southwest are facing
today, exiting airports, how do you feel about the changes being made?
Yes. So, I mean, when I think about
Southwest, I think, frankly, they've been trying to add too much capacity to
the marketplace. And so, look, as much as they need
Boeing aircraft because they're they're larger.
And the increase in pay they gave to their pilots unions, those larger
aircraft allow them to, you know, to spread the cost of that pilot over.
More people in the airplane help them lower their costs.
So for sure, the lack of getting airplanes is really making it difficult
for them to drive down costs and improve profitability.
But this is an airline that was looking to grow its schedules at 6% in an
economy that's grown maybe 2% since last year.
I think really the post pandemic bouts where everyone had to go away and summer
vacation fly somewhere on summer vacation is over.
So that extreme demand, I think, is fading.
And I think so, you know, fares just aren't rising anymore.
They were flat at Southwest. They were down at American today.
And so I think part of what Southwest really needs is less capacity, less
flying. And that's why they're cutting back
these cities. Is there a read through from southwest
Jorge to the rest of the industry? You mentioned American as another
specific example, but when you're looking about across the entire airlines
industry, is this something we need to look for across the space?
It is, right. So I think you saw in JetBlue's
earnings, I think the more your airline is focused on the domestic business and
the basic economy seat, the more challenges you have.
There's just too much of that capacity in the marketplace, we think.
Right. And that means that that's a commodity
and you're going to have to lower prices to fill airplanes.
To the extent you're in premium seating, you can provide, you know, any kind of
sort of upgrades more more a better meal, you know, more more space.
And those are the deltas. Those are United's.
You're going to see better yield development, which is the price paid per
mile flown. And that's what we've seen.
American is one of the full service carriers that actually caters more to
the economy, you know, seating and a little more of the interior of the
country. I think that's why they had more of
their problems today. It's interesting you have Southwest
saying that the restructuring steps that they're taking so far could contribute
1000000000 to 1000000005 to the pre-tax profits this year.
But the market doesn't seem to be biting on the plan.
Why is that? Well, again, I think we're seeing some
softness in the in the marketplace. And so I'm not sure, you know, the
market really believes that Southwest can get fares to rise to the level they
need. And it's going to be hard for them to
cut expenses because, like I said, they're just not going to get all the
deliveries of the Boeing MAXS. And so they're going to have a hard
time, you know, sort of spreading those costs over more seats.
So they're in a bit of a rough patch here because they can't really reduce
expenses well and revenues and isn't going to cooperate for them, I don't
think. Speaking of those expenses, I'm curious
how the airlines are now positioned for higher fuel costs, higher oil costs.
We've seen the cost of oil obviously accelerating pretty rapidly so far this
year. How are they positioned going into the
second, third quarter? And where might we see some surprises on
the input cost side? Yes.
So I think that if fuel costs keep going up and frankly, even if they just stay
here, they're going to be higher year over year and that's going to create a
real challenge for the airlines. Right.
So they don't hedge theirs. So most of them don't hedge.
I mean, you get a bit of hedging at JetBlue and Alaska.
But the core and I will say actually Southwest does hedge as well.
So those airlines could potentially fare a bit better as fuel prices rise, but
most of them don't. And so that'll be a challenge.
And to again, we think the basic economy seats are probably in
excess and so therefore pricing a little bit soft, it'll be really hard to push
through that increased costs to to that basic economy customer.
Now, if you're United and you're at Delta and the front of the airplane is,
you know, is is really demanding summer vacation travel no matter the cost, you
could probably push it through to them. And to the extent business continues to
flow back for those big full service airlines, you push through to them the
increased costs and they'll be able to manage it.
But the more you're in the basic economy world, it's going to be really hard to
do. You know, you saw Southwest really
address significant challenges in part from the reduced deliveries of these
Boeing planes. Where else can we see the Boeing
challenge start to ripple into the airline industry?
Well, so United should have it. But I'd say, you know, United used to be
less focused on. Their domestic business and they used to
use smaller gauge airplanes on it. So they've been increasing size, which
has been helping them, and they've been sort of bridging some of that gap
between them in Delta and in fares. So you should see it there.
But you don't because again, of this change going on it united Alaska is
another one I get concerned about. They're very big Boeing shop taking a
bunch of deliveries. Alaska showed some pretty good results
this quarter and it was driven by, you know, what they called a nice return in
California business travel. And we saw Southwest tell us the same
thing. And so that tells me that Alaska might
be getting a bit of a bump from maybe some better West Coast trends.
Alaska does have some premium seating, too.
That helps, but those are the ones I worry about, most notably Southwest.
They'll be Alaska. They'll be United are the other big
Boeing customers here in North America. George, we have to leave us.
We have to leave it there. Thank you so much for your time and for
all your analysis this week on a very busy word, earnings week also for the
airlines, of course. That is George Ferguson of Bloomberg
Intelligence. And coming up next, we're going to talk
about tech because artificial intelligence and cloud infrastructure
are top of mind over at Microsoft. We'll preview what to expect for the
third quarter report. This is a close on Bloomberg. And it's time now for our top calls.
A look at some of the big movers on the back of analysts recommendations,
starting with Monster Beverage Truist cutting the energy drink company two
notches from buy to sell. Analyst Bill Chappell calls Monster a
great company, but with limited reach, he questions its ability to tap into new
customers for sales and growth. He also says there's no reason why it
should continue to hold a super premium valuation multiple.
This is Monster's only sell rating. J.P.
Morgan also downgraded the stock this morning and shares are moving down more
than 2.2%. And Deckers outdoor next in line.
The owner of the footwear brands HOKA and UGG a downgrade to neutral from buy
at Bank of America. Near-term trends at Deckers are fine,
but the analyst cautions that a softer than expected margin outlook could
temper the pace of upwards earnings revisions.
Therefore, he sees better opportunities elsewhere within his coverage.
Shares also down more than 5% on that name.
Finally, UPS upgraded to buy from hold at HSBC.
Price target raised to one $70, up from 1.50.
The analyst expects the shipping and logistics company to shift its focus on
volumes and margin recovery. This, coupled with its UPS Postal
Service contract, could restore confidence in its 2026 guidance and
shares now moving up about 2/10 of 1%. And those are some of our top calls.
And we're also less than an hour away from Microsoft's third quarter report.
Revenue expected to increase 15% in the quarter, mostly driven by its Azure
cloud computing unit. Joining us now for more on this is
Truist analyst Joel Fishbein with a buy rating on Microsoft.
Do you still see risk going into the earnings today, given the sentiment we
see around the big tech names and any signs of weakness?
Only. Thank you for having me, first of all.
But the only risk we really see this is macro related.
Obviously, we can't control what happens with interest rates and and the economy
and the markets moving on this economy. But we think that Microsoft is amazingly
positioned here to capitalize on this big trend that you brought up in your
preamble, which was A.I. And frankly, there's no better
positioned company there. And we think those numbers coming out of
Microsoft are going to be very positive. And we've got a lot of data points, and
we've done a proprietary survey that says 80% of the customers we surveyed
are going to increase your spend with Microsoft.
So we think Microsoft is well positioned to come out of this earnings and several
others in a very positive light. John, can you put Microsoft in the
context of the overall software industry?
You mentioned that it is something of an outlier.
It has unique tailwinds relative to the rest of software.
What are you looking for across the space in addition to sort of Microsoft's
nuanced approach, what are we seeing in software?
What should we look for in this earnings season?
It's great. It's a great question.
You know, we think it probably has been overhyped.
There's billions of dollars being spent in AI from infrastructure to
applications. And if you think about what your social
positioning be, over over 1,000,000,001 billion users of Microsoft Office, they
have a massive cloud computing network and not unlike Google and Amazon
and also Oracle Building one as well. But we are now seeing them move from
people trialing, piloting into actual production, and companies like Walmart
and Mercedes are using Azure as a service which will be driving the
number. It's not only here in the near term, in
the long term, and I think that puts them in a very unique position relative
to a lot of the other companies. And this is one of the needs in our
space that we're actually seeing monetization.
People are actually making money on on air and we think that that could drive
the growth rate higher. We think the Azure growth here, the
bogey here is 20%. We think it'll would likely be higher
streets to 50% overall top line growth. We think they'll probably be closer to
60 to 70 driven by this trend.
And we think that will continue. If you're in the early stages and
continue for some time. You know, Joe, we asked you about the
downside risk, but what about the upside?
If you think about where they have the potential to really expand on
expectations currently set out by the street, where do you think that they
could provide a little more color? So I think that's going to be the real
question here. How much do they want to disclose from a
competitive positioning that you talked about?
They are contributing to their actual growth going from 1% three quarters ago
to 6% right now? We think they're on a trajectory of it
being closer to 8 to 9%. Did they disclose that number?
Number one? Number two is do they disclose how many
co-pilot and co-pilot users they actually have?
Again, from a competitive perspective, they probably don't want to, but they're
really going to get pushing a lot of color about that.
Again, externally, we're hearing demand is very, very strong and we're moving
from trial and piloting into real production.
And people are talking about. Massive cost savings by enabling this.
So those are some of the key factors that I think we're looking for from
Microsoft. And they'll be pressured to give a lot
of color around them. Talk a little bit to us about their
capital deployment. What is Microsoft doing with their cash
at this point in time? How does that differ from the rest of
the software and then the rest of tech? So the first thing they've been doing is
deploying it towards A.I. investment.
So you probably seen a massive amount of investments.
The latest one was in the Middle East building out data centers there.
I think they've spread the love around in terms of investments here.
They've done some what I call a few hires where they're going to some of
these companies and hiring engineers. That's number one.
I think they'll continue to buy back stock to offset dilution.
And I think that you'll continue to see the small dividend going forward.
They do need to you know, this is a capital intensive business, the building
of this data center. So you'll think of majority of the cash
investment will go towards. We got to leave it there.
That's thanks to Joel Fishbein over at Truist.
And coming up next, we're going to talk about Chipotle's sizzling hot quarterly
results and a pickup in traffic. That's all up next, conversation with
the CEO. This is a close on Bloomberg
and. For our television and radio audiences.
I'm happy to welcome now Brian Niccol, the CEO of Chipotle, who, of course, has
just announced that the full year outlook over at Chipotle would be
boosted for the year because there is more growth there than at other fast
casual rivals in this space here. Brian, what's going differently for you
than perhaps a lot of the industry? What is driving people into the stores?
Yeah. Well, great to be with you guys.
And look, you know, I think the purpose of Chipotle has always been food with
integrity, using classic culinary techniques so that we give people
delicious, nutritious food. And, you know, I think that I think
we've just done even better of late is bring that experience to people in a
fast way. So, you know, one thing that also makes
our brand really special is the customization that you can get with all
these great ingredients. And so we've been working hard to ensure
we're staffed, we're trained or deployed so that our team members can give people
exactly the burrito or bowl experience that they want at a pretty meaningful
speed so that people can get on with their day.
So I think that's what you're seeing is the power of great food, great culinary,
great people, and now also some great operations around throughput.
Can you talk to us a little bit, Brian, about the general state of the consumer?
I think this stands out as a very strong success story, but also in the midst of
a lot of skepticism with respect to how much the consumer can continue to spend
and the general health of the consumer. What do you see from your consumer?
Is it Chipotle specific or do you generally see a very strong consumer out
there? Yeah, look, when we do the research on a
broad scale basis, we definitely see that consumers are feeling a little bit
of pressure on the economic side of things.
Right. Gas prices are elevated.
They've been dealing with inflation for a while.
Fortunately, the wage market has been strong and unemployment has been really
low. So the good news is jobs are there.
Wages are there. But they are feeling pinched on, you
know, kind of their budgets as it relates specifically to Chipotle.
Fortunately for us, the feedback we get is the value proposition has never been
stronger. So if there being more, you know, choice
in how they're going to choose their ten or $15 on a meal away from home, what we
continue to hear is we're one of the great solutions for that type of outlay
of cash. And so, you know, we're that's why we're
so dedicated to having great ingredients, you know, great culinary,
and then obviously giving people the customization that they want so they get
the food at the speed that they want to. So I think that's that that is the thing
that's separating us right now is our ability to provide this great culinary,
great ingredients at what are pretty reasonable prices.
It's interesting because some of your products are so popular that not just
the earnings today are grabbing a lot of attention.
It's this idea of chicken. And the chicken shortage is really being
faced. You know, we had reported that you told
staff or recommended, rather, that they stop eating the chicken, given the
popularity of some of your chicken items on your menu.
How has this been perceived by employees?
There have been some pushback on the idea of itself.
And do you have to change anything in terms of the way you handle the product?
Oh, no. I think this is a story that's looking
for a headline. You know, what would actually happen is
the supply got really tight. We asked all our employees, including
myself, to pitch in for a week to maybe try something else on our menu.
The good news is we're through that pinch.
There's no challenges on our chicken supply.
Actually, our supply teams that are for now, you know, fabulous job of securing
supply to what has been really tremendous demand.
So, look, the good news is our employees
were happy to pitch in. I guess there were maybe some employees
that didn't want to pitch in on this one.
But in the end, we came together, did what we needed to
do. And, you know, we're going to continue
to focus on giving people great experiences with our product.
And that includes chicken. You know, it's interesting because you
guys have been very fast to pivot around a lot of things here.
I'm really curious around other potential ways you react to the
consumer. You had mentioned kind of the general
states so far, but do you think that the consumer would be vulnerable to any
future price hikes? Do you think that the price hikes
already having been put on products or as far as you can go?
You know, look, I don't know the answer to that for everybody.
The good news for Chipotle is we definitely believe we still have some
additional pricing power if we needed to take pricing in the future.
Our hope always is that we can hold our pricing because we want to protect our
value proposition always.
And I think frankly, it's one of our competitive advantages are really
positions of strength is just the strength of the brand because of our
unique commitment to ingredients and the speed at which.
We can give people these customized meals.
So, you know, look, I definitely think the consumer is feeling pressure.
All right. We've had inflation for the last couple
of years. In some cases, things are up 20, 30%
from where they were just not that long ago.
And now here we are, hopefully with inflation starting to moderate.
But still, things are, well, elevated from where they were a couple of years
ago. And I think that's what positions us so
uniquely in this space is at the end of the day, you can still get a really
meaningful bowl or burrito from Chipotle.
They for around ten bucks, if you choose not to have chips and Glock or drink and
stuff. So, you know, look, I would suggest
everybody look hard at their value proposition and ensure people feel great
about what they're getting for what they pay.
And if that plays out, you'll be rewarded with business.
I think that's what we're seeing happening.
Let's talk a little bit more about those embedded costs and just the general sort
of embedded inflationary costs and how you're managing through that inflation.
I know that Chipotle has several automation projects underway.
Maybe talk to us about where your automation priorities are and how much
that might offset the margin pressures from study or inflation.
Yeah, So thanks for asking about this. You know, obviously we set out to figure
out what are ways we can be more productive in the restaurants.
And specifically we started with asking our employees what are the what are the
pinch points, what are the things that are most challenging to do?
And one of those things that came up was cutting coring and scooping avocados
every morning to make our guacamole. And so we've created a new robotic or
robotic device that will cut core and scoop the avocado.
We still have to hand mash it and we still have to, you know, add the
cilantro, lime juice and onions and stuff.
But, you know, it gets rid of some of the harder parts of making guacamole
every morning. And those are that's just one example of
many other things we're looking at. We got feedback that frying the chips is
a difficult task. So we experimented with a a robotic arm
to fry the chips. That one hasn't worked out.
So we're going back to the drawing boards.
But the good news is the learning from the robotic arm for frying chips
informed what we did on designing what we call auto koto and then other places
that we're looking to build innovation is on our digital make line.
Is there a way for us to help our employees build bowls and burritos
on that line so that with the one or two people working on the line, they're
capable of producing even more burritos and bowls.
So other things too, like AI and machine learning to help us in our rewards
program, our forecasting, our supply chain.
So I'm really optimistic about the innovation that we've got coming down
the pike. Obviously, we have to take it through
our stage process validated, ensure that it really plays out the way we want.
But I think we're we're hunting in the right place that will make the job
better, protect the experience for our customer and provide no compromise on
the culinary. You know, it's interesting, speaking of
inflation, curious about the California $20 an hour minimum wage for fast food
workers since this has happened here. Curious, Bryan, about your view on what
else would be impacted with that rise in minimum wage for workers here.
How do you think about how that fits into your broader cost picture and
whether you need to make changes elsewhere?
Yeah, I mean, look, obviously we move the wages accordingly and then, you
know, I'm sure you're familiar with this, but that creates compression for
wages throughout the business, meaning managers and apprentices and people that
have more tenure at the crew level. So we adjusted all those wages
accordingly. And we did take a price increase in
California to offset the wage inflation that we're
dealing with, which was close to 20% wage inflation.
And what I'm happy to say is, you know, we didn't have to change anything else.
You know, we're not cutting corners on our food.
We're not cutting corners on portions. We're not cutting corners on the speed
at which provide our service. You know, we're committed to giving
people the Chipotle, the experience they know and love with the culinary that
they know and love. And, you know, obviously, we had to
raise prices a little bit. But, you know, the reality is it's more
expensive to do business in California. And, you know, we adjust accordingly.
Brian, we thank you so much for your time.
We should say Chipotle shares actually today hitting a record off the heels of
those results as well. That is Brian Niccol, the CEO of
Chipotle Mexican Grill. We're going to stick with that last
thing we were talking about, that California wage hike that we've seen.
Bloomberg Economics says that it could also raise the risk that the Federal
Reserve delays its first rate cut. Joining us for more context is Anna
Wong. She is Bloomberg economics chief
economist. Very curious about how you see this wage
hike really impacting the broader economy.
Of course, California being a whale in the room here.
When you think about how many people live there in the United States.
Yeah. So, you know, California employed about
12% of the total national employment.
And the number of workers that are directly affected by this fast food
minimum wage hike is about half a million.
And just those half a million workers seeing 20% increase in wages would boost
the employment cost index, which is a wage measure that the Fed pays a lot of
attention to. It would boost it by 0.1 percentage
point. And add to that, as Brian just said, not
only are the fast food workers seeing 20% hike, but they need to raise the
wages for managers and a lot of other related jobs that could that could boost
the ECI by a total of 0.2 percentage point.
And the Fed is getting these numbers on the second day of their July FOMC
meeting. So that means that it could be that when
they looked at the employment cost index, they would be like that would be
like maybe they couldn't do the cut in July.
And we also think that if they don't cut in July, then they probably missed the
window for cutting because they are after unfavorable seasonal patterns.
Base effects would cost a 12th month change in inflation to drift up.
And along with Bloomberg Economics, we thank you so much for keeping an eye on
something that is under the surface. Perhaps not a lot of people had noticed
how that would be a bigger impact here. Now, coming up, we're going to talk
about shares of Hertz now hitting an all time low after the company reported a
loss that was nearly three times worse than analysts expected.
Tons of ripple effects. It's our Stock of the hour up next.
Stick with us. This is the close on Bloomberg. And. Time now for today's Stock of the Hour.
Shares of Hertz hitting an all time low and Abigail Doolittle joins us to
explain. And this is a total mess.
So they put up a loss of a dollar 28 per share.
That's almost three times worse than what they were expected to do.
But they put up $2.1 billion in revenue, which actually beats that speaks to a
margin problem, problems with costs and it really having to do with their pricey
EVs. They have this huge inventory of Teslas
now, ironically, the huge inventory of Teslas, that's because of their biggest
owner, Knight had Capital asked them to buy these EVs a couple of years ago,
thinking the values would go up, but the values have declined.
So now they're taking big depreciation charges to write them down.
In addition, they've closed locations. Collision costs an issue revenue per
car. So lots of issues here.
But the new CEO, Gil West, he came from the former GM Robotaxi, the head there.
He's an operations geeks. He's saying he's going to turn it
around. He's determined to get it right.
Still a lot more for him ahead and more for us ahead as well on the close.
Stick with us. More markets into the close.
This is Bloomberg. This is the countdown to the close,
emotionally Basic, alongside Gina martin Adams and Gina, we are looking at a
market that has been having a bit of a tough day.
Pretty remarkable. If you look at it, the S&P 500 still
down after some big tech earnings only really now down one half of 1% with the
Nasdaq 100 down 6/10 of 1%. The ten year yield now still above four
seventies. So even that bond market sell off still
quickening and the dollar now on the decline, but essentially flat on the
day. Interesting to see here the equity
reaction on the tape, isn't it? Yeah, and it is all about equities,
which tells you it's probably mostly about earnings.
So the bond market isn't reacting materially to GDP.
Then what's really going on here? I thought at the beginning of the day it
was really about GDP, it was really about earnings, it was really about
what's going on in the economy. But I do think the market is a little
bit nervous. Well, these tech stocks really put out
the earnings numbers that we're hoping for, particularly after Mehta sort of
disappointed with an outlook that wasn't quite what investors were were counting
on. Biggest moments of the day still after
the bell. Now, earlier today, we spoke with Stuart
Kizer of Citigroup and we asked about the increased downside risk in equities
after today's GDP numbers. The GDP print this morning probably
opened up a little more space to the downside than we thought you would had.
You know, our view coming in to earnings was a combination of strong GDP and
strong EPS growth set a very high floor for us equity markets, you know, getting
higher inflation and lower growth and you would have wanted probably opens up
a little more space there. For more market analysis, let's welcome
Leo Kelly. He's founder and CEO of Burden's Capital
Advisors. You know, this idea of downside risk I
think is interesting, particularly because we did see some, let's say,
brutal selling in the last couple of weeks.
We did have that optimism come back this week.
But at what point do you think the selling is over?
But I think the selling is over when we get through what I was what I would call
the inflation bear market, this is all a continuation of a two year plus time
period from 2022 when inflation really started heating up and bond yields
started to rise. So until we settle this, until we know
how this is going to end, I think we see continued volatility at an elevated
pace. Talk to us about what you do with
sectors if you're worried about inflation, your point about volatility
continuing check has done very, very well over the course of the last year or
so, despite the concerns about inflation.
Would you stick in tag or do you move to other sectors that are maybe a little
bit more inflation sensitive? Yeah, I think you have to be very
careful with tech here. Specifically with the handful of names
have gone to astronomical levels now they've corrected a little bit, but the
valuations are still high. The answer to your question is you have
to mind valuation. I think the market and
the market started to get overly optimistic about these.
The six rate cuts, which for the life of me, I never understood how they came up
with six rate cuts, let alone even one rate cut now seems seems to be a
question. And what we know about technology is
technology does better in lower rate environments where capital is plentiful,
more people are running to risk assets. That's when high valuation assets do
well. So our thought is the risk is higher for
inflation to continue. Remember, the Fed has to make a decision
here, either take the economy to the brink of or into recession to fix
inflation, or just stay off of recession and deal with inflation.
Never really hitting target, continue to go higher.
That's not the best environment for long bonds.
It's not the best environment for tech. So I do think you have to be active
here, financials, small cap stocks. I think the international markets look
interesting. Why those markets, it really doesn't
have to do with the Fed, has to do with valuation being significantly cheaper
than these these top names that everybody's fallen in love with in the
last 18 months. I'm interested in your view here outside
of the United States, because we know there are still the strong dollar
dynamic and you're seeing it not only hurt other countries, you're also seeing
it really weigh on some of the multinationals.
Do you think that that dynamic continues and can continue to put a pinch and some
of the expectations investors had coming into this year?
Well, again, I think international stocks, despite the dollar strength,
international stocks have done quite well here over the last year or so.
They're holding up well. And again, it comes down to valuation.
They're cheaper than their U.S. counterparts.
And so while there's a lot of risk in Asia with what's been happening with
China, the markets outside of that still to us
look to be opportunistic. I think you have to be very patient
there. Long term plays, you get nice dividends
in some of these markets. The valuations are lower.
And so I think there's still opportunity there.
Remember what the US did here with with the.
Increasing money supply by 40% in two years.
That's third world countries, stuff that happened all over the world.
So really what we have is water rising, all boats up and down.
And I think we'll continue that pace. Talk to us a bit, Leo, about how you
balance your portfolio of equities and bonds in an environment where inflation
is more volatile, more pervasive, more concerning at large, and stock prices
and bond yields are positively correlated.
I think this is the biggest challenge for asset allocators and and investors
in general. How do you look at the world when when
we're in that kind of broader macro landscape?
And where do you find some value outside of stocks and bonds to kind of offset
that imbalance? Yeah, it's a great question.
We have been really of the mindset that yields will stay higher for longer and
will potentially go higher. I was on the show, I think, in January
and, you know, we thought the six rate hike thing was crazy.
So what we've been doing to offset the risk of interest rates rising and long
bonds getting hurt and some of these growth stocks going down, we've moved
money into value oriented stocks with dividends.
Okay. And income replacement.
We're keeping our duration in our bond portfolios low.
In other words, buy short bonds, you get a higher yield and less risk.
And we really are interested in the private equity markets.
Specifically, we like private credit. We've allocated capital to private
credit. It's a good place to be.
Yields are high. It's not as susceptible to movement with
the bond yields in the public markets. And so I think that's a great place to
put money. I will say this, though, you have to be
incredibly discerning when you go into the private markets.
You need to understand or have a manager that understands credit quality and is
as good as that as they are at reading a balance sheet.
Leo, We have to leave it there. That is Leo Kelly, founder and CEO of
Verdant Capital Advisors, certainly taking us all across the market.
Gina There's certainly a lot going on in almost every asset class you look at
today. Yeah, and it is a big challenge.
I do think that that is the biggest challenge for the broader investor
class, is what do you do in an environment like this where we sat in an
environment for 20 years where stock prices and bond yields were negatively
correlated. So there was an offset.
Any time you had some weakness in equities, you had bond strength.
That has not been the case in the post-pandemic world, and that's really
disruptive for asset allocators and managers of of capital.
I do think it also feeds through to the equity market and we've seen that a
little bit through the volatility in the sector rotation.
It's a very, very challenging climate. Gina Of course we are certainly looking
at limbo for a lot of investors out there, but now we are moving closer to
the closing bell for market coverage right here on Bloomberg as we take it to
the bell and beyond. Beyond the Bell Bloomberg's
Comprehensive cross. Coverage of the U.S.
market. Close starts right now,
about 2 minutes away from the end of the trading day.
Sonali Basak and Gina martin Adams counting down to the closing bell.
And here to help us take us Beyond the Bell with a global simulcast, we're
joined now by Carol Massar. And since then, Vivek bringing together
our Bloomberg Television, radio and YouTube audiences worldwide to parse
through the crucial moments of the trading day.
And certainly it has been quite the day Carol.
Yeah, interesting. Right?
And we're definitely well off our worst levels of the session.
Having said that, I look at the S&P 500, you still have more than 300 names to
the downside. And folks, if you look at some of the
ones that are going to be reporting Google, it is down right now just shy of
2%. Microsoft, it is down about 2.4%.
So you're seeing these names as we get ready for earnings trending, lowering
the trade, incredible range in today's trade to the Nasdaq, 100 down half a
percentage point right now. It was down as much as 2% earlier in the
session. Gina, the S&P 500 down more than 1.6%
earlier in the session, now down only half a percentage point.
Yeah, and a nice climb back. And tech is not leading the downdraft,
which is interesting considering all the nervousness around tech.
This really is seems to be related to matter.
And a market that was caught off guard by what Maytag said regarding their
spending and their future growth prospects.
It's definitely weighing on the rest of the communications space, putting a lot
of pressure on Google after the close or alphabet as as the younger folks say.
Nonetheless, I do think it's notable that tech stocks are actually in the
green now, the tech sector rising, and that's helping the broader S&P 500
closely out of this negative territory. Yeah, it's interesting.
And we'll see what today has to bring as well.
Just a lot of uncertainty out there as we wait to see what more of the tech
giant has to say. We are getting the bells here now down
to the close and we are indeed ending the day again in the red here.
We're looking at the S&P 500 really still down on the day, having closed
close to one half of 1% lower with even bigger declines here on the Dow Jones
Industrial Average, down almost 1%. That NASDAQ 100 now down about 6/10 of
1%. Of course, snapping that winning streak
we saw earlier in the week. All right, guys, real quick on some of
the movers in today's session. Nvidia, that stock up about 3.6%.
This this has to do with what we got from Metta, basically, because as they
have saying, we're going to do up our spend our CapEx.
We're doing a lot of things when it comes to AI.
So companies that play in the air space benefited and that included NVIDIA.
It was up about three and a half percent.
And you also had super micro, it was up about 4.3%.
Hey folks, we've got Microsoft, so let's get to it.
Crossing the Bloomberg terminal, third quarter revenue, 61.9 billion better
than what the Street was forecasting. That was a forecast of 60.87 billion
third quarter EPS. We're looking at $2.94 a share.
Let's go to cloud revenue. So key for this company, Intelligent
Cloud for the quarter, 26.71 billion better than the street forecast of
26.25. Looking at personal computing revenue
that to a slight beat, 15.58 billion versus the estimate of 15.7 productivity
revenue pretty much on target 19.57 billion.
The Street was looking for 19.54, but that third quarter revenue folks coming
in better than forecast and you've got the stock up almost 5% here in the
aftermarket. Yeah, expectations were for about $61
billion. We're seeing it at about $62 billion for
the third quarter. Going to the press release.
Looking at what Satya Nadella chairman and CEO of Microsoft has to say about
the quarter, quote, Microsoft, co-pilot and co-pilot Stack are orchestrating a
new era of AI transformation, driving better business outcomes across every
role and industry. Finally now, it's interesting.
We do have Intel also now out. You do have adjusted EPS forecasts,
missing analyst estimates here. The second quarter revenue is estimated
to be 12.5 billion to 13.5 billion and the estimate had been 13.6 billion, a
little shy of expectations there, even with revenue very narrowly beating
estimates here. Intel shares now down more than 2%,
fluctuating more than 2.5%, quickening its losses now after market.
And what a contrast between the two. You've got the software company
contrasting with the hardware company. Clearly, Microsoft has been just a
dominant force in software, investing in all the right places, growing in all the
right places. Intel, a little bit of a different
story. And that's definitely showing up in this
quarterly earnings season with not necessarily bad results, but not an
across the board just pummeling of expectations like that which we saw from
Microsoft. Okay.
Let's get on over to Alphabet, because we're seeing the results come right now.
It looks like a B when it comes to first quarter revenue, 80.54 billion, beating
estimates of a $79.4 billion first quarter EPS.
Well coming in way above expectations at a dollar 89 versus estimates of $1.53.
We're also seeing first quarter operating income significantly beat
expectations up 25.47 billion versus 22.4 billion.
The stock just surging right now up by. 8% while taking a page from, should I
say, whose book matters book The company, the board approving initiation
of a cash dividend, declaring a cash dividend of $0.20 a share.
You want to know why the stock is really popping in the after hours?
That's got to help in a big way. Well, it's interesting.
You're just seeing it soar past 9% after market and Alphabet right now.
And you are really seeing these results coming out of Alphabet and Microsoft
shrugging off a lot of those problems you saw in technology.
You got to go there. Yeah, share buyback, too.
This is something that investors are certainly loving right now.
Alphabet authorizing to buy back up to an additional $70 billion in shares.
Shares Alphabet higher by 9.5%. Definitely needed this in the
communications space, which was really beholden to what what Metta said with
respect to the outlook. This is should turn the tide for
communications at large, depending on what the other stocks do.
But remember, this is the fourth largest stock in the S&P 500.
This could make a really big difference to the tone of the market.
Yeah, as we open up tomorrow, I got to say that alphabet move, man, that is
just a big one, nine and a half percent to the out to the upside here.
You know, initiating a dividend, a big buyback.
And what's interesting is talking with our own Mandeep Singh about, you know,
alphabet. It's all about engagement.
And this is what you want to see at this company.
Advertising revenue at Google, 61.66 billion that was above street estimates.
YouTube ads, revenue that was above what the street was anticipating, services
revenue coming in. So really cloud revenue, that too was
above what the street was expecting. So you look at all of the businesses
across the board. But what's really key, again, this is an
engagement company. This is about advertising and that is
certainly firing on all cylinders. Yeah, worth reiterating the cash
dividend of $0.20 per share. Also, the company authorizing that share
buyback add up to an additional $70 billion worth of shares.
I go to the press release and I look to see what Sundar Pichai, CEO of the
company, says that the results in the first quarter reflect strong performance
from search, YouTube and cloud. We are well underway with our Gemini
era. That's what investors want to hear about
and there's great momentum across the company.
Our leadership in AI research and infrastructure and our global product
footprint position as well for the next wave of innovation.
Remember, investors want to see that the company companies search product is
keeping up when it comes to AI and competing effectively against everyone
else. She's working on integrating AI tech
into search a.k.a meta platforms. Every headline Crossing the Wire is
making investors love this story more. Look at that 12% higher on the day.
And it's because not only of that 70% $70 billion share repurchase
reauthorized here you also have that cash dividend declared of $0.20 per
share. And not only, Tim, to your point here,
Sundar Pichai just really highlighting here the Gemini era and momentum across
the company, particularly leadership in AI A.I..
You do have him really expanding more there in their operating results about
consolidating their teams as they've announced that focus on building AI
models. So driving efficiency here while
focusing on the future, that's that's what's holding on here to this stock
right now. All right, guys.
So you've got Alphabet up about 12% in the aftermarket.
You've got Microsoft a gain of about five and a half percent in the
aftermarket. Made me want to look at the Nasdaq 100
e-mini futures. And you've got that up, that index up
about just shy of 1%. So providing some upward momentum
overall to certainly the Nasdaq trade. Okay.
Let's go back and check out what shares of Microsoft are doing, up 4.5% as we
speak. Shares rising after third quarter
revenue beats estimate. Worth repeating these headlines, third
quarter cloud revenue coming in above estimates at $35.1 billion.
Estimates are for $33.93 billion. So a beat there.
Also third quarter revenue coming in at $61.9 billion, handily beating those
estimates of $60.87 billion. Yeah, and a nice little payout to
shareholders as well. And more than $8 billion, $8.4 billion
to shareholders via dividends and buybacks over the quarter.
That I think is a very welcome surprise for investors that are really counting
on Microsoft to be a spender, but then give a little back a bit back to
shareholders and it certainly adds a bit of juice to the stock price, which is
soaring in after hours. Very different story.
So Microsoft soaring, Alphabet is soaring.
Not the case when you look at Intel, that stock in the aftermarket, we're
looking at about a five and a half, almost 6% decline here as we speak.
The weak forecast exactly giving a weak forecast.
You know, big maker of personal computer processors, such a big part of their
story, but giving that lackluster forecast for the current period, it is
still struggling to right the ship, turn it around and kind of get back to the
top tier. The chip industry having a tough time.
All right, guys, last name for you is the big names and some big movers.
So we're going to certainly track this into the after hours and certainly into
the Friday trade. All right.
That's a wrap. Are cross-platform radio, TV, YouTube,
Bloomberg Originals. We will see you again, folks.
Same time, same place tomorrow. Now let's get more on Microsoft results.
Anurag Rana Bloomberg intelligence senior technology analyst, joins us now.
What do you think about the results that you saw first blush?
What is there to like that investors are most holding on to?
And does it hold into tomorrow? The Azure growth of 31%, I mean, that's
a big jump. The expectations were 28%.
And frankly speaking, going into the quarter, we thought anything above 28
would be a welcome. I mean, this is a very big number,
frankly, given the current macro conditions.
Is there anything bad in this report on Iraq?
I mean, every every headline I'm seeing come across the terminal is a beat.
They're even handing out more capital to shareholders.
They seem to be beating everywhere. Is there anything that we can point to
as a risk for this company right now? Yeah, I'll let you know.
In one and a half hours when they give guidance, because that's really what's
going to dictate what's happened to the stock tomorrow, because that 31%, they
better find a way to either, you know, say they're going to be flat growth rate
next next quarter for 31% or better. You know, otherwise you're going to see
a reversal of this. Right.
I mean, is there anything that they could say that could really stop the
party to the point that both of you have been making here, especially when it
comes to spending in terms of kind of building up on future plans,
particularly as it relates to Asia? So one of the things you would notice
right now in the last few weeks, non-IT Tech spending is has been weak.
In fact, it's it's been abysmal whether it's Accenture and IBM and perhaps even
Intel. So when you look at the AI part of it,
that's probably what's driving a lot of what's happening with Microsoft.
So they need to keep that momentum going.
Otherwise, you know, it is as I said, it's going to be it's going to be a
different story tomorrow morning. Talk to us a little bit about their
efficiency. I mean, they obviously are beating
across the board on every revenue line, but they're also extremely efficient and
producing pretty solid margin. Where do you see potential future gains
from efficiency coming from? See the scalable model of software as
something now they have been spending quite a bit on CapEx and they've been
investing quite a bit. Now over time that really translates
into, you know, high gross margins, how high return on those invested capital
and somebody like Microsoft, it can absorb a lot of these investments better
than anybody else. So I think there's a lot less spend on
sales and marketing, I think already still.
Okay. So so it's a scale business and then
there isn't anybody out there better than Microsoft wins when it comes to
scale in the software world. Anurag Rana, Bloomberg Intelligence,
thank you so much for joining us right after those breaking results.
I also want to bring you some more breaking news now, more breaking
earnings. We have SNAP reporting seeing revenue
for the second quarter exceeding analysts estimates to be 1.23 billion to
1.26 billion. The estimate had been one point to 1
billion. You also have daily active users for the
first quarter beating analyst estimates. Check out SNAP shares just soaring after
market reaching almost a 20% gain post market.
A lot of interesting news coming out of these social media companies.
We're going to go back to big tech now because we have more on Alphabet also
soaring. We are joined here by Mandeep Singh,
Bloomberg Intelligence senior technology analyst.
And, you know, when you think about Alphabet, it's so funny to go through
these big tech names and see the divergence of what's going on.
They have just shown the market that they have a ton of cash on hand that
they're also willing to return. Is that the biggest part of the story or
is there more? I mean, look at the beat on search.
That's a core business. When they come out and beat like this
where it reflects in the operating margin.
32% consensus was at 28%. That just tells you how healthy that
search businesses. And it continues to command the kind of
margins we're used to seeing with Google search.
So really, everything else is a side story right now.
You know, with YouTube and cloud, all are all the segments did well.
But the real key segment is search. And it all the talks about search
getting disrupted. I think they have proved their naysayers
wrong here. What do you think they did right on
search? What drove that beat?
I mean, the Gemini launch of it was by startup initially, but then they kind of
got it right. And now they are integrating Gemini with
pretty much every product they have, whether it's certain, look, even if
there will be some disruption in terms of, you know, perplexity or chat, Betty,
taking some share in terms of volume. Ultimately, you have to come back to
Google, search for real time results. That's what everyone is realizing, is
it's very hard to build that crawling infrastructure for real time search,
because when you want to kind of ground the chatbot results, you need to go to
Google for that real time context. Well, what do you make?
I understand search is the main game in town, but what about the other efforts
being made at YouTube ad revenue? How does it compare relative to what you
may have wanted to see? And that's a big difference between an
alphabet and a meta in the case of Alphabet, all that.
CPU capacity that they are getting from an area is getting deployed in that
cloud business. In fact, the cloud business margins are
better than expected as well because everyone wants to train on those GPUs
and they are actually using that to drive the cloud revenue.
Cloud profitability was a bit of a concern before, you know, Generate API.
I think that is on the right track now. You see incremental margins coming out
from the cloud segment. Talk to us a bit about this capital
deployment announcement, buybacks and dividends, all in one nice pretty
package for the investor in Alphabet. Does it take you by surprise?
Is it about time for this company sort of where are we in that cycle?
No, I think it's kind of good to see them being prudent about capital
allocation given they generate so much cash and given the search business is
intact in terms of generating, you know, that kind of free cash flow and dividend
is pretty much symbolic for both meta and alphabet.
But it's a good thing. It kind of draws more long term
investors. And in this case, I mean, there's no
doubt that they can keep generating 80 to 90 billion in free cash flow every
year or so. Right.
What do you think about the capital return plan here?
When we think about these companies and you think about their use of cash, you
wonder whether they're giving back too much to investors, frankly, Obviously,
investors like it. But is it better that they give it back
or is it better that they invest and they are investing?
So, look, they've I've no doubt they will raise their CapEx by 30% similar to
meta. But the difference is matter was losing
20 billion and reality labs that nobody liked.
So in this case, Google has their moonshots.
But I think what they have shown is the cost discipline and they are still in
that phase. Their cost discipline is showing up in
their margins. Once we are, I think past second half,
that cost advantage is going to dissipate and then it will be more about
top line growth. You did a disservice by comparing and
contrasting Google or sorry Alphabet and I'll never get that right and matter
earlier. But I'm curious, I'd like to go back to
that conversation because they are the two biggest behemoths in communications.
Which one is really the guide or the the bellwether for the sector at large that
we should look to for signals, if you will?
Yeah, I mean, in the case of Alphabet, they really signaled the health of the
digital ad spending market simply because, you know, when it comes to
search, there are a large number of advertisers that just use search.
Whereas on the social media side, the advertiser base is probably smaller,
albeit it's more effective in terms of targeting the ads.
So the fact that Snapchat also did well, it tells me that digital ad market is
bouncing back. And look, the small business sentiment
is still weak. So that's the caveat in terms of the
sustainability of digital ads. But there's no doubt that when it comes
to digital ad spending, search, Google search spend is the most
non-discretionary part of it. And that will continue to show in that
Google ads results. Mandeep Singh of Bloomberg Intelligence,
we thank you so much for all of that breaking analysis.
More breaking news crossing the terminal here as we also have earnings from
Atlassian. We also have some news coming out of the
company as well. The stock now down more than 6% after
market. They are having a CEO transition over
there at the technology company after 23 years.
Scott Farquhar is stepping down as co CEO.
The company says it's to spend more time with his family and focus on
philanthropy and work in the technology industry globally to further their
initiatives. His last day will be August 31st.
He'll continue as a board member and a special advisor, and he will, yes, be
stepping down in the coming months here. And of course, you do see a change here
in the stock by the tune of nearly 7% as we speak.
Now, coming up, we're going to take a deeper dive into those results from
Google and Microsoft with Brent Bell. He's an equity research analyst over at
Jefferies. We're going to go around the board on
all we've seen over the last 24 hours. Stick with us.
This is the close on Bloomberg. Spring season is here.
I think we're all asking the same question just how much earnings growth
we're expecting. Bloomberg is first to break the numbers.
Iliad is coming out right now. We have talked to a number of shares of
pinterest lucid group coming out with its earnings.
All eyes right now on nvidia. A lot still to come with the smartest
insights. How much favor could profit and revenue
have been better than what the street was expecting saying in line with
estimates. We will have full and instant analysis
Continuing coverage on Bloomberg. Context changes everything. Now let's get back to our top story
results from Alphabet and Microsoft out just a few minutes ago.
And we're joined now by Brent Thill, equity research analyst at Jefferies.
To go through these numbers and really parse through the noise here, perhaps we
start here with Alphabet, because this beat is not only what's giving investors
some love here, it's also this capital return story.
Do you think that there's any bad news, frankly, when you look at these results?
Yeah, no real bad news. YouTube by five, search by three, cloud
by two. So you had a pretty strong beat across
the board going into earnings. Google was the most negative.
Investors in Internet have hated this story relative to other stories that we
cover. So the sentiment was strongest on that.
Obviously, you saw the bar high there. It was very low for Google.
So Google had a low bar to jump over given all the AI concerns.
And clearly the numbers were good. The capital return is good.
The dividend installation is there. We're still looking for a CFO.
It's been nine months. I don't know why it takes so long, but
we're still looking for who is going to be the replacement for Ruth.
But beyond that, I think the AI worries are going to continue to linger on this
one. And they're not totally out of the
woods. But short term, obviously this is not
many. These AI technologies are not enough to
disrupt their dominance in search. And I think everyone is continuing to be
concerned down the road, but it still feels like good, good results and a good
clean beat across many of the key metrics.
I think the one thing that we've been seeing between that of Microsoft and
Google is everyone is spending a lot more on CapEx.
Google's CapEx was 2 billion ahead. Microsoft's CapEx was a billion ahead of
our number. So you got 3 billion incremental in
CapEx. You know, that announced a big a 12%
increase in CapEx yesterday. So this is clearly going to all a data
center infrastructure today. None of these services are monetizable
yet. So continued view on when can they
actually monetize AI and that's still probably a ways out.
Bryant Correct me if I'm wrong, but my interpretation of all of these Giants
spending so much money on CapEx is that's more to go around for the rest of
tech. And we should see generally tech stocks
performing relatively well given the surprise that they potentially face at
the top line. Yet yesterday we had the revenues and
the generally negative response really overwhelmed markets today.
What's going on there? I would think that positive CapEx from
these companies would be positive news for tech.
Yeah, I think you're right. I mean, if you think about it, semis and
hardware today was up and video was up 4% and is up one.
Dell's up for Internet and networking is up four.
So I think exactly what you're seeing is higher CapEx is good for infrastructure
today is and infrastructure you know it's like it's like you build a house,
you got to buy the land, you got to get an architect, you got to put the
concrete in, you got to put the water. You can't have the artwork, which is the
applications in the AI until all that stuff's done.
So right now everyone thinks like you're going to some magic pixie dust and all
the tech lights up and air, and that's not going to happen.
What's happening is what you said is you're spending to build the
foundational infrastructure. Today, all air is in the infrastructure
layer. It is not in the application layer.
And so Microsoft and others aren't benefiting.
Salesforce.com, Adobe, they're not benefiting as much.
But to your point, you're seeing a strong surge into all this
infrastructure, including energy. You know, we're continuing to do a lot
of work at Jefferies, like we're running out of energy transmission lines to get
the the energy to these customers. There's a whole host of infrastructure
that has to get built. That is going to be the this is going to
be the first area of spend. So our clients are largely overweight
semis in our hardware and are looking at coming back to software and Internet.
You know, once we see this investment cycle start to slow down, we haven't
seen signs of that yet. Brian, even if you love these numbers
for Alphabet, for Microsoft, what you're saying about CapEx, what I'm wondering
is what level of growth do they need to sustain in order to really supplement
that spending to boost those future initiatives?
Because today's numbers might be great, but if those margins start to compress
in the future, these numbers don't stay as large for macro reasons or otherwise.
Where is there the most risk and in which stocks?
Well, that's the beauty. What just happened even at Google and
Microsoft, margins are going higher and Microsoft committed to higher margins in
the age of AI. So don't you know, don't mess around
with Amy Hood, the CFO there. She her biggest room is the room for
improvement. You she everyone was freaked.
Hey, like margins are coming down and Amy's like, margins aren't going down.
We're going to charge a lot of money and we're going to help our clients and
they'll get value and we'll make money on this.
So we're seeing actually what's so different about the dot.com era is we're
not seeing money wasted. We're seeing these companies actually
making money early on on these services because they're charging so much for
them. They're expensive to run, but they're
making money and margins are going higher.
So I think, again, you have not crazy valuations and you're continuing to see
pretty good support. Microsoft remains one of our top picks
for 2024. So we obviously have yet to get much
guidance from either of these companies. That's yet to come to keep us all
excited through the evening. But nonetheless, what are you expecting
with respect to Microsoft and Alphabet going forward?
What can we hear and how high is the bar for these companies?
Yeah, I mean, this is it wasn't a magic quarter.
It was the guided that hurt the stock. And so to your point, you know, we don't
have that yet. We don't know.
Google doesn't obviously guide and they never have.
Microsoft gives you a lot of color. And Google should go to the Microsoft
school of of of how to give guidance. If I had my my my $0.02.
But you think about with Microsoft, I do
believe that these companies will be aggressive.
We're in a CapEx war environment. We've said this repeatedly.
There's only going to be a few companies that really went in the air because you
need user data and money and there's a literally on both hands, you can count
who's going to win that war. And so we're going to continue to see a
spend. I think we'll get care.
More CapEx comment. You have 20 seconds here, but for
Atlassian, you see the CEO, the co-CEO stepping down here, Scott Bach, you are,
but you have Mike Cannon-Brookes staying on board.
How big of a deal is that to lose their co-CEO at this time?
It's a big deal. I mean, he's been there forever is a big
deal. There's a lot of things going on inside
that company, a lot of moving pieces. So they need to stabilize the ship.
They need to get back on the right foot and get to cloud.
And they've had a lot of moving pieces. So this is another brick in the wall
worry, if you will, for the stock, and that's why you're seeing the stock down.
Brent, we appreciate it. Thank you for going through so many
names with that. A third is Brent Thill over at
Jefferies. Now coming up, our own Ed Ludlow spoke
with Porat, the alphabet CFO, in the last few minutes.
We're going to bring you exactly what she said up next.
This is the close on Bloomberg. And. Let's get back to those results from
Alphabet. Ed Ludlow now joins us, the co-host of
Bloomberg Technology, and he just spoke to CFO Ruth Porat.
What did she have to say, particularly about this big beat in search?
Because as our own Bloomberg Intelligence and Mandeep Singh point
out, there were some skepticism that this could continue this strong.
Yeah, I mean, Porat went to her kind of go to phrase, which is resilience in
search, you know, search and the advertising market generally,
it's going to be difficult to get a health check on that until the call.
And I'm sure she'll go into more specifics.
I think, you know, alphabet doesn't give sort of very rigid guidance, but very
careful with her words. Porat did say that that testing's the
word she used is showing that, you know, bringing Gemini, the latest AI model or
generative A.I. tool to search the testing showed that
it's driving increased use. And those little nuggets, those little
pieces kind of answer the question which is before the investment, when are you
going to start seeing sales growth directly from the AI work you're trying
to implement? And that's there's much evidence that
we're going to get at this stage. So clearly a big beat across the board
search being a huge part of that ad. But I'd say one of the bigger surprises
is this capital deployment and the buyback and dividend growth that has
kind of shocked many. Talk to us about that decision.
Why now? Surprised, Gina, this was that's been in
vogue. It's not even an original idea at this
point. I mean, fit for Alphabet is their first
ever debate. You know, it's interesting because
investors, you know, look at the after hours trading.
I think the dividend, the expanded buybacks, a big factor in the after
hours performance. You guys had Brent Hill on on the show
last segment. Right earlier today when I spoke to him,
he accused Alphabet of being the least investor friendly company in the world.
Well, you know, a dividend, a buyback is pretty investor friendly.
And perhaps response to his statement, by the way, was we appreciate the
feedback. Well, did she should she say anything
else about that, too? I mean, is the results themselves kind
of a affirmation that what he's saying might not be the case in the future?
Yeah, look what she said. A bit more expanded was that they think
about capital allocation and capital strategy constantly, not just on the
shareholder returns. It clearly they've moved on to Debbie
and that's being welcomed. But they also have to think very
carefully about expenses and basically resource allocation.
Right. This has been a story for Alphabet.
You know, they had to cut back in some areas to to put on the priority, which
is basically cloud to go to the cloud growth of 28% year on year in the
quarter. And you know, again, this isn't a
company that gives us very formal guidance, really in the same way that
many of the other mega caps do. But the commentary on cloud that she
gave me was, yes, hey, I played a really big part in this quarter Gone and that
generally the market across all the subsectors and industries they sell
cloud to showed strength. But look at the first part of that
sentence. So you know as it relates to where
they're spending, they clearly feel confident enough to return to give
shareholder returns while they are also in investment mode.
Right. They have to continue to invest in the
infrastructure that's allowing them to to scale the cloud based air offering.
And thank you so much for your time and your reporting.
That is Bloomberg Technology co-host Ed Ludlow.
Now, a number of companies out with earnings in the last couple of minutes.
And here to take us through some of the results are Bloomberg's Emily Griffen,
Normal Linda and Abigail Doolittle. Emily, start us off with SNAP because
after a 32% decline this year, you are now seeing shares snap back higher more
than 23% on the day. How well exactly are they doing?
Yeah, well, that's exactly right. We're seeing that stock up 22%.
The prior seven earnings reports, the stock had declined post earnings.
So if these gains hold until tomorrow, we'll see SNAP really break that losing
streak. The second quarter revenue forecast was
higher than analyst estimates as the company reworks its advertising model.
The company also reported a surprise profit.
It was a small one, adjusted EPS at $0.03, but that was versus estimates of
a loss per share of 4.8 cents. The first quarter revenue also beat
estimates at $119 billion. That's up 21% year over year.
Also slightly beating estimates and daily active users for the social media
company at 422 million also beating estimates.
So all in all, some relief for these SNAP shareholders because like you said,
down over 30% year to date. I'll be watching for maybe any signs
that the company is going to see growth. If we do see a tech talk ban, hopefully
that would bring in some more revenue for SNAP.
Norah, what are you looking at? Well, let's take a look at one of the
big three phone service provider companies.
That's. Mobile.
We are seeing a slight pop in after hours trading this afternoon, up about
9/10 of a percent. Now, let's break in some of the numbers.
We're looking at the positive side. We saw the stop top profit expectations
for the first quarter and it saw first quarter EPS of $2.
It also boosted its forecast for the full year for postpaid net customers.
Now, on the downside, growth slowed in its high speed Internet business.
And this is really in focus for the company as it was a larger drag than
expected. And this comes after Verizon just
reported a loss of its phone subscribers and AT&T reported a gain.
But we are seeing all this in the mist after T-Mobile just got approval to buy
budget phone company Mint Mobile. Over to you, Abigail.
Great analysis, Norah. Let's take a look at the odd stock out
and that is capital one. And it's odd because it is down down
4/10 of 1%, but off the pre after market lows.
At the lows, it was down closer to 2%. And this has to do with the fact that
they missed their first quarter earnings adjusted earnings estimate.
They came in at $3.21. The assignment was 330 revenue.
It did beat revenues of $9.4 billion better than the estimate of $9.33
billion. But deposits were also just a little bit
light. They came in closer to 351 billion.
The estimate above 352 billion into today, up 11% this year.
Not so shabby. Not eating into it all that much.
And one thing that's really interesting here tonight on Capital One, I was
surprised by the 3.5% short interest on Jamie Stock, a tech stock that wouldn't
be too surprising. But on a big financial stock, you don't
see that every day. You sure don't.
And of course, a lot of interesting things happening over there in the card
industry, too. Thanks to Bloomberg's Abigail Doolittle
normal Linda and Emily fail and another company out with results is Intel.
And certainly a lot going on there. We have the shares now down more than
8.7% after hours. Remember a lot banking on how quickly
their growth turns around here. Joining us now is Mario Morales, group
vice president enabling technologies and semiconductors at IDC.
When you took a look at the numbers and the path forward for a company like
Intel, what were your initial thoughts? Well, one of the things I thought about,
I mean, they're still continuing to gradually improve.
You're seeing an improvement on a year over year basis of 9%, which is pretty
solid for for Intel given what we've seen in the last couple of years.
But they're still not quite yet growing at the same pace as the total industry.
And a lot of it has to do with the fact that they're still losing some market
share in the data center and some of their smaller business units continue to
suffer from elevated inventories and slower and softer demand.
Talk to us a little bit about their guidance.
They not only missed on revenue, but guided on second quarter in a little bit
of a disappointing fashion. Where's that coming from?
Well, I think, you know, seasonally the second quarter tends to be a little bit
softer than the third and fourth quarter.
So I think what you're starting to see now is just that, you know, I think it's
going to be in line with Q1 is what they guided and maybe a little bit better
than that, which is not abnormal. I think that's normally the seasonality
that you get for the PC space specifically.
But they are expecting to see a second half that is a lot stronger, especially
as some of the new platforms for part of their PC begin to roll out, especially
the follow on to Meteor Lake, which will be Lunar Lake and soon after Arrow Lake.
And these are all HPC platforms. I think one thing that's tough, Mario,
is that Intel shares were already the second worst performer on the
Philadelphia Semiconductor index before they reported results.
And now the report has really shed those shares a little bit more there.
They're still down today. How do they competitively stack up here?
I think when you look at them, I mean, clearly the reorganization that they
made a couple of weeks ago that they announced was very significant for them
and it was very necessary. I think the timing of of the
announcement was part of the the issue that you're seeing today in terms of
their performance for investors. I think it's going to continue to take
some time for Sprint to truly recover. They definitely have the right pieces
from a technology standpoint. They're building a lot newer products
and the foundry business seems to be at least stable from a perspective of
technology now. Now they just need to win the customers
in order to drive the scale that they need to drive to drive top line
revenues. Talk to us about that very point.
How will they win the customers? How will they go out and compete in this
incredibly competitive industry, considering just the focus of attention
seems to generally be favoring some of their competitors?
Well, definitely they're the newcomer, but they are not a small company.
And I think one of the things you're seeing is that not only will the
investments that the government is making through the chip that help
support the cost structure, But, you know, at the end of the day, most
customers are all looking for an alternative.
So they're looking for someone to be the alternative to TSMC and to Samsung.
And if the company continues to execute and bring in some of these newer
technologies, then I think you're going to see.
More attention from from the established companies are the big ones.
And when you think about AMD or Qualcomm, these are the companies that
they're going to have to win in the coming years.
I think we have to ask kind of a flipside to if you're talking about this
idea that people are diversifying back into Intel.
On a customer level, how much risk is there that they don't that the gap kind
of widens, especially with the trajectory they're giving with the
forecast that has fallen short now of expectations?
Well, all of this takes time. So when you make an investment and you
decide you're going to build a plant, you're deciding you're making a decision
for the next 5 to 10 years. And, you know, they've been on this
roadmap where they're introducing five technologies in four years.
So they're sort of almost at the tail end of that.
And I think you need a couple years of time to let customers, you know, play
with the process, be able to optimize their own silicon to it.
And then you ultimately see a design win that eventually leads to commercial
volume. So we're at that stage where, you know,
they're doing a lot of kicking of the tires.
So the customers are in terms of intel, but you're not really going to see this
just begin to scale until you start getting into 20, 26, going into 2027.
And that's why the company decided that the foundry part of their business will
likely not make money until that period of time.
So we're looking at margins from Intel of roughly 45%.
And this is a company that historically had margins north of 55, 60% from what I
recall. What is there in the margin lines?
Is it really just a matter of their top line sales growth just isn't quite
cutting it? Or is there something in their internal
cost structure that they should be addressing as well?
Well, I think that when you look at it, a lot of it has to do with the fact that
there's a lot of upfront costs that that they're making rate that they were
behind from a technology standpoint and are now trying to catch up.
And that takes billions of dollars of investment.
So we've seen that in the last three years and we think that some of that
will begin to pay off in the coming years.
But part of it is just that large upfront costs.
And I think you're now, because of the new reorganization of the company,
you're now starting to see that the products teams need to also become a lot
more efficient. And once they do, they'll be able to
elevate the gross margins overall. Mario Morales of IDC, thank you for such
a deep look into Intel and its industry, especially on a very complicated
earnings report that we're taking a look at today.
We're going to take a look at other companies that have reported in the last
hour a lot out of the gate here. You have snap up more than 24%, really
recouping a lot of the losses from this year alone.
They had given second quarter guidance that beat analysts estimates, really
snapping back their alphabet, also up more than 12%, really shuttering any
fears right now in that big tech industry alphabet, of course, with that
massive buyback plan and dividend declaration and Microsoft as well, still
up over 5%. Stick with us.
More coverage ahead. This is the close on Bloomberg. And. It's time now for the top three.
Every day at this time, we do a deep dive into the people at the center of
today's top stories. Up first, we're going to talk about Mark
Schapiro, the Endeavor and Tyco president and CEO.
He sat down with Alex Rodriguez and Jason Kelly on their latest episode of
the deal. He talked about how company culture
comes from the top. If you're not at a company where the
executives, the leaders, the managers are investing in their people like that
succession planning for the future, trying to identify the future stars of
tomorrow, investing in them, and then bringing them up the ranks, nurturing
them, you should get out of there. You can catch that full conversation on
the latest episode of the Deal tonight at 9 p.m.
on Bloomberg Originals or tomorrow at 7 p.m.
on Bloomberg TV. And it's so interesting.
Of course, we know that certainly marks a pullout.
Farrow has been doing many deals. We hope to have him on the deal at this
time is pretty remarkable. Yeah, very, very apropos if as they say.
But also this company, his commentary was really interesting about company
culture being really essential to success and something that I think we
all look forward to hearing a little bit more about.
I'm watching Leena Nair, the Chanel CEO, defended the luxury brands pricing after
it raised the cost of one of its best known handbags to more than $10,000.
She sat down with Bloomberg Bloomberg's Francine Lacqua.
So we could raise our prices according to the inflation that we see so of
really linked to the cost price. We've also made a commitment to price
harmonisation across the world, which means our clients should not experience
excessive price differentials. No price differentials, no matter where
they buy. More inflation, right?
Can't get away from it. Sonali, who's number three?
We're watching Peter Orszag. He's the CEO of Lazard, and he's pretty
new to the job. He says he's focused on an ambitious
expansion plan after the company posted the best first quarter revenue on
record. And it's so interesting, Gina, because
you see these independent investment banks, some of them are called
boutiques, if you will, really starting to jump back with that slow rebound
we've been seeing in M&A. But let's see if it holds.
Certainly for Peter Orszag. It's early days.
It is working out. Yeah, one would hope we certainly see
the investment bank struggling with M&A, IPO, you name it.
The issue has been struggling, a struggle for those segments as well as
the bigger banks with larger departments and investment banking.
So I think the entire capital markets are kind of hoping, fingers crossed,
that comeback stories come back. Still ahead, we're going to watch what
investors need to know for tomorrow. Stick with us.
We will talk a little bit about earnings that are still on the tape ahead.
Stick with us. This is Bloomberg. The. Busy day of earnings, but another busy
day ahead. And one big thing investors will be
watching tomorrow. Exxon and Chevron both out with earnings
tomorrow morning. And for more, we're going to be joined
now by Bloomberg senior oil reporter Kevin Kelly over in Houston.
It's interesting, with energy really leading the S&P 500 so far this year.
How does that set expectations really high for these two energy companies?
Yeah, definitely. Expectations are high.
They had had a pretty knock out fourth quarter and it's been a it's been a
certainly been a strong a strong start to the year.
I mean, one of the key things that we're really watching out for is any insights
into how arbitration proceedings are going to be between these two companies
and are they? They are they're having a dispute over
Chevron's takeover of Hess, which gets Chevron into Exxon's Guyana projects.
So the two companies are kind of dueling, and it's a fairly unprecedented
dispute over that. So any any kind of insights into into
there is going to have is going to be going to be of great of great interest.
It's a it's quite a it's quite a major headache, especially for Chevron.
And then that and then the other the other key thing we'll be watching out
for is is that Exxon, when Exxon expects its $60 billion purchase of that clean
air to close, it's currently being looked at by the FTC.
The expectations are that it will close by in the in the first half.
But as we've seen recently, the FTC has been it's been blocking a number of a
number of mergers. So that would be something to watch
pretty closely. In addition to that, it does seem that
the energy space has been a pretty big drag on the indices at large, posting
negative growth rates on a year on year basis.
But that's expected to ease throughout the rest of this year.
When you're thinking about their guidance, when you're thinking about
where they're going to go into the rest of 2024, what are going to be the key
drivers of that recovery? Well, I think think you mean oil prices
have been pretty strong, strong this year?
I mean, especially this year, especially in the most recent.
What's due to the geopolitical situation and what's going on in there in the
Middle East? We've dropped back a little bit in the
past week or so, but current prices, anywhere between 80 and $90 is is very,
very comfortable for these companies. Typically, they only need about 40 or
$50 there in order to break even and to pay their to pay their dividends and
share buybacks. So these are these are very, very
comfortable prices at the moment. And really where the energy transition
is going, a lot slower than people expected.
And investors are now looking for oil and gas production growth, which is a
big change from from the last of four, four or five years or so.
So both Exxon, Chevron are both looking to show the market that they have the
barrels to pay these buybacks and dividends that they've been raising
recently. Kevin Crowley down in Houston, thank you
so much for your time. And a busy day of earnings for you
tomorrow. Now, speaking of tomorrow, we have a lot
of things forward, too, including overnight China, the Bank of Japan
decision with the yen being as weak as it is, it's going to be fascinating to
see how their decisions really set the tone for the market.
Yeah, and you can't get away from those central banks that will also get the PC
e data tomorrow, which I think is going to be an interesting follow up to the
GDP data that we got today. Are the consumers, the consumer strong
enough? What's happening with inflation dynamics
inside the consumer space? Are they spending on only services now?
And when will good spending come back as a really key consideration and if it'll
have any move on the yields here? We've seen already the two year hop so
close to 5% just today. Will it have an impact?
And of course, because it's Friday, we do have all those earnings before the
bell, thank goodness. Thank goodness it's Friday.
Those earnings are going to come in hot and heavy with the energy sector
Chevron, Exxon, AutoNation, Newell Brands, Colgate and AbbVie.
What are you watching, Gina? I'm really interested in what happens
with those energy companies, mostly because as we were just discussing, they
have been a huge drag on the index. There's just been no earnings growth out
of that space. Can they start to show some recovery as
indicated by oil prices? Will we see that or won't we?
Is a huge question mark for the S&P 500 and the equity investor at large.
We should say. Also we have Microsoft and Alphabet.
They still have their earnings calls. And so we'll get some news out of that,
potentially some guidance, probably not from some of them.
We'll see how that impacts the market. But that does it for us right now.
Balance of power is up next. A lot going on in that political world
as well. Have a great evening.
Get some sleep. This is Bloomberg.
