Bloomberg Markets: The Close 12/22/2023

Live from Studio two at Bloomberg headquarters here in New York. I'm Romaine Bostick and I'm Scarlet Fu. Let's kick you off to the closing bell here in the U.S.. A big focus, of course, on the markets with the inflation report that investors wanted to get coming through exactly as they had hoped. You have stocks up. Bonds are pretty much mixed. And, of course, bonds closed for trading already at the top of this hour. Remember the record close that we're keeping an eye on here for the S&P 500 is 47. 96 is what we're watching for. We're about 30 points below that right now, but we are on track for an eighth straight week of gains. And you can see SBI, the ETF, that tracks those biotech names now at a six month high. Some big M&A deals in that sector. The ten year yield basically unchanged at the moment. The dollar inching lower, although it has pared some of its losses weaker versus all the G10 currencies except for the yen remain. Yeah, we're going to focus a lot here on some of these big market moves over the past eight weeks. We're also going to focus a lot today on consumer spending and the health of the U.S. economy with the latest monthly data crossing the wire this morning. And it was good that showed underlying inflation remains largely in check. The core price index, it strips out food and energy, now rising at a 1.9% rate on a six month annualized basis. That's the first time in more than three years that that measure is below the Fed's 2% target. The same report showed incomes rising in November and personal spending even when you adjust for inflation at its strongest pace since July. That's good. Even Goldilocks good, right? Well, what about if you account for Nike's tepid earnings report last night and that pivot to billions of dollars in cost reductions? What if you account for Hasbro jettisoning 20% of its staff right before Christmas amid slumping toy sales? Or how about Ford slashing production goals for EVs, as would be Buyers become wait and see wallflowers and take an even less discretionary company, Walgreens Boots. Moody's downgrading downgrading the drugstore chain earlier this month to junk because of what a weaker consumer environment. Consumer credit card balances have now pushed above trillion for the first time ever and delinquencies they've spiked above those pre-pandemic levels. But of course, the stock market is not the economy, as the famous saying goes. So for now, until there is meaningful evidence of a meaningful ding to corporate profitability, investors seem content to continue bidding stocks higher with the Dow and the Nasdaq 100 hitting records this week and a scarlet. You just pointed out the S&P today at one point coming just about 23 points away from reclaiming the all time high that is set what, all the way back on the first trading day of 2022? Yeah, it's a little wonder that when you look at stocks as a whole, they remain on a bull run even after the dramatic selloff on Wednesday. That kind of ended up being not much more than a hiccup for the week. The S&P 500 set to close out its eighth straight week of gains. There you have it. That is the longest winning streak in five plus years. The Nasdaq 100, by the way, on track for a similar run. And the catalyst for the gains, of course, the Almighty Federal Reserve. Increasing expectations that the central bank is done with rate hikes have turned into conviction that rate cuts are on the way as data point after data point in recent weeks showed slowing inflation and a cooling but still growing economy. Investors are now pricing in at least six rate cuts in 2024 versus 2 to 3 back in late October before bonds and stocks really began rally remain. Absolutely here with one week to go here in the year sitting on some pretty meaningful gains for all of the major indices. Cara murphy joining us right now, CIO at Kestrel Investment Management to help kick us off to the close here on this Friday afternoon. And I start with the big question here, Kyra, that everybody wants to know here is do you remain overweight into 2024? So we can all agree, I think, that Santa came pretty early this year and in quite size. You know, we've had an incredible market rally in a fairly short period of time. It does feel a little little bit, though, like Santa might need to take a short vacation. We still think fundamentally there's a lot of strong momentum within the equity markets. But there are a couple of technical indicators that in October were flashing like really good buy signals that are now suggesting a bit of caution. So for instance, in late October, we had a really high percentage of names that were trading below 50 and 200 day moving averages. Now we have a majority of names above those levels, so that's often a sign of caution. In late October, we saw both retail and institutional investors who were quite bearish. That's usually a goodbye signal. Now those have reversed into bullish territory. So there are some things indicating out there that this rally has been quite strong, quite fast. Now, that said, we do have strong seasonals heading into January. Typically the month of January and early January are quite strong for equity markets, but I wouldn't be surprised to see a bit of a pause in there. It would be interesting to to see sort of if there is further upside here, what provides that catalyst, whether it ends up being the macro, which really drove the markets this year, or we do take a closer look at corporate earnings. Obviously their new earnings season will kick off in mid to late January here. So we'll get a better sense of how companies did at the end of the year, but more importantly, their outlook for the rest of the year. And let's face it, Cara, I mean, most of the reports we got this year over the last three quarters here were at least better than fear. Not necessarily great, but better than feared. I think you make a great point. And for any sustained market rally, you have to have both those things really working in your favor. A strong macro that's then confirmed by individual companies. And so far in the latter part of the year, as you suggested, we've had both. So in third quarter, we really saw corporate earnings bottoming starting to sustainably turn higher. And then of course, we had the the well talk much talked about Fed pivot recently, suggesting that financial conditions were going to continue to ease next year. So as long as those two trends continue, again, you have a pretty strong underpinning for the economy, for the market heading into 2024. I've got to ask you about the amount of money that's sitting on the sidelines and poised to come back to work, whether it's in the bond market or the stock market. You noticed that there has been some outflows for the first time since October. What do we know about where it's heading and how tentative it is? So one word of caution is that often we'll look at money on the sidelines within money market funds. That whole dynamic has changed a little bit as interest rates have gone up. It's sort of pulled money that would normally have sat in in recent years in bank accounts into money market funds. So that measure kind of works a little bit differently than what we've seen in recent cycles. So I want to have a little note of caution there. That said, we're definitely hearing a lot of client conversations that they're pretty comfortable in their money markets right now. Why put my money at risk when I can earn four or 5% in a money market? So there is some interesting data to be gleaned. And the idea that money market funds are starting to come down a little bit and that those dollars are likely to find their way back into the market. So I think there is a fair amount of dry powder available out there, probably just not quite as much as just the pure money market fund numbers would suggest. Yeah, people have been burned many times. They would rather stick with where they know they're going to get some good returns. I want to ask about small caps, because you mentioned that while large caps have largely moved on and we see that with record highs or near record highs for the major benchmark indexes, the Russell 2000 this week entered a bull market up 20% from its low. But you say it's still pricing in a recession. So that suggests there's a lot more room to go. It's really remarkable when you compare the performance of S&P 500 versus Russell 2000 from the peak that we're just now reclaiming on the S&P side. Russell 2000 know, up until recently was still down 20% from its peak. It's had a nice rally into the end of the year but we've had it by many measures, historic underperformance of small caps relative to large caps. We also have historic low valuations relative to large caps. And yes, I think small cap names have stronger fundamental headwinds. Right? They rely more on funding, which is impacted by a higher interest rate. They tend to have less diverse earnings. All of that is true. It's tough for a fundamental picture. But again, how much of that is priced into that low relative valuation? I think a fair amount of that is actually priced in. All right, Kara, always great to catch up with you. Have a wonderful holiday season and we'll catch up with you again in 2024. Karen Murphy over at Kestrel Investment Management helping to kick off the close here on this Friday afternoon. In just a bit, we're going to get you some more insights into that PCE reflation report that we got earlier this morning, along with other economic data points involving consumer sentiment. Jennifer Lee, senior economist over at BMO. Capital markets going to be joining us in a bit. Plus, the outlook for M&A in 2024. We'll be talking with the superstar corporate lawyer, Roger Cohen from Sullivan and Conwell. Also, a sit down with Rob Hocking, the man of the moment here. He's the head of product innovation over at Siebel Global Markets. And the exchange expanding those zero day options on the Russell 2000 to 5 days a week, matching what you get on the S&P 500. That conversation and so much more in just a second right here on Bloomberg. If you look back over the course of the year, it is really stunning how much progress the economy has made. Inflation has come down faster than even the more optimistic forecasts, and growth has remained very resilient, along with strong employment. If you recall a year ago, the consensus projection was that getting inflation down would require a spike in unemployment and a recession. And that was Lael Brainard, the National Economic Council director and former Fed vice chair, speaking earlier here on Bloomberg Television about the latest numbers that we got, those PC numbers that showed strength, consumer spending, strengthen personal incomes, and more importantly, starting to see a real tamped down year of inflationary pressures. Jennifer Lee joining us right now BMO Capital Markets senior economist to talk a little bit more about the trend line here, a trend line here that at least on the headline number, we're still around 3% on that core number, particularly when you annualize it out over the last six months. We're pretty much right where the Fed wants us to be. Jennifer, are you encouraged by this? I am very encouraged. First of all, good afternoon and thanks for having me on. You know, when I first saw the numbers this morning, first word on my mouth was wow. Secondly, I looked out the window and I expected to see a series of reindeer trotting by the office. But, hey, I mean, this is like a great way, obviously, to end to end the year. We've got a couple some more numbers coming out next week, but what a way to finish off what has been quite a tumultuous year. You know, the U.S. consumer is still in very good shape. Businesses are still aggressively investing. As you just mentioned, consumer confidence is also on the rise and inflation is being tamped down. So this isn't this is something that I think Fed Chair Powell very much welcomes. I am curious about economic conditions when you look at this report and let's just take some of the spending numbers, because everyone's been so focused on the health of the consumer, whether that is going to hold up deeper into 2024 here, at least for right now, it seems that spending levels are at a high enough level and more importantly, at a low enough level to keep the Fed somewhat happy here. Do you anticipate that that kind of a symbiosis or balance, if you will, will persist a little bit longer? Well, I think, you know, we've been calling for, you know, slower U.S. consumer spending. And I think it is I mean, this is like a great month, obviously, but I don't think it's sustainable. I think we're going to probably see slower growth coming into the into the first quarter of next year. But that's okay, because as long as job growth remains strong, as long as wages and salaries continue to rise. And by the way, I was also very encouraged by that point 6% increase in wages and salaries for that month. And, you know, it's not great for inflation. That's true. But at least it means that consumers are workers have a lot more money coming into are being put into their pockets or their wallets right now and they can put some aside for a rainy day. And that's never a bad thing. And I think it's just gives overall more fundamental support beneath the U.S. in the U.S. economy. And of course, the PCE, the inflation numbers were just part of the releases that we got today. We also got durable goods. And I want to ask you about that because the gain in November on a preliminary basis was a lot larger than what economists had been looking for, a 5.4% increase versus an expected 2.3%. I know that transportation was a big part of that, but even when you back that out, it was still better than expected. What does that tell us about what's going on underneath? Again, I think businesses are, I think a bit more of a leaf condition. But the same time we've got all those different sources of support from the government like the like the the Inflation Reduction Act and of course, the science for some ships at all encouraging more investment in the US economy. And this, by the way, durables is notoriously volatile. So we have to sort of take it with a grain of salt and there will be revisions, you know, and we always watch those very carefully. But certainly as the third quarter ended, as we're going into as we're like halfway through the fourth quarter data wise, you know, it's show us that, you know, business investment are still nice, is still pretty solid. I think core orders were up 0.8%, which was, you know, four times what we had expected. You know, a slight revision to the to the prior month. But, you know, it doesn't matter because one 8% is very solid. Core shipments were also up strongly. A point 5% again, shows that the business businesses at least also still have a little bit more on to it and is also throwing their weight behind the U.S. economy. Again, very volatile, but at least we're seeing some pluses, some plus signs, at least in these numbers. Yeah, and to your point, the previous month for durable goods was down more than 5%. So it just gives you a sense of the swings that that that number can give us when you boil it all down for the Federal Reserve, for Jay Powell. He'll never say this, of course, but is it mission accomplished? I'm sure he's like. I'm sure he's wiping his brow right now and squeezing up a sweat. I don't think he's mission accomplished just yet, but he's certainly going to be grateful for every single piece of positive economic data and encouraging economic data that he can get as long as we can get a series of them and we're going to bring it back down. Inflation, if you can get three, four or five months of decent data, then we can start talking about rate cuts. But I think obviously, as I've been, you know, as everyone's been saying for for lots of the last few weeks, at least, you know, anything earlier than a mid-year, I think rate cut is going to be way too premature. We need to see a lot more data. And again, we could see revisions, we could see some give back in coming months. So we need to see the trend heading in the right direction. All right. Jennifer Lee of BMO Capital Markets, thank you so much for joining us. And I like what she said about anything earlier than before midyear remain would be premature. It's hard to say that when the market is pricing in more than six rate cuts. Yeah, the market is kind of all out in front of this. And here, look, a lot can change over the next few months, particularly when people get back to their desk and you get through earnings season and maybe things shift right now. But look, I mean, he Jay Powell kind of delivered the Christmas gift, right, that everyone it wasn't mission accomplished, but it was about as close as you were going to get without him actually saying it. And the market is clearly ran with it. If he feels like he needs to push back on that over the next few months, then yeah, he can do that. What's the next meeting extended to January or something or I don't know is people I feel like they always. Are they on the same page? Do they talk? They supposedly I mean supposedly there's a to write like in the old days we agreed. But I mean even before that, I remember in the old days, Greenspan would actually kind of call them before the meeting. Right. Right. So everything I'm waiting for now, we don't know now. Yeah, but when that come out, like ten years from now. Yeah. I can't wait. I need it now. Let's. Let's ask some Hollywood writers to come up with a drama series regarding that. That's next on Bloomberg Originals. All right. Coming up, we'll get insight on what to watch for in commodities in 2024. Our guest is Cathie Kreisky, senior commodities ETF strategist at INVESCO. This is the close on Bloomberg. Just want to alert you that the S&P 500 losing ground very quickly here, briefly dipped into the red still for the moment, clinging on to gains, but only up by two points. It did rise as much as 6/10 of 1% to 47, 72. That record high that we're all keeping an eye on is 4796. We'll keep you posted. Obviously, this is a day before the Christmas holiday. So thin trading is to be expected. And of course, we're seeing the bond market closed early. So there's not a whole lot of participation at this point. Yeah, bond markets shut down in two. We should point out seen a bit of a flip flop in the energy space as well. Oil prices, which had been higher on the day, now dipping into the red here as we get closer to our commodities, closer to 30. So let's focus in on the year in commodities. It was a bullish year for gold for the most part here, but the overall Bloomberg Commodity Index is lower, dragged down by that drop in oil and grain prices. So what can we expect in the year ahead? Joining us to discuss the outlook for commodities in 2024 is Kathy Christie, senior commodities ETF strategist over at INVESCO. Great to have you here and great to have you in studio. Yes. Thanks so much for inviting me. I love commodities because we always talk about, you know, kind of the stock market as this forward pricing mechanism, blah, blah, blah. And of course, when you look at spot commodity prices, you get probably a little bit more reflection of sentiment in the here and now. And I am curious that when you look at some of the price moves over the past few weeks and months, what is that telling us about how people are interpreting economic conditions? Well, that's a great question because really so let's look back 2021 and 2022. Commodities were the best performing asset class. I think people forget that sometimes. Right. We were number one. And what was what were everyone was worried about inflation. Right. And so we educated our clients about how do you hedge inflation? Commodities. Commodities are the most efficient hedge for inflation. So then we look at 2023 rough year for commodities. As you said, Buy.com is down. We finished some of our PDC, we're looking like down 8%. But some of the areas like you alluded to are doing okay, right? Agriculture, the broad based agriculture doing okay. Gold did okay, but we've seen a shift in client sentiment. Why add commodities, right? It's not about inflation hedging anymore. It's about hedging uncertainty. Right. And that whole idea that in this age of uncertainty, we have wars. Right? We haven't seen that in many, many years. So we have the war in Ukraine. We have the war in Gaza. And so and we call it like the three ages, Right. Hamas, Hezbollah and the Houthis. Now, we've all been focused on the, you know, Hamas and Hezbollah. But who's causing all the drama in the market right now? Right. The Houthis with the tankers. Right. I'm glad you point that. I think that's interesting to see that people are hedging, not the inflation, but hedging or the uncertainty, the uncertainty and risk here. Are they doing that in a sort of a broad basket way with commodities or are they being more tactical in picking specific commodity? It does depend on the investor. So some instinctively will use gold, right, because it's a safe haven. But we do believe broad based is better and that's why this main product we have, PDC is all the sectors. It's energy, agriculture and the metals and it has a decent amount of gold in there too. But you're right, people are looking for what is the best hedge and people make that mistake all the time of choosing one commodity. Look at the attacks of October 7th. Everyone bought crude oil, right? And things tend to gap up and then trend down. Right. So we have to be careful for those moves. But I tell you again, under that umbrella of uncertainty, we have the energy transition. I was actually lucky enough to go to COP 28. It was great. You guys did great coverage there, too. But seeing like this is going to be this energy transition is going to be like the industrial revolution. So there's so much uncertainty around that. And then they committing to tripling renewables. That's very much going to affect industrial metals. Right. So there's a lot to pass through here and I'm glad you bring up DBC, which invests in a basket of commodities. What if you wanted to go more narrow and look at oil in particular? Are you doing that through a US? So are you doing that through the oil futures themselves? You can do both. We have a product db o which is just WTI crude and we definitely see inflows there. But you're right, people can just choose it or just do the futures, but people have to be careful of contango and backwardation. I know I don't want to spend all my time on that, but remember, I think the easiest way to remember it is when you're in school, right? You want to get a B instead of a C, B for backwardation, B is good, C is bad, contango is bad. And what's in WTI right now, we have contango just a little bit in the very front of the curve. So that hurts when you own like a product that's just front month. The years it took me to remember that I remember that contango is like going up. That was I always remember that Taylor Riggs taught me that one. So when I, when I was studying for CFA, looking for commodities, investors need to understand contango in backwardation. So backwardation is great. Positive roll yield. It signifies scarcity. Right? But what's been contango? So what do I want to deal with? Backwardation or contango? You just want to go straight for the exposure to companies. And Romania is laughing at me because I'm not going. Remember contango be over. See if you want to go through companies and. Possibly benefit from the price action and the dividends and the buybacks that they offer up. Is that a better option to do that? So unfortunately, I don't even watch the companies. I watch the commodities right now because again, when you invest in equities, there's equity beta, right? You were just talking about that. The energy goes, yes, they are impacted by the commodity price, but you want exposure to commodity prices. You need to go directly to the commodity ETFs. Like I said, we have my favorite right now is industrial metals, largely because I do always think that. Dr. Copper Right. It takes the temperature of the economy. Yeah, I really like copper going forward for 24 and 25 we have the green demand, but also don't ever bet against China, right? The China building, all of that is starting to come back. So I do like industrial metals and we have DB for industrial metals, which is copper alley and zinc. Well, anyone who is waiting for China to come back had a long wait. Right? 2023 unfortunately. Kathy, really appreciate your joining us today and happy holidays to you. Same to you. Thanks so much. Kathy Ghriskey is senior commodities ETF strategist at INVESCO. What did you say? Contango Yeah, well, that one that was high because I would always get them confused. And no matter how I would read the definition. And then if you ask me this later, I couldn't figure it out. And then Taylor gave me that dumb mnemonic or whatever you want, and it's like and it stuck with it. Well, you know, not to brag, but I did get my chart. I know, I know. Thought that was just another option for us. And it didn't go to my head at all. No, not at all. All right. Stick with us. A lot more coming up here on the clothes. We're actually going to get you a settlement here of some of those commodity prices in just a bit. Don't go anywhere. This is Bloomberg. Welcome back to the close. Some breaking news out of Washington. And we're learning that the U.S. Supreme Court has refused to put that immunity clash involving former President Donald Trump on a fast track. What does that mean? Remember prosecutors here who had been investigating Donald Trump and seeking to prosecute him for his role in trying to overturn the 2020 election results, had sought to put the immunity question to the Supreme Court on a fast track that would allow prosecutors to start a trial against Donald Trump as soon as March 4th. The Supreme Court is now saying that is not going to immediately review that and it is kicking it back down to a federal appeals court to take a look at it first. We're going to try to get to some more details exactly on what this means for the former president for the potential trial involving that January 6th election case and, of course, President Trump's own re-election campaign in 2024. But right now, we do want to go back to the markets here and let's get a quick check here on what's been happening in the markets, specifically with commodities. Abigail Doolittle is here right now with our commodities close, Abigail. So overall remaining scarlet, we do have commodities higher. You can see more green on this screen than not. But take a look at crude oil. Take a little bit of a breather down about 4/10 of 1%. However, heading to a second, up week in a row, up toward $74 per barrel for WTI crude. As the Red Sea situation continues to create some uneasiness around potential supply in the future. Natural gas getting a bid for a second day up 1.2%. Gold higher by 6/10 of 1% and sugar. Yesterday we were looking at this year's big decline, the worst year since 2010, down more than I think it was, 25%, 27% today. A bit of a bit, a bit of a reprieve, up 1.9%. However, on the year, I think this is our last commodities close hard to believe of the year. But if we take a look at the Bloomberg Commodity index on the year, we of course have stocks flying high. Not so much for commodities. Take a look at the Bloomberg Commodity index starting the year higher, but oil a big drag, down eight or 9% this year. Commodities down about 12%. When you have a divergence in risk assets like that. If we were to plot the S&P 500 here, that's not necessarily a good sign for either. They're going to somehow converge. I guess we'll find out in 2024. Our thanks there to Abigail Doolittle. A look at commodities. Now let's turn to, well, M&A dealmaking. This year has been somewhat tepid. The bankers in the U.S. debt capital markets are optimistic about an M&A revival next year. So far, there's a pipeline of at least $250 billion in transactions that could in part be funded in the debt markets next year. Let's get some perspective out of Roger Cohen. He is basically the man in Washington you would call if you were doing a deal. He's a senior chairman, Ed Sullivan and Cromwell. And four years has been the go to on all of these issues. And Roger, let's get right to it here. We know this year hasn't been good for dealmakers and particularly in certain pockets like banking, etc., here. Are you hearing or are you anticipating that we'll see material strength or at least a material improvement next year from where we are now? Well, first of all, great to be with you again. And yes, I do expect material improvement. Now, it's from a low bar, I think, for bank M&A. If they had hit were able to say it was a tepid year, it would be a lot better than the actual this year, which was probably the lowest level of activity in 50 years. Two of the biggest issues with M&A, if you're making the decision whether to pursue a deal, is how do you financing it and are regulators going to sign off on it Of those two aspects, and I know there are other aspects they have to consider. Well, but of those two, which do you think is going to be most important for folks to focus on next year? Actually, although there has been a lot of focus on the regulatory aspects and I would in no way diminish the importance of those aspects. I think the more critical issue is the question of how purchase accounting flows through when you're doing a bank transaction, because the rapidly accelerating interest rate environment until recently created major capital holes in a bank balance sheet. If purchase accounting is applied as it would be to any transaction, it will certainly mean that deals have to be in stock. Cash would be a very scarce commodity because of the further impact on regulatory capital ratios. If interest rates continue to decline, that problem will be alleviated. The bond portfolio will start to roll off. But absent an interest rate decline, this issue of purchase accounting remains the major obstacle. When you say absent an interest rate decline, are you referring to a series of Federal Reserve interest rate cuts or are just persistently lower bond yields sufficient? I think it's the latter, but. It's a great question. No matter what the Fed does, how many cuts, how the unless you get those long term bond yields down the purchase accounting hole will remain. Okay. Gotcha. The other issue that you point out, too, that held up M&A in banking, of course, was regulatory issues. Is that specific to certain administrations or is that something that could be less of a factor come November or early January 20, 25? So it there is an element of specificity to the regulators in power. There always is. But I think it is more an issue of simply a regulatory recognition that consolidation can improve safety and soundness. And I think that's taking hold in this administration. There is a general antipathy towards mergers, but there are offsetting issues. And the offsetting issue here is the safety and soundness of the system. And if there cannot be mergers among the regionals and the smaller banks, there is more pressure on the safety and soundness. Is there a difference between domestic mergers, mainly to domestic companies versus some of these cross-border transactions that have cropped up over the last few months? I think there is. And I am hopeful that whether it is this administration or any other administration will recognize the cross border does not equal bad that acquisitions involving countries which have the rule of law, which are our allies. They should not be faced with serious obstacles. I do want to go back to the idea of financing these deals and the idea of how this financing has become a little bit more intricate than in the past. I mean, usually there was a pretty straight pipeline through the banks to the syndication, etc., and to the investors. We know that traditional banks, to a certain extent, have pulled back just a bit. Private equity and private capital companies, private credit companies, excuse me, have stepped up to fill that role here. Does that change the dynamics all in terms of the total costs to the acquirer and for that matter, even the inquiry? Well, I think inevitably, as the banks have been required to basically leave this area and ceded it to the private credit funds, that will increase cost. Just fewer competitors means more cost. But I don't think that we are seeing costs which are so prohibitive that they would preclude financing of well-constructed transactions. I do think it would be good for the economy as a whole if banks were more capable in a regulatory sense of assisting in the financing for these transactions. Roger, final question to you. You mentioned that obviously there's the financing part of it, the purchase accounting, the regulatory issues that held up M&A. But I'm curious, what is the appetite for consolidation within the banking industry itself? There have been plenty of calls from everyone from Treasury Secretary Janet Yellen for some M&A in the banking space to to others yet within the banking industry itself. What are the leaders saying? How are they feeling about this? So I think those banks, which are in effect, eligible to do transactions, which is everything below the globally significant, are important institutions. They are seeing mergers as an answer to a number of issues. One is competition, and it goes back to remains to comment on competition outside the banking sector. That's one answer. It's a an answer to the problem of technology and the costs which are involved. And it's also an answer to regulatory requirements. A $500 billion bank doesn't have five times the regulatory costs of a 00 billion bank. It may be only one quarter times the regulatory cost. And so scale is critical for the industry. It's become even more so over the last few years. Roger, really appreciate your joining us and spending some time with us. Roger Cohen is the senior chairman at Solvent and Commonweal. But that title really doesn't do him justice, remain, as you put it. He's the man at the center of so many banking deals over the last two decades. Three decades, Three decades. Yeah, he was like a big deal. There was a short list of lawyers that you recall he was on to deal with the regulatory agency, and he was pretty much and his firm, I would say two was at the top, the number one call if you can afford them. But then you went down the list. I think during the financial crisis in 2008, he was on involved in every deal on either the buyer or the seller side. Yeah, and he knows this industry, the broader M&A industry landscape better than anyone here. And it's always great to get his perspectives, too, because I think there's been so much kind of misinformation and a lot of hype and a lot of gloom and doom around what's been going on with deals this year, and particularly with the regulatory environment, whether this was just going to be the complete kibosh on anything and everything here. And, you know, obviously it's a balance and companies are going to have to sort of navigate here. But overall, I mean, he seemed to think that things are relatively healthy. Yeah. Yeah. And the contradiction that you have from, say, a Janet Yellen, the Treasury secretary, saying that more bank mergers will be needed to, you know, at the FTC and the White House overall pushing against any kind of consolidation because they didn't want the big to get even bigger. Yeah. All right. Let's get back to our breaking news right now. As Romain was telling us earlier, the Supreme Court has refused to put the Trump immunity clash on the fast track. Jody Schneider of Bloomberg News joins us now from Washington. Jodi, in plain language, what does this mean when it comes to President Trump's attempt to get re-elected as president? Well, first of all, what they're saying is they will not. Fast tracked the decision. The court, without comment and without a public dissent, said they are not going to make a decision soon. So this basically puts in jeopardy that March 4th trial date. The prosecutors wanted to start that trial in D.C. on March 4th over the precedence over the charges that the president tried to incite, that the the disturbance on January six, two years ago. So this will actually hurt the prosecution's efforts. It doesn't tell us that they will ultimately, you know, say he's not immune. They they don't that doesn't tell us what they'll do. They just say they're not going to decide in a speedy fashion. Well, okay, maybe that's a good thing, Jodie, because this is a pretty consequential decision. Can you explain to us what the argument that the Trump administration has made? Because isn't the idea here, and correct me if I'm wrong, is that their argument, the lawyers argument is that a sitting president is going to do things in service of the country, in service of his duties as president, that he should be immune from any legal consequence once he's out of office. That's essentially their argument remains that that if he the actions as president basically give you immunity, that you did that acting in your role as precedent, therefore you can't be tried as an individual. Now, of course, the prosecution is making the argument that he did things that that were not necessarily in the role of president. He was not following his constitutional responsibilities. And that is what will be at the core of the case. So they're saying he shouldn't be immune from this. We want to try this case and see what happens. Is there any precedent for the immunity argument? Because I think we can all kind of see the slippery slope here, even if there is a partial immunity that really opens a can of worms for any future president that maybe is less than ethical to do things that maybe he or she should not be doing. Right. And that's at the core of this. So a lot of people are saying, you know, and I think a lot of legal scholars will say this is probably the right decision. If you fast track this, then you're you're speeding things up too much. At the same time, it does call into question whether when that trial will start. And of course, we are running into campaign season. The president, who was running as the former president, who was again running to be president. It's a very unusual situation, is saying he doesn't want any of these trials to start until after 2024, until 2025, when he is hoping he will be president again. And there's a lot of talk about, especially, you know, in the federal cases that he would try to pardon himself. So it gets it's a it's a just an extraordinary set of circumstances. But for now, what the court is saying is they're not going to fast track. All right. Jodi Schneider, really appreciate your joining us. Bloomberg's Jodi Schneider really giving us some context here with the U.S. Supreme Court refusing to decide immediately whether former President Donald Trump is immune from prosecution for his efforts to overturn the 2020 election results. All right. Let's head over now to our top calls remain. You've got those. Yeah, let's make that hard pivot here and take a look at the sell side here with some of the top calls that we've gotten today. The big movers on the back of analyst recommendations. I'm going to start off here with Coinbase. The interesting note out by JMP Securities almost doubling its price target to $200 from 107. The prospect of a spot Bitcoin ETF that would of course be a positive for Coinbase and for the broader crypto market. That's what everyone is talking about. And while the analyst is more constructive on crypto, he said that it's Coinbase itself that's going to benefit, most particularly being at the forefront of this industry though shares up about four and a half percent. Next up, let's take a look at Tesla price target I'll raise there as well, getting a boost at $350 from 310 over at Wedbush analyst Dan ISE keeping that outperform rating on expectations for the car company to hit trillion in market cap at some point in 2024. Ives says higher prices and steady demand in China will actually drive valuation. Remember, Tesla actually got above $900 billion in market cap in July before slipping. Since then, it's slipping. Let's just a bit here on this Friday afternoon. And finally, let's take a look at Nike, a downgrade today to market perform over at TD now and that's after that quarterly report really disappointed everyone. Cowan says consensus estimates for the sports apparel company are now too high, and it suggests that Nike must improve its marketing and investments if it wants to compete with some of these upstarts like Hoka on Holding and Lululemon. Shares of Nike having an awful day down 12%. And those are some of our top calls. We do want to take a different approach here to the retail and consumer spending. And shine a light now on how people will buy things, buy now, pay later. It's all the rage. And U.S. consumers spent 7 billion for online shopping using buy now pay later platforms like a firm like Klarna and buy now Pay later also accounted for almost 8% of sales. Joining us now to talk a little bit more about this is Andrew Jeffrey. He covers fintech software over at Truist. And let's just start off here. I mean, buy now pay later seem like for a while the bloom is coming off the rose or at least market sentiment here. But based on some of the preliminary numbers that we've seen this holiday shopping season, a lot of people are still using it. Yeah, I think, in fact, it's just the tip of the iceberg. When you look at buy now, pay later as a percent of e-commerce remains less than 5% at a firm's largest customers, in particular Amazon and Shopify, the company only has about 1% of shopping cart or tender. And as it expands into the physical world with the affirm card deck, you're going to see the TAM expand even more. Our bullish view is that BNPL is moving into the mainstream as a tender type and it can rival debit over time. And we think Affirm is the leader. Why is affirm the leader? What? I mean, just because it has a built in name or it's an easy way for investors to play it. Just walk us through the the argument here. Yeah. Well, certainly one of the things we've seen in the last 12 to 18 months is consolidation in the industry. So one of the market's concerns was proliferation of bnpl startups. We've seen a lot of consolidation. We're down to four players. A firm is the only one that offers what we consider truly underwritten loans, and more than 80% of its loans are interest bearing, meaning that the consumer is paying the interest rather than the merchant bearing the cost of the product. But I think more than that, it's the tech integrations. It's what the company calls Dynamic checkout, for example, which allows a consumer to choose myriad different repayment options, can can buy down an interest rate, for example, to improve his purchasing power. The integrations have helped them take share at Amazon and Shopify, these two mega customers as well as Walmart and then the expansion into the physical world. I think it's very important to remember 80% of global commerce or the start with U.S. commerce is at the physical point of sale. So the ability to offer a car really expands the TAM. And that's why I think you saw the stock rise 15 plus percent on the Wal Mart self-checkout news the other day. So, you know, we have a tendency to say bnpl is the domain of teenagers or younger people who don't necessarily trust credit cards. Does the data back that up or is this something where the total addressable market is a lot larger because you've got older shoppers, older consumers who may not have necessarily gravitated to buy now pay later, really adopting it at a pretty high speed. Well, I think there is a real demographic force behind Bnpl. I think gen-z younger consumers gravitate to Bnpl largely because of aversion to traditional banks and cards, which oftentimes don't have very clear disclosures or sort of hidden fees. But I think especially as the company moves into the physical point of sale, you're going to see that demographic broaden out. The biggest challenge for firm long term, I think, is that 80 plus percent of its current transactions are with repeat customers. The key for the company is going to be expanding use into a broader base. I think that's the next leg of growth for Affirm. And I mentioned the Affirm card as an important part of that as legacy banks lose share. But certainly demographics play an important role. And I think as gen-z spending power rises, that only benefits bnpl as a category. Great stuff here. Andrew, great to catch up with you. Have a wonderful holiday. Andrew Jeffery at Truist. Thank you. Our focus here on Affirm, Klarna and some of the other buy now pay later firms. We want to pivot to that to the broader market here. And as we've been reporting, CIBO is expanding its zero day options on the Russell 2000 index to five days a week. We reported that story yesterday. Of course, this comes amidst all of the focus here on these zero day to expiry options and whether they're causing any sort of ructions in the market. Remember, SIBO last year expanded the number of days where you can trade that on the S&P 500 to 5 days a week, and now we're going to get five days for the Russell 2000. Let's take a little bit of a deeper dive into this with Rob Hocking joining us right now. He's the head of product innovation over at CIBO Global Markets. Rob, thanks for being here. Let's start off first on the Russell on this, a move to expand the options activity on small cap stocks here. Was this because you were getting a lot of requests, a lot of demand from investors out there for it. That's right, Romain, thanks. First off, thanks for having me today. I'm excited to be here, but yeah, that's exactly it. It was all driven off customer demand. You know, we started with the S&P 500, the large cap that's those options have been out now call it 18 plus months. People have gotten familiar with them and incorporated them into their strategies. There's now, you know, 18 months worth of data to back test. And with that, you know, the demand started to say, okay, hey, we have this in large cap. How about moving it over to small caps so we can replicate a lot of these strategies? I'm curious, it's been well, it's been at least a year now since you expanded to five days on the S&P, on the S&P options contracts. And I am curious as to what you saw in terms of growth in volume once that was kind of firmly implemented and just basically the adoption and use of it, who is using it that. Yeah, it's been a steady growth story. I think just the options industry as a whole, we're looking at, you know, closing out 2023 with a fourth consecutive consecutive record option's usage year. And so with that, I think we're where we're seeing investors move to is this idea that options were created to help you manage risk, define your outcome. And as people get more and more comfortable with the use of options, we're obviously seeing that expanse go into We want more functionality. Can you can you change the tenors? Can you expand that kind of option set? Because we're getting comfortable with them and we want to use them in different places. And so with zero DTA, yes, it's been it's been a great growth story. We continue to see it to see it go. When we started, you know, we're now looking at probably about 47% of SPC's options. Usage is falling in that zero category. Call it about 1.2 million options a day. And so we're excited people are getting more and more comfortable with them. Made sense to now move it over to the small cap universe with the Russell 2000 and we anticipate to see similar growth there as well. How about the breakdown in terms of individual investors, retail investors versus institutional investors for the S&P 500 zero dated options and whether you expect a similar breakdown for the Russell 2000 zero dated options. Sure. Yeah. You know, unfortunately, SIBO doesn't control clearing on the end, so some of these estimates are a little bit qualitative on our part, but we estimate right now that we see roughly about 65%, 60 to 65% institutional, with the balance being retail. I would imagine, you know, Russell 2000 could see similar numbers. So time will tell there. But yeah, with that breakdown and I think another thing that's really important to get out there is the diversity or the balanced use case here that we're seeing. About 40% of the usage coming from customers is the outright buying of options. So by a call by a put, we define that is really defined risk. You know, the most that an investor can lose is that premium they spend up front. Another large chunk we see is in the form of spread trading. So more importantly, credit, spread writing, selling of spreads capture that yield. It's kind of an overlay strategy, but once again, defined risk. We like to see that, you know, the investor going in knows their max loss upfront really of that usage case. You know, only maybe less than 5% is what we call unlimited risk trading, which is that selling of outright options, calls or puts. So, Rob, I also got to get your take on what you think happened on Wednesday. Did you notice anything unusual on your end when we had the major stock indexes reversed course quickly and then fairly dramatically moved to the downside, Zero dated options was blamed by some as the catalyst for the sudden reversal specifically puts tied to the S&P 500 at 4755 to 4765. Yeah, I think in this case, you know, the data doesn't point to that. I think people are looking for a villain and and unfortunately the data doesn't back that up. I would even use like the 4765 who had the largest open interest on the day, a little over 120,000 contracts that traded, but a very balanced trade. We saw roughly 61,000 contracts sold versus 62,000 contracts bought. So an imbalance that market makers had to take down of roughly, you know, a little over a thousand contracts, which for for this universe is not something that that challenges market maker liquidity or product liquidity. So in that case, you know the balance continues. We keep seeing a very good mix between buys and sells strikes. It's just there's so many different, I would say, strategies. They're utilizing these these options that it creates a very balanced market that, you know, we just don't see see the the negativity that I think a lot of reports have brought to the market. All right, Rob, it was great to catch up with you. And of course, you spent a lifetime trading this before your current role. Appreciate you taking time for us. Rob Hocking, he's the head of Product Innovation over at Siebel Global Markets out there in Chicago. A closer look at some of those zero day options. Scarlet Witch, as we pointed out all week long here, it's kind of been the boogeyman to a certain extent. At least the people are projecting, I guess, what they see in the market as sort of volatility and disruption and blaming it on some of those short dated options. I don't know. CBO put out its own study saying that's not the case. There are all the studies saying that there is some sort of correlation. I guess we'll find out it's a new product. As far as new products go, there's not as much data or at least certainly not as much ID accessible to people. So it's easy to point the finger at it when you're looking for one factor to to draw on. Yeah, and there's always going to be something you can point the finger on. If it was a zero day option to do something else here, maybe what was it the, you know, triple leverage VIX ETF or something like that. So there's always something out there that you have to contend with the risk here. Anyway, there is a lot going on in the markets today and of course this week as you round out into the final trading here ahead of the big Christmas holiday. We're going to break it all down for you after the break. This is the close on Bloomberg. And. Just about 3 p.m. here in New York. This is the countdown to the close. Let's get a view from the top. I'm Romaine Bostick and I'm Scarlet Fu. And of course, the day before the Christmas holiday, you don't expect a whole lot of volume. But there is movement here. Yeah, volume is like here. But nevertheless, stock still setting up for what is going to be an eighth straight week of gains of about. Let's an hour ago here we actually saw stocks dip into the red but back in the green here, only fractionally here. But unless there's some big sell off over the next hour here, most of these indices have already locked in their gains up for the week ahead of what's going to be a holiday shortened week next week. Here you see dollar weakness once again here. And then look at the bottom here. This is the consumer durables index. You basically put you pick any sort of index that involves apparel makers, retailers after those Nike earnings. That really rattled a lot of folks. Absolutely. And we'll take a look at the Nike share price in a moment there. But it's notable that it's not just Nike, it's a bunch of those names they're all saying telling a similar story when it comes to consumer spending. Yeah, And flip up the board here, too, because it's real quickly, I do want to go back to the broader market and this idea here of what's being priced in and more importantly, the competition for yield up. A returns on what you're looking at right now is the equity premium, basically the premium you get for taking on the added risk of owning stocks versus a fixed income. That equity premium still remains negative and that could be a big roadblock here. Remember, the idea is a lot of people think we'll get back to those halcyon days when the equity premium was big. But for right now, we still remain in the red here and that's going to be a big factor, I think, in a lot of portfolio planning next year. Yeah, we just have to get through the Santa Claus rally first and then in 2012, maybe people will refocus on. Well, Jennifer, Lisa, she saw Santa outside her window. Well, there you go. She's coming. All right. You mentioned Nike earlier. Let's take a look at Nike shares right now. The worst performer in the Dow Industrials losing as much as 12% on the day. That is the most in September of 2022 after the company gave a weak second half forecast and also announced a massive cost cutting program, $2 billion over a number of years remain. You mentioned at least one analyst. You know, it was less than three years and I think that's a rattled people. It wasn't just the cost cutting, but the compressed time that they're doing in that I think is raising a lot of speculation that there might be something a little bit on this. All right. Let's take another look at a mover that is on my radar. It's the biggest gainer in the S&P 500. And the ticker is a and assess and says and Bloomberg has learned that this is a software company and it is considering its options amid some takeover interests. A couple of names have come up. None of this is confirmed, of course, but that's enough to keep the investors buying it, bidding it up by more than 12%. Yeah, absolutely. Something I've been keeping an eye on, too. I thought you had McGurn on there, which is that Maddern or No, no, it's another biotech. Oh yeah. Tamara Oh yeah. Yeah. Well my and is more and this is on the heels of Bristol-Myers buying Corona Therapeutics. It means a race to acquire new drugs is on. So a lot of these biotech names are catching a bit. Okay, I had a really good comment about Modiano but apparently for the wrong stock. All right. So nevertheless, we are at five biotechs. Actually, that's a bright spot today. It is their Nasdaq biotech index. The last time I look was up more than 2% here. But most of the other major indices right now are only higher by fractional less than a percent here on the day. As we move closer to those closing bell, stick with us. Our cross-platform coverage of today's top stories. It starts right now. Countdown to the Close. Bloomberg's Comprehensive cross. At form coverage ahead of the U.S. market. Close starts right now. This is the countdown to the close. Romaine Bostick alongside Scarlet Fu. We're joined right now by our colleagues in the radio booth, just Martin and Mike Regan. Welcome to our audiences across all of our Bloomberg platforms, which spans radio, television, Bloomberg originals, and our partnership with YouTube here on the final trading day of the week. And volume is down, but stocks are up on the day and on the week, guys. They are in the S&P 500 off those highs, but still on track for eight consecutive weeks of gains there. So quite the run that we've seen over the past two months and especially since those lows in October. But Mike and I were talking about this, a Santa Claus rally that actually officially starts today. We've talked so much about this, especially when we get into the holiday seasons. And I know traders and investors, Mike, like to talk about this, but it's actually something that Stock Traders Almanac define. So it's actually the last five trading sessions of the year and the first two in the new year. And over that seven session span, if you go back to 1969, average is a gain of about 1.3%. But the whole purpose of it isn't necessarily a trading strategy, but more of an indicator whether or not the S&P 500 bucks that trend or not, but something that, you know, tis the season, Mike, whenever it comes around this time of year that everybody likes to talk about, I don't know. Just I think Santa is a crypto bro these days looking at the price of Bitcoin flying around in his sled. So it was his magic touch. But you know, romance your point. Look at that volume on the S&P 524% below the three month average at this time of day. I think we're you know we'll be lucky to get through a day with just some little moves when volume is that low. You know, that low liquidity is a dangerous thing. But so far, knock on wood, Scarlette, no fireworks today. No fireworks say nothing like Wednesday. When we had a sudden reversal. We already had a little bit of a mini reversal earlier in today's session. You know, what we're paying attention to, of course, is the look ahead for 2024. And a big question is, what will consumer spending look like? Because there's a lot of anecdotal evidence out there that the consumer is getting pretty stretched. And yes, people are spending a lot for the holiday season, but not necessarily for themselves. And when they are spending, they're putting it all on credit cards. And now the credit card balance in the US, according to the New York Federal Reserve, has increased to 48 billion in the third quarter alone, pushing the total to .8 trillion now. Yeah, I mean, and look, and this gets to this idea to I mean, everyone sort of looks at that number. And we should point out, obviously, that number goes up every year just because, you know, obviously the population grows and the economy grows. But when you look at some of the ratios here, you are seeing more stress. You're seeing credit card delinquencies go up. Obviously, there's a lot of concern about subprime, autos and other things here. But you put it all together here. Is that enough to really sort of affect the headline aggregate numbers that we see that have painted a relatively stable picture of economic conditions? Well, speaking of consumer spending, Mike and I are actually going to have the CEO of Priceline, Brett Keller. He's going to be joining us later in the program to talk about, obviously consumer spending, holiday travel, but still when there is higher prices for these tickets. But what he's seeing and how he's viewing the economy. So that's something I'm looking forward to getting into later on. Yeah, I think, you know, when we talk about that sort of absolute level of the credit card debt, you know, I think it is important to put it in context. You know, what is that? How does that compare to sort of that excess savings that people still have in their bank account or what's it look like as a percentage of GDP? You know, once just a nominal number going higher tells you one thing, but what's it really balance out, too, in the rest of the economy? So, you know, do do consumers still have that savings to burn through as well before there's actually, you know, some delinquencies and whatnot in the credit card? I mean, I'm told we got to go. I'm surprised that we didn't get to this shortlist of Academy Award nominations. As you know, I was nominated for Best Original Song this year. Oh, really? Well, let's hear it. Well, yeah. I mean, if we can't get to it now, we'll be back in about an hour. So, Mike and Mike, if we had more time, I'd sing it for you. Oh, well, you know what? How about in an hour from now? So we'll actually be back together again, live on TV and radio due to an on Bloomberg Originals at 4 p.m. for our Beyond the Bell coverage. Of course, when we take you through today's market close by, guys. And we continue to count you down to the closing bells here on Bloomberg Television. We're about 50 minutes away from the close of U.S. equity trading for the week. Brice Doty joining us right now, CIT Investment Associates senior portfolio manager. Great to see you, Brice, here on what has been a pretty good day and quite frankly, a good week, a good month and really, I guess a good year here. You think that's going to continue into 2024? Well, that's kind of a loaded question. I do believe that we've had a good run here. And and it's the the Fed Fed really as much as the Santa rally. And that trade looks like it's starting to peter out, at least in the bond market, because with today's really impressive, impressively low inflation data, you've seen, you know, very little action in the bond market. Now, granted, maybe everyone's left for a long weekend or something like that. But yeah, it's oftentimes when there's low volume, as you pointed out, sometimes that's when there's big moves in the market. We've had hardly anything. Well, so that makes me think that everyone's put their trade and everyone's extended their duration. So maybe that bond rally is is coming to an end and may not follow through into next year's much as much as we might hope. Yeah, I'm curious about that too, because I thought there would be when I saw the numbers across the wire at 830, I immediately thought, Oh, this is going to be a huge day. And, you know, the market action has been, you know, kind of tepid. I mean, even when you account for all the people away from their desk here, we did not see the big moves. And it gets to the question here, has all the good or the potential good been priced into this market right now? I think a lot of it has. I think I think a lot of managers have extended their duration. They get exactly where they want it for year end. You know, everything looks pretty better for the clients. And and then you'll see a rotation into next year because spending will fall off a cliff. I think I think this holiday season was the last hurrah for consumers staying their last last dollar on unfun things. And they'll go to very, very hyper focused on necessities in the first quarter and they'll cause a rotation because you'll see people, maybe a bond managers selling their corporate bonds or lower quality bonds in favor of treasuries. So that might push Treasury yields down a bit, but widen spreads so the corporate yields won't really move that much. Mortgage yields, it might not go down as much as Treasuries as well. So so, Bryce, let me just to jump in here, because you say spending will fall off the cliff. What's the what's the rationale behind that? Because so far, inflation is coming down and, you know, we're headed in the right direction. And if if inflation was not going to be the thing that caused people to pull back on spending, why would it cause people to pull back next year? You know, that's the thing that's so unusual about this current situation that we have is that none of the old rules apply. You know, people would normally be balking at at higher prices, becoming more discerning about what they buy. But they were so flush with cash that they didn't have to. But now they burn through that cash. It's no longer the house's money. It's now your hard earned dollars. And when you go to buy something like how many how many hours did I have to work to be able to afford what's in my cart right now? And so it changes what you're focused on, the luxury items that are, you know, really weak. They're seeing the biggest discounting right now. A lot of that drove the goods prices down that that produced such a low p e number this morning. And so it's a it's a different consumer than it was this last year. And it's amazing. You know, you make a really good point on this inflation. Inflation is coming down and yet people are complaining about it more than ever. What that tells me is that it's because they're paying attention now because they have to. And so that's another indication to me anyway, that's that the spending, hyper spending is really going to change now. Okay. So inflation is coming down because of the Fed's rate hikes. The Fed's rate hikes should also slow employment, but we haven't had real hard evidence of that beyond a cooling of the labor market. What is it that you see that a series of interest rate hikes has not really put the kibosh on the job market? Yeah, I think that the rate increases have been a just a tremendous disaster for that for the economy and inflation. They actually slowed the pace at which inflation would come down by trying to destroy the employment market like you just reference and panel at the very end of his November 1st press conference, finally kind of admitted that that was a huge mistake. They were trying to get unemployment to get up to like 5%, which would have wiped out a million plus jobs and thought that that would be the key to solving inflation. Yet what has happened is that employment has surged. The labor force has surged above its long term trend line, and that has resolved all the supply chain issues that were happening, causing problems that increase the supply of workers, the supply of goods, supply of services. And as we know, the more supply, the lower the cost. And the Fed raising rates just make it more and more difficult for businesses to it to achieve that resolution in the supply chain issues. So I think the Fed had, you know, started earlier and stopped at three and a half or 4%. Inflation would have resolved itself much quicker. Yeah, but they were sending the economy and that's really going to also bite in the first quarter. Well, the original sin of not moving in time and being behind the curve. Bryce, really appreciate your joining us. Bryce Doty of CIT Investment Associates. And as we count down to the close, we're going to talk next about Bristol-Myers Squibb agreeing to buy Karuna Therapeutics for 4 billion. That's giving all the biotech stocks a bit of a lift. We're going to speak with Laura Chico, senior biotech analyst at Wedbush. And a conversation here about the regulatory burden faced by publicly traded companies. The latest grievance out of Elon Musk and insight on the markets from Lindell Dugal. She is senior equity strategist at Federated Hermes. All that and more coming up. This is the close on Bloomberg. All right. The U.S. equity markets right now setting up for what could potentially be an eight straight week of gains. The gains are fractional, to be sure, particularly for the Dow and the S&P 500. But you're talking about NASDAQ 100 still in record territory. A Dow Jones industrial average just a smidge off a record territory in an S&P 500 that at one point on the day traded within 23 points of its all time highs, set back on the first trading day of 2022. What the first day of 2024 will bring for the markets, of course, will depend a great deal here on macro conditions with a market that is already trying to run ahead of the Fed pricing in as many rate cuts as it can reasonably expect. And the Fed now facing a big decision heading into next year as to whether it wants to push back on that. Abigail Doolittle joining us right now every day at this time for our Options Insight segment. And Abigail, you are taking a look at that divide between the Fed and Wall Street on rate cuts next year. It stands out and it seems as though there's been a divide between the Fed and Wall Street for, I don't know, the last 18 to 24 months. And now it's about rate cuts. The idea that the Fed is pricing in three for next year, the Street six, how do we bridge that? Well, it's going to be an interesting year in 2024. To talk more about this, let's bring in Spencer Hickman of Tolu Capital Management. Great to have you with us again, Spencer. And what do you make of this? And it's interesting because I think going into the Fed meeting and some of the data that we've had more recently, traders were looking for a floor. And then after Powell gave the Powell Pivot party, all of a sudden up to six, how is that going to how is that divide going to be converged? Thank you for having me on, Abigail. Currently, as you said, the markets are pricing in six rate cuts for 2024, while the Fed is forecasting for three rate cuts. And that disparity could cause a lot of volatility as we head into the new Year. In either scenario, we believe that whether we get three rate cuts or six rate cuts or anything in between and that will remain to be seen. We believe that a two stance steepen our is a trade worth putting on due to some historical circumstances are currently the two stance yields curve is -43 basis points inverted. Historically, every time the Fed has begun to cut rates, the yield curve has normalized. And so and sometimes it's even normalize up to 150 basis points. So given this historical precedents and given the fact that there is a lot less volatility in the front end of the curve and there's more uncertainty in the back end of the curve with a lot of things, inflation, growth, whatever it may be. We personally believe that there is decent risk reward to be had in this specific trade heading into the new year. Well, you know, you're reminding me of something that I've not heard people talk about in a long, long time. But when the 2/10 curve does invert, it's been inverted for a long time. Even if it is on the cusp of coming into some sort of normalization, as you're talking about, usually at some point in the 9 to 24 months after a recession does occur. But talk of that has completely fallen away. That could be a bearer of volatility as well. Absolutely. And if you look within as an example, small caps, you know, the Russell 2000 is up 12% month to date, while the S&P is only up 3% month to date. That was that clearly signals from the equity side there is a pricing of some sort of soft landing occurring in 2024, what would be at odds with a recession. So in terms of small caps, what do you see next year? Because the the it's interesting to see all these indexes at resistance. And if we take a look at the RV X, which is the Russell 2000s of X relative to the VIX, there's basically a ten point spread. Absolutely. So the RV X, which is the Russell 2000 version of the VIX is at 23, while the VIX itself is at 13. And we believe one thing that is causing that elevated volatility, of course volatility just means moving above or below the average. It can work in either direction and we believe one cause of that is if we were to get that soft landing type of scenario where the Fed would most likely be cutting rates three times just to recalibrate real yields, that would be the type of environment in which this outperformance for small caps can continue on the back of some positive data. On the other hand, if we were to be in a situation where we would be in a more hard landing type of environment, maybe that's more what the market is attempting, the credit market, is it timing the price? And with those six rate cuts in that environment, small caps are a lot more correlated to economic conditions and one would reasonably expect small cap earnings to be materially impacted a lot more than large cap earnings. So we believe that heightened the volatility. Is the market just trying to discount in unison? It seems interesting that whether there's a soft landing or a hard landing, cuts are priced in, but the influence on stocks and volatility a little bit less clear. Spencer Ackerman of Tulu Capital Management, thanks so much for joining us for Options INSIGHT today. And from New York, this is Bloomberg and. Shares of the software company ANSYS have been rising all day long here. We're now learning from the Wall Street Journal that synopsis. The other another software company is in talks to acquire ANSYS. A little bit earlier here, there was a report here that ANSYS was considering strategic options, including I guess, fielding some interest from potential suitors. We're now learning, at least based on Wall Street Journal reporting, that one of those suitors is. Synopsis. Synopsis. Shares down about 45% and the shares remain higher on the day by about 14. All right. We'll try to get you some more details on that. Meanwhile, we want to go back to another breaking story involving the Supreme Court and the former president of the United States. The Supreme Court is refusing to immediately decide whether former President Donald Trump is immune from prosecution for seeking to overturn his 2020 election loss. Kelly lies joining us right now from Washington to explain a little bit more about why this matters. What's going on, Kelly? Well, it matters remain because this is a critical question when it comes to the prosecution of the former president. Jack Smith said it was of the public interest for the Supreme Court to fast track this decision because he would like the trial in the 2020 election case here in Washington to begin on March 4th. Potentially, that timeline now is in question because the Supreme Court has refused to decide on this question immediately. It's worth noting we do not know why exactly they have decided this. They have no explanation. There was no public dissent, But it would have been unusual for them to skip over essentially the usual process, which would have been the appeals court hearing this first. That is now what will happen going forward. There will be an appeals hearing. They'll hear arguments on January 9th and the process will move forward from there. Any response or any comment from the Trump campaign? And if not, if this moves forward on January 9th, as you mentioned, what does the timeline look like, look like from there? We haven't yet gotten a response from the former president or from his campaign. Nothing yet either from Jack Smith, the special counsel. But to your question on timing, it is probably going to be very difficult for that March 4th date to stand. We should note that this is pretty common in legal cases. The former president deals with not just criminal ones, but civil as well. There is a tendency on the part of his legal team to delay as much as possible. So this is going to be quite difficult to get this process process started. Keeping in mind as well that we're dealing with a bunch of concurrent timelines here. The March 4th trial date is a day before Super Tuesday in the U.S. and many of the other trials that the former president is going to have to deal with do at this point coincide with the presidential primary season if those dates aren't moved as well. Yeah, absolutely unprecedented the times we're living in here. I mean, can you imagine a former president and the current frontrunner for the Republican nomination all under trial in the middle of an election year? I don't think the optics of that, no matter where you fall on the political spectrum, anyone really wants to see that. Kelly, great to catch up with you. You can catch Kelly Lines every day on Balance of Power, which airs immediately after this program, 5 p.m. out of Washington. Meanwhile, we turn back to the markets here with just about 35 minutes until the closing bell. Stocks holding their gains here on the day and on the week here. Fractional gains here, but a continuation here of that rally that is now in its eighth straight week. Scarlett, when we talk about here, whether there will be any sort of action next week, a holiday shortened week with Christmas on a monday and I presume a lot of people away for the whole. Their earnings are probably I mean, there's are earnings. It's never sleeps anyway. It should be a relatively tepid week. I think both of us will be gone. But stick with us. We are going to stay here, I think. Two five. Yeah, that's a rumor. I mean, I mean, you are you know, we'll be back to keep off. The Ranger might take you. This is a close on Bloomberg. This is the countdown to the close. Just about 30 minutes up to go here in the day. And thankfully, the whole week here and for us is going to be the whole year. Yes. But it's a rally. That rally has sustained itself. It's modest, to be sure, but eight straight weeks now, eight straight weeks for the S&P 500, the longest in more than three years. And when it comes to the markets, it feels like we're on autopilot here. The bond market closed early 2 p.m.. And for the equity market, being on autopilot means melting up. And when you look at the sectors in the S&P 500, consumer companies are at the top and the bottom. Consumer staples are leading the way up 7/10 of 1% led by dollar retailers, Dollar General, Dollar Tree. And on the bottom there is consumer discretionary. And that's really because of Nike. Nike, of course, coming out with a disappointing outlook for the second half of next year and also announcing a big, big cost savings program over three years, $2 billion as it tries to right size itself for the eventual turn in consumer spending for me. Well, speaking of consumer spending here, of course, those Nike earnings yesterday really rattled a lot of folks. You saw a lot of stocks overseas like Adidas and Puma. Also a move lower here. And then back here in the U.S., you had a lot of Nike's peers like Lululemon, like on holding also move lower, as well as its retail partners. That includes Foot Locker, down 4% on the day Dick's Sporting Goods Academy Sports also that lower here on the day raising just a lot of concerns not so much about whether this is a specifically a Nike problem but whether a lot of folks are just kind of tapped out with some of that discretionary spending on apparel. That that will be a big story heading into next year. Another big story involves video games. There was an interesting report out of China here about a further crackdown on the amount of time and more importantly, the amount of money that they want people to spend within those games. That really hit a lot of the Chinese video game stocks, including NetEase, its ADRs here in the U.S. down 16% here. Bilibili was also down and of course, some of the US based stocks also got dinged a little bit on that as well. Meanwhile, two bright spots, Rocket lab, the space company up 22% on the back of a new contract that we just learned about to launch a U.S. government satellites into space. That's about a $500 million contract. But a lot of people think it could end up being much bigger than that with some of the incentives baked into that. And Marathon Digital, this has been a good week and quite frankly, a good year for crypto and marathon. Digital has really been at the forefront of that nine straight days of gains for that stock, ten straight weeks of gains for that stock. Both of those measures are a record streak for the company. Scott Yeah, Bitcoin and Bitcoin related companies have all been doing fairly well in 2023, but most of 2023 at least on the M&A front, has been pretty sluggish, however, not lately and not in the health care space either. Bristol-Myers Squibb today announcing it is buying the schizophrenia drug developer Corona Therapeutics for 4 billion. Laura Chico, its managing director and senior biotech equity research analyst at Wedbush Securities, and joins us now. Laura, it is good to speak with you. Why now? Why is there such a pick up in biotech M&A after a pretty quiet 2023? There's a lot of regulatory concerns early on in the year. Have those dissipated? Well, thanks for having me. Yeah, it's a function of a couple of things. I do think that the biotech sector has been under considerable pressure over the course of the year, but, you know, valuations remain pretty favorable at this point. FDA has been very productive in terms of the number of drugs has been produced or approved, rather. And I think in terms of the M&A, a lot of these assets are now maturing and getting through key value inflection points and de-risking data points. So I think that's really setting the stage with large biotech and pharma having a lot of capital to deploy and pipeline gaps to fill. I think the time just kind of comes together. So we've definitely seen a pickup in biotech M&A through the second half of this year. So how long? Give us a sense of how long this effort to buy up smaller biotech companies has gone on for, because obviously they have to do their due diligence. They have to kind of kick the tires around a little bit before they can move forward with an actual bid. Is this something that takes three months to complete, six months to complete? What kind of timeline are we talking about here? I think it really depends on the asset that you're looking at and the scale of the deal as well. So I think in this instance we'll get a little bit more clarity on the negotiations once the SEC filings post. But I would just also point out, you know, this is the second deal in the CNS or the neuro psychiatry space that we've had take place just in this month. We've had Abby Sara Bell for about $7 billion at the beginning of December and now have Corona and Bristol here at the end of the month. And this gets to that question there as to whether that does become the big bet that a lot of the at least some of these pharmaceutical companies are going to make. I know there's been so much focus on other areas of health care, such as like with the weight loss, drugs and such. But this one has kind of been bubbling under the surface for a while. Absolutely. I think CNS you hear this mantra once in a while that CNS is the new oncology. I think it's the the culmination of a lot of unmet need, not a lot of therapies available to treat people and look at schizophrenia as a as an example, we haven't really had any new therapies in decades. So Car x t represents a very new mechanism. And then there's a few other competitors that are working on similar muscarinic agonist antagonists that are following up behind them. So I think this is another class that's really set to kind of gain traction and speed in the in the months and years ahead. Well, giving your background or at least your education in the medical space here, I am curious as to whether this becomes sort of a11 treatment type of drug, meaning it just treats one thing or whether there could potentially be broader uses for it. Yeah, with car T specifically, I think the pipeline and a product phrase that we hear actually does apply. So in our estimates we only assign credit for schizophrenia and Alzheimer's related psychosis. But Bristol today did mention that they're interested in exploring in other adjacencies like Alzheimer's agitation, bipolar disorder. And because these pathways are really centrally involved in a lot of these diseases, I think it could have broader applications. And one just one quick question. We only have about 30 seconds. So but when do we get to that stage? Because with regards to the Alzheimer's drug, so we had so many disappointments this year and last year where it looked like we finally found that breakthrough. And I'm not saying that this particular drug could be that breakthrough, but are we at least moving in the right direction in terms of what we're learning from some of these failures? Absolutely. I think this has been an exciting time for Alzheimer's specifically, but I do think 24 and 25, we're going to get to start start to get more data readouts that are going to help inform on where we go next. So I think it is an exciting time in that space specifically. All right. A lot of movement here in the central nervous system, diseases, treatments based here. Laura Chico of Wedbush Securities, thank you so much for giving us some insight here on Bristol-Myers latest purchase. Coming up, we've got the top three Grayson Wildcat two, by the way. Oh, is she right? Oh, well, you wildcats hanging out together. All right. The top three, where we focus in on the top three movers and shakers at the center of the day's biggest stories. This is the close on Bloomberg. Oh, Wildcats. It's time now for the top three. Every day at this time, we take a deep dive into the center of the people or into the people at the center of today's top stories. And I'm watching Romain Tidjane Thiam. Remember him, the 61 year old banker. Why I kind of forgotten about him. And then there was a great story on the terminal today, and I was like, Oh yeah, this is what he's up to. He was the CEO of Credit Suisse before he stepped down in early 2020. Turns out he is trying to run for president of the Ivory Coast. He's trying to become the opposition party's candidate in order to get his name on the ballot in the 2025 election. Yeah, and he's got a little bit of an uphill climb here. Apparently, there some concerns because he holds dual citizenship with Ivory Coast in France. And I guess you can't be president with a dual citizenship, though he said he's willing to give that up. So the courts still have to kind of rule whether he's even eligible to do this. But interesting to see that he's, I guess, found potentially found a second career here. And you were mentioning on ceremony, President UN has a similar pedigree. Yeah, no, it's our current president had a similar trajectory in U.S. and finance, I should say, global finance and then found his way into politics. There's a trend here. Another so we'll keep an up on him and another person I want to check in on here, because we kind of miss this story yesterday and we really have to give him his due. But Robert Solo passed away. We learned about it yesterday. He was 99 years old, so he lived the full life. He was a Nobel Prize winner. But more importantly, he really did change the face of economics. So a lot of people forget that at some point, long before we were ever born, you know, people looked at GDP growth. It's just been about the inputs of capital. And he was like one of the first people to say, where's the data on this? You know, everyone was just kind of we just kind of assumed that that was what it was. But he put empirical data to it. And what he found was one of the biggest drivers was not capital, not labor, it was technological advancement, it was a huge advancement. And it really became the cornerstone of modern economic theory. Of course, he sparred a lot with Milton Friedman and some of the other giants of the day over and over it, but nevertheless, he gets to do it. The other thing that I thought was interesting about him, in addition to his work on economic theory as a professor at MIT and the law that laws that have come in from him, I do you know how many Nobel winners, how many prominent people basically were his pupils is his his mentees, his students over time, Joseph Stiglitz, William Nordhaus, Peter Diamond, Alan Blinder, who didn't win a Nobel. But of course he went onto to bigger. But it Mario Draghi was his duty here and none of them none of them had anything bad to say about, you know, it's pretty interesting that what you say is, you know, the the innovations he brought to economics is now conventional wisdom, because back in the day it wasn't. And I think that tells you everything you need to know about how big his impact is. Yeah, absolutely. All right. Let's also take a look at number three, the last four. So I'm watching and I feel like we watch him every day is Elon Musk. He is blasting the state of U.S. financial markets, which he tends to do. He spoke in a wide ranging talk. Is this new or was this from. No, this is really Oh, do because I feel like every day he's got a grievance that he has any grievance here he is talking about the price of investing stoking volatility. He doesn't like passive investing. Oh, take a listen. What percentage of the market that is passive is simply is too great at this point. So there that is somebody actually has to make an active decision. But the passive investors are riding on the decisions of the active investors. You get essentially massive movements of the stock or based on the decisions of maybe four or five active major stock pickers. The late Jack Bogle would disagree, but maybe Ellen is referring to the fact that Tesla joined the S&P 500 about three years ago and has trailed the benchmark index since then. Yeah, I always feel these grievances are always a little bit more personal in nature here because, I mean, look, I mean, you know, I mean, we've had this debate here and I don't know if we want to bring it get right to Emily Griffith to join us here on set to talk a little bit more about this. There's been this debate for a while, Emily, about whether that passive investing is just disorienting, the market or making it a little bit less transparent. Yeah, I mean, this is something that we often see academics come out and say, and of course, the people within the passive world, Jack Bogle himself have refuted these claims. But his basic argument here is that passive investing makes stocks more volatile, decreases market inefficiencies. And Musk used the analogy of a guitar amp. I don't know if you guys have ever used an electric guitar. I have not tried that. But he said that when a stock enters, it amplifies the movements like a guitar amp. I think, you know, he mentioned Bogle, and he also said that he agrees with Bogle's mission to kind of bring passive investing to the masses. But this idea here that it's going to create more volatility when you have index funds kind of piling into a stock if it's added to a benchmark. And then other stocks that are not in benchmarks are kind of left behind was the argument Musk was making. He's also just not happy with being a publicly traded company overall. That was a big part of his complaints. Right. And I mean, Tesla has really benefited. Absolutely. There's a trade off there, right? Yes. I mean, he did to be fair, he did say getting access to public capital has been good for Tesla. But as we know, Space X is one of the largest private companies. And he also took Twitter, now ex private. So he did discuss with Cathie Wood kind of these trade offs between public and private. Right. Of course, at least one of those companies we know has been talking a lot about potentially spinning off part of that business into the public markets here. Emily Rafale taking a closer look here at the interview that Elon Musk had with Cathie Wood here about passive investing. And though the burdens of being a public company coming up here on the program, we cover public companies count. You're down to the closing bell. Linda dissell, Federated Hermes, senior equity strategist, is on deck. This is Bloomberg. This is the countdown to the close Romaine Bostick here alongside Scarlet Fu. Just about 10 minutes until we get to those closing bell. Scarlett and sox kind of holding the line here between gains and losses. Nevertheless, we are setting up for an eighth straight week of gains. Yeah, and consumer companies are at the center of it, whether you're on the upside or on the downside. Consumer staples doing better. Consumer discretionary doing poorly because of Nike primarily. And concerns about consumer spending on discretionary items. Biotech certainly getting a bit here. You can see SBY moving up by more than three and a half percent on M&A in that space. Central nervous system drugs are at the center of Bristol-Myers Squibb expansion as it tries to fill some pipeline gaps. And the bond market for change. No action right now. Yeah. Bond market shut down at 2 p.m. today here. The stock markets shutting down like normal at four here. So most of the price action that you've seen today, that's pretty much what you're going to get. Let's get some insights out of Linda DISSELL to talk a little bit more here about what to expect in the year ahead. She's Federated Hermes, senior equity strategist. Linda, always great to see you here, and particularly here on I guess what for at least for us, is the eve of Christmas, at least the working Eve, I should say. I do want to talk a little bit about consumer spending because there are so many mixed signals coming out of it. We continue to see data that shows in aggregate spending is holding up. Then we get kind of the anecdotal stuff out of like a Nike earnings that seem to suggest consumers aren't spending. I'm not sure what to make of this here. Is there something there that we should be worried about? Oh, well, hello. Thank you very much. So much for having me again. And happy holidays to you all and glad to be with you. Even if we can't talk to our Bond friends, you know, you probably at this point in time. But the consumer has been very, very strong all year long. And as we fall, we have a proprietary survey that we look at or information that we look at at Federated Hermes and it looks at the the sales in the May and the April-May timeframe and then the back to school time frame. And what you saw in both of those time frames was that the consumer, though they're still spending, is getting more cautious about what they're spending on. They seem to be trading down in terms of price points and the like. And I think you're seeing that into this holiday season. Yes, increased spending, but certainly not as big an increase as you were as you had last year, which was obviously coming off of that off of the Covid, the Covid scare. So still good, but getting more discerning, I think on the consumer side. Okay, so discerning isn't bad. I think a lot of people will take that, particularly Linda, when you look at the rally in markets and more importantly, the broadening out of that rally there. It's not just people chasing after those big growth stocks that they are looking at, some of those cyclical names that are much more tied to economic conditions and at least for now, they seem comfortable buying them. Yes, they do. And you know what's really interesting about the buying power that we have right now is there are all kinds of statistics coming out talking about how very strong and broad the market has been really since the beginning of November. And history says you really don't want to fight that. You don't want to get bearish on that too soon. When you couple that with the fact that you're seeing hedge funds buying, you're seeing retail buying and you're seeing insiders buying, that is all a very bullish component. And and as we've been saying all year long, it's been such a narrow market that means that all of these other areas still are reasonably inexpensive. They've not been picked over at all. And the areas that beat up the most, your utilities, your small cap stocks and and your cyclical stocks have been amongst the most beaten up. And they're the ones who tend to do best when the Fed goes on pause. Reason to be bullish going into the new year. Yeah and I mean but people have been calling that for a long time and we've had several head fakes. What makes the recent outperformance of small caps in some of these beaten up sectors more sustainable this time around? Well, that's a really interesting question, you know, because what was what we've seen in these past runs is bumping up against resistance points. And and this is this is something all the technicians know. So we definitely, as you suggest, we need to get through that. We need to punch through in a meaningful way. And I think that we may have to wait until next year to see if we do. And that probably will come from whispers out of what the fourth quarter earnings were for many of these companies. Was it also broad and strong as the first three quarters of this year were? So that's what we'll be looking at, amongst other things, is earnings outlooks. Earnings outlooks is crucial, of course, and profit margins has been the key story for for corporate earnings over the past year and especially going forward. We heard from Nike, for instance, the top line growth isn't necessarily there, but they will do what they can to protect the EPS if margins continue to surprise to the upside, what is the evidence that investors are willing to branch out to some of the other sectors that have been left behind when they can continue to bid up the ones that have worked like the Magnificent Seven, like the tech companies? Well, I would I would argue that the evidence has been November and December trading, because when you look back in history, you have not seen this kind of strength. I saw I saw statistics going back to the late 1950s that you are near very the most rare time frame in terms of how many stocks, how fast the breadth has gone on. And I think what you're pointing to is the very important profit margin surprises that really, really surprised all year long, even as we were fighting inflation, companies have surprised big time. And if they find a reason next year to concern themselves with expenses because they can't pass through costs like they had been all this year, that is when we start to wonder if they're going to start to lay off because the job market has been so unbelievably strong. And who will they lay off? If you wanted to worry about something, I think that'd be an interesting one to do So. All right. What's the one bright spot for you, Linda? At least the one that you anticipate for next year? We anticipate a broadening out of the market. We anticipate that earnings will continue to do well. We remind ourselves that it's an election year and election year and incumbents know they need a they need a strong start to the year in order to get re-elected. I think that that our politicians will do whatever they can to make things look good and keep things looking as good as they are. We come into the new year in a good place, powerful both business and consumers. I just would not fight against that, nor would I be concerned about a pullback when we've raced too far too fast here. I would not be concerned. All right. We're they're going to have to leave it there. Have a merry Christmas a great rest of the year and we'll catch up with you in 2024. Linda, do so. They are over at Federated Hermes helping us count down to the closing bell. Here Are stocks holding on to most of their gains. Kind of a rinse and repeat of what we've seen over the last few days and weeks where the gains are fractional, but a pretty sizable outperformance once again by the small caps and some of those technical names. Yeah, and again, I go back to that idea of whether this is durable or not. We've seen enough instances where it hasn't panned out. Exactly. And I guess the earnings picture will really answer that when those start coming out in earnest in late January. Until then, we're kind of grasping for straws in terms of looking for hints on the direction of the economy. Yeah. 2024 Well, that's a big reason why I'm actually looking forward to the next earnings season. Not so much for the reports themselves, but really because they're going to really be in the spotlight to provide much more clarity for what they are, where they see things going in 2024. And I know, you know, CEOs and CFOs don't always give you all put all their cards on the table. But usually I feel like you're going to add something a little bit more candid out of them that maybe what you get out of Jay about. Well, Jay Powell is always looking to to kind of tamp down whatever excitement is going on in the markets, except for this last earnings, except for the last presser that he held where he was like, sure, go ahead. Yeah, Well, you know, he's a fan of this program, so sit tight, everyone. As we move closer to the closing bell, our full market coverage right here on Bloomberg as we take it to the bell and beyond. Beyond the Bell. Bloomberg's comprehensive cross-platform. Coverage of the U.S. market. Close starts right now. And right now we are 2 minutes away from the end of the trading day Romaine Bostick alongside Scarlet Fu. We're counting down to the closing bell. Here to help take us Beyond the Bell hits a global simulcast with our friends just met and then Mike Regan in today for Carol Massar and Tim Stanwick. Welcome to our audiences across our Bloomberg platforms as you pass the most crucial moments of the day here with global stocks right now on an eight week run, and that includes U.S. stocks with the NASDAQ 100 at near a record high. Looks like it's going to close at a record high. And the S&P 500 at one point today, guys, look like it actually might get there as well. It's actually when you look at the S&P 500, about 9/10 of a percent off from that record that was last reached on January 3rd of 2022. So getting close to that two year anniversary mark. But we were talking about the official kick off to the Santa Claus rally period earlier on here with you all about an hour ago. So we'll see if if this can eke out a potential record here in the next few sessions for the S&P 500. Yeah, just as sometimes I wonder if I'm the only one who cares about valuations anymore. I look at this round numbers. Well, number one around. No, I do care. But you know, I love a good round of certainly. But we're, we're getting close to a round number on the forward p e of the S&P 500 which is would be 20 19.7. Now, you know, anyone who knows the old Peter Lynch rule of 20 will just be like, wow, this is this is out of control. That's so much higher than anything we saw before the pandemic. I know earnings growth is supposed to be pretty strong next year, but I don't know, Scarlet, I've got to wonder. It's all it's all about the macro trends, right. And the inflation data that we got today through PCE pretty much came in exactly the way investors would have wanted to see it remain. I mean, everything slowed down. It was a little bit worse than expected. It's pretty much what people wanted. Yeah, absolutely. Zero as we get the closing bell here in New York and again, you're wrapping up what is pretty much a solid eight weeks of gains that we're seeing for the broader market here, despite the fact that the price action today was a bit tepid as volume was significantly below where it normally is, as this is the last trading day before the Christmas holiday on Monday. And presumably for a lot of folks, probably the last trading day of the year, the Dow Jones Industrial Average lower on the day, only by about 19 points here, but is still going to be higher on the week, the S&P 500 higher by eight points or about 2/10 of a percent. The NASDAQ composite higher by 29 points or 2/10 of a percent. And the outperformer on the day, that's the Russell 2000, once again higher on the day by 8/10 of a percent. All right. Let's take a look at how the sectors performed. When you look at the S&P 500 by two dozen industry groups, you could see that the gainers outnumber the decliners. At the top of the pile is food and staples, and that is up by 1%. Those are really some of the dollar retailers, Dollar General and Dollar Tree pharma companies also doing well. Bristol-Myers among those and commercial and professional services rounding out your top three, the decliners. I mean, there's really one to speak of and that's consumer durable and apparel and that's Nike dragging things down as it came out with a disappointing forecast for next year. Well, I'm going to go ahead and take some of the gainers here. So merger apparently Friday, not merger Monday here, but Karuna Therapeutics ticker symbol. And this is K RTX. You look at this stock rising almost 48%. So this is its best percentage gain actually since August of 2022 there. So this does comes after Bristol-Myers Squibb did agree to buy the schizophrenia drug developer for about 4 billion. So it's a big deal here, and especially when you think about highlighting the drugmakers race to this pipeline holes there and what this could mean for the schizophrenia drug here. Taking a look over at Bristol-Myers, Obama is the ticker symbol on this, up about 2%. So best day actually since not too long ago, December 13th. Another stock I have to point out, though, looking at satellite company, Rocket lab. So this is a company with about a little over two and a half billion in market cap, though. When you look at this stock, though, jumping close to 23%. So its best day since September of 2021. You see this and actually 1a5 actually $515 million deal from a U.S. government contract. And Citi analysts were actually talking about this earlier, saying how it's positive for the stock, given that it's more than doubles of the backlog for its space systems business. And then finally, another one I'm looking at is ANSYS. So this is a software company. The ticker symbols and s on this up about 18%. Best day since April 1999. So a long time since it's last had this big of a percentage gain on a one day basis. But Bloomberg News actually reported that it is weighing options amid a takeover interest remain. Well, just let me tell you about some of the downers in the market. I always get the downers remain. I don't know what that tells about me, but Nike has. Scarlet said, wow, what a massive drop. 12% worst drop since September 22, 2022. Sportswear giant sees full year revenue rising only about 1% and. They are looking to save about $2 billion in savings, a large part by dismissing workers and simplifying their product line. Weaker sales outlook in China and the rest of the world is part of the story here. Also, Cummins, the engine maker, down almost 3%. They said they expect to book a $2 billion charge to resolve allegations levied by U.S. regulators that some of the engines for pickup trucks were equipped with devices to subvert emissions rules. They're talking about 630,000 model year 2013 two 2019 RAM to 2530 500 pickup truck engines. And finally, synopsis not a stock you hear a lot about. It's makes software to help design chips and electronics components. The big one of the big gainers of the day was ANSYS, similar software company that is exploring its alternatives. Some analysts, including one at KeyBanc, thinking that synopsis might be the suitor there. But the problem remain is they might not have the cash to do it. So investors probably worried about either some equity or debt issuance to pay for that deal. Well, definitely a potential deal, I guess, I should say, put on a radar for 2024. Let's check in on what went on in the yield space and quite frankly, not a whole lot. In fact, when you look at all the volatility that we had in yields this week, you would think that we would have seen a dramatic change. But for the most part here, we're pretty much where we were last Friday. The two basis point drop on the day, a four year two year yield here. But we should point out at four, three, two, it's only a smidge below where it was last Friday. Similar story for the ten year yield, which is higher here on the day by less than one basis point here at 3895. But remember, it closed out last Friday, right at 391. So you mix that all together for your 20 and your 30 year yield and you get a sense here that and we've seen this and this was actually brought up a little bit early on Bloomberg Television here Scarlette with one of our guests here. The idea that the market has kind of priced in, I guess all the good, at least for right now, that it thinks is coming from the Fed pulling back and whatever is being baked in with corporate fundamentals here, maybe that will change when we get to January and the volume picks back up for at least right now. I think the status that we saw in the bond market this week, at least on an aggregate basis, kind of shows that I think that's a fair statement to make, especially given the data that we did get today, especially the p e barely caused a ripple in the bond market, which suggests that everyone saw they data was like, yep, that's pretty much what I expected. Everything's inflation slowing down. We're getting the kind of numbers that Jay Powell wants to see. I was positioned for that. Well, something that our team on the equity side, it was a story that I wrote along with Alan and Poppy coming into this week. We're actually looking ahead to kind of look what could potentially be the next catalyst in the coming weeks. Obviously, next week, much lighter week here. What you think about especially nobody on the calendar when it comes to Fed speakers, not surprisingly. But then, you know, lighter on economic data, too. There's some pending home sales. But January 14th is when we'll have the unofficial kickoff to earnings season, obviously, when Jp morgan reports there. But only nine were actually looking at how earnings estimates since last May really haven't budged that much going into 2024. But it is averaging around 11% when you look at the consensus estimate in Bloomberg Intelligence. But I feel like once we get past the next couple of weeks, we'll turn our attention back to earnings season, which feels like it never ends, right? Mike? Yeah, exactly, exactly. But I want to rewind a little bit to something that Romain mentioned about, you know, yields being pretty close to where they were a week ago. What's amazing to me, you know, we had this first the first two year back to back drop in the bond market in basically forever. But if you look at the ten year yield especially, it's basically where it was more or less within a few basis points of where it closed at 2022. So if you look at just the year, you know, return in the bond market, I think, oh, what a boring year, you know, not this insanely volatile year that we saw. So yeah, really, really pretty amazing, really. But that gets that idea too. I mean, obviously we know there are a lot of active investors who have to be active, but of course, for those folks who are a little bit more passive or don't necessarily have to check their prices every day, like I said, if you had just kind of been asleep for the last eight, nine months and then you just take a look at where prices are, you would be like, Oh, okay, nothing really did happen except the narrative has changed completely, But that's only been asleep for like two months. Remain though. Yeah, well, that's fine. But that's kind of the beauty though, of the market here. We were having a debate on Bloomberg Television about Elon Musk latest grievance. And of course, he, you know, for some reason hijacked Vogel's name in his mouth. But we kind of forget that the gift that Bogle, I think, gave to a lot of investors out there was this idea of just kind of, you know, just shut the computer off, set it and forget it, and just let the market do that. Told me once in, well, you know, it'll work through me and Scarlet. And I know you're a big fan, Mike and I have to have to hop here, but I think we were promised you were going to tell us something about a song cycle. You're singing something like that. But anyway, I hope that you'll have a happy holiday weekend. I have lots of candy. I know I will be as well, but that does it for Beyond the Bell. Our cross-platform coverage of the market close on Bloomberg Television. And in Radio, Bloomberg Originals and YouTube. Meantime, this is the last beyond the bell of 2023. So catch us. Same time, same place in January. Bye, guys. All right. Stick with us here on the close. We've got another hour into this program. And of course, given that this is the last trading day before the Christmas holiday on Monday, we're going to get some expert commentary over the next hour on a number of holiday trends from shopping to travel and everything in between. Stick with us. This is Bloomberg. I. All right. Put it in the record books here. The week is over as we head into the Christmas holiday on Monday. So a holiday shortened week next week. So most of the price action that you saw today, this week and in the weeks prior might be as good as it gets. And quite frankly, it was very good. The MSCI All world index up for an eighth straight week. This was indeed a global rally. Remember, just over the past month, we've seen the Nasdaq 100 reach a record high. The Dow Jones Industrial reach a record high. Stocks in Germany and France also hitting record highs as well. Most of the technical levels here, that had been a big point of resistance for the market. Those have all been blown past right now to the upside. If you're keeping an eye on the S&P 500 here, there is some resistance around that 2770 level here, but an all time high around 2790 and change here. The Russell 2000 still playing catch up has a long way to go before it gets to a fresh all time high. But on a weekly basis, a 2.4% gain here and more importantly here to continue outperformance that we're starting to see in the Russell 2000 versus the S&P 500. In terms of return, that's a good thing here. Meanwhile, some other big movers to keep an eye on here on a weekly basis was U.S. Steel. We didn't talk a lot about this, but a lot of concern right now about that bid by Nippon to buy U.S. steel. But Dhanush here is also getting a big boost on the week, up about 10%. And FedEx, that was your biggest decliner on a weekly basis in the S&P 500. We've been talking a lot also about some of the moves that we've been seeing in the yield space. 12 basis points on your two year yield on the week, the Bloomberg dollar spot index week once again for a second straight week. And you take a look at the commodity index. It's been sort of straddling the line between gains and losses. And this is really the yin yang that's been going on right now between what we're seeing in energy and some of the softness there, some of the strength that we're actually seeing and some of the soft commodities in agriculture and really the basket case that's going on right now with industrial metals and in other industrial commodities, until we get a little bit more clarity on what the heck is going on over in China. But you know what's been good Bitcoin and rest of the crypto space, 3.5% gain here on the week. That may not seem much, but you add it up here on an annual basis here and massive outperformance versus the rest of the market up more than 160%. Yeah, Bitcoin really making a comeback in 2023. When you look at the market action today and I know there's not a whole lot to speak of, but one thing stood out, which is specialty apparel retailer struggling following a weak sales outlook from Nike and growth issues in key markets like China. So let's bring in Bloomberg Simone Foxman to give us some more insight. A lot of those consumer names really struggling in the wake of Nike's results. You were listening to the conference call. You look through all the headlines. What really stood out to you? Yeah, I think what stood out to me today, this played out across various markets. It started with Nike's suppliers in Asia and then it transferred to Adidas and Puma in Europe. And then we ended up anything associated with sports, anything associated. Well, not just not any quite anything, but just about everything associated with shoes was all take it took a huge hit in today's trading. You look at like Dick's down 2.7%, Footlocker down almost four, Skechers down two and a half. One name that was not down, however, was Deckers Outdoor. They make Hoka. Remember, this is a running shoe that's a competitor really big those sneakers Yeah there's the interestingly I mean and like like Hoka Lululemon for example some of these brands that have their own particular appeal. Yeah they took they took a little bit of a hit. You look at Deckers down a one and a half percent but they didn't take the 11% hit 12%. I'm glad you brought that up because that's been a big concern for Nike that there are a lot of new entrants into this space that are stealing a lot of the spotlight. But one of the criticisms of Nike, particularly when you kind of put it up against, say, like on holding or HOKA or some of those other brands, is those brands seem to be a little bit more focused. Nike is just a sprawling company in terms of the amount of products it has and brands. And when they made that cost cutting announcement yesterday, they talked about this on the conference call, really trying to streamline what they offer to basically narrow it down. And for Nike, that means you'll have a thousand shoes to choose from a set of 2000. But nevertheless, I'm curious as to whether this was more of a Nike specific story rather than a broader read on consumer spending. You know, I think it was a Nike specific story with people will really see Nike as a standout. Right. And so when something happens to take the shine off of Nike, wow, it really gets it takes a toll on the market. But you did see this, you know, broaden out through the market. Yeah. With the sense that, you know, the consumer may not be as strong as we had initially anticipated. You know, that's when you look at some parts of the consumer space, you look at TJX, you look at Ross stores, you look at Mart, all of those names up today, Best Buy, in fact, even up today suggesting that, you know, this isn't a complete consumer story. It maybe it's hitting a space of the consumer. And if I can. Yeah, go ahead. They pointed out they had a note out this afternoon talking about the distinction between the consumer spending on experiences and consumer spending on stuff. They say that gap has now widened to 500 basis points. People really are still continuing to spend on stuff like cruises. Well, if Katie Greifeld or he or she would tell you that jogging is an experience, but I think a lot of us I don't know if that's an experience, that's a chore. But I got to ask you two fold in today's economic data as well on inflation, which came about as well as anyone could have expected. How does that stack up with what we heard from Nike and from some of those other retailers? I think the message that we've heard from a lot of retailers lately, we cannot continue to pass on price increases. I think we heard that even more from the packaged goods food companies who've talked about not necessarily being able to continue passing on the things that really drove their earnings. I would note as well, you know, when you back out from the inflation element of it, really big holiday week. But for the rest of November season is really much slower. So the fact that we are seeing only modest increases in overall spending, what's that meant? That November was actually quite a slow month until we got to that final week that really pulled us through. All right, Simone Foxman a closer look here at Nike. Of course, that was the big decliner here on the day. Some breaking news crossing the wire right now, this involving open air and its valuation. We're now learning that the company is in early discussions for a new round of funding that would give it a valuation of more than 00 billion. This is according to people familiar with the matter that our Bloomberg reporters have spoken to here. And at that valuation, if it does indeed hit that, it would make it probably the second most valuable private company out there. And Tim Miller joining us on the phone right now to talk a little bit more about this. Hanna, what do we know? Yeah, so this round of funding would make open air worth at or above 00 billion. This is a massive valuation. You know, this is on top of the tender offer for January that would have employees sell shares at a valuation of $86 billion. So as you can see, there's a lot of demand here. Openai is one of the hottest startups right now. It's one of the hottest startups, and it's gone through a lot of turmoil of late, but it seems to have settled down. And now they have a CEO who is back in place, Sam Altman, after being kicked out shortly. What do we know about Microsoft's involvement in in open air going forward beyond, you know, there being an investor in the company? Has has has the support really solidified in the wake of all the drama? Yeah, We understand, you know, Microsoft and Openai are still working closely together. Obviously, you know, there was that tumult with Sam Altman's firing from the board and then his return. So, you know, this is a strong path forward for the company if this funding does come through. You know, as we know, there are still details being finalized here and still things hanging in the balance. All right. Hannah Miller, thank you so much. Really appreciate your joining us. And again, once again, the headline is that Open Air is in talks to raise new funding at 00 billion valuation. The storyline for Open Air is just so fascinating how like it rocketed from one direction to another and now it's kind of like that whole thing didn't happen. Yeah, I mean, this is I don't know about, you know, what to make of this here, too. But we should point out, too, in that reporting, in addition to that broader evaluation, they talk about this this separate project that Sam Altman had, the two year project, which we now know was kind of at the heart of him being ousted. There were some disagreements, I guess, between what he wanted to pursue and what the board thought they should pursue. They're also saying, and according to our reporting, that they're now finding funders for that as well, including from an Abu Dhabi based fund as well. So it's all tied to open air and the board structure. Right. Which was a non-profit organization, was open. At least this part of it is a for profit entity using nonprofit. Too much money sloshing around for that to be here. The headline Open Air and talks to raise funding at a valuation of about 00 billion. All right. A lot more coming up here on the program. We're going to follow the holiday season here as we are headed into what is the Christmas Day holiday on Monday. We have a great line up here. We're going to talk movies with Sean McNulty over at the Angler. We're going to talk about with the CEO of Elf on the Shelf. Remember, Elf on the Shelf? When my son was a little kid, we always put that around. We're going to get her take on what's going on there. I'm going to talk to the Points guy about travel. Eric Rosen, who works there. We get a little bit of insight on that as well. Stick around. This is Bloomberg. 2023. A memorable year for Hollywood, to say the least, from labor disputes and layoffs to changes in leadership at the executive level. But what lies ahead in 2024? Joining us now with more is John McNulty. Sean is contributor at the anchor. So, Sean, clearly the Hollywood strikes was the big story for the industry and it really kind of took over the second half of this past year. And, you know, we all managed to get through it. There's still plenty of stuff to stream on TV. And of course, the movie theaters came out with the Taylor Swift movie, the Beyoncé movie. What does it mean for 2024 in terms of the pipeline for movies? This is where you're really going to see the strikes take hold, where maybe TV in the fall. There was a lot of broadcast TV going on. That's going to kick back in pretty soon in 2024. But for movies, the first half of the year is rather sparse. There are, I think, four major wide release films in January, three alone on Martin Luther King weekend. And then the rest of the month is pretty sparse. You have a few films in February. Marvel is coming back with the Madame Web. So we'll see. The Marvel test will come into into play in February. March has three major, three big titles, and that's about it for March. So it's pretty bleak until, again, Memorial Day, the summer kicks in, but even this year, there is no Big Marvel kick off to summer in early May this year. So the first five months, maybe six months, is going to be really tough for the movie theater business. Yeah, slim pickings. And you mentioned in March, I mean, the movies are coming out June two, Kung Fu Panda, four, new Ghostbusters. I mean, they've got good ideas in Hollywood. They're just remaking the same thing over and over again. And Marvel, of course, had its moment and it seems to have passed. Yeah. I mean, you know, the Marvels was a big for Disney was a big flop in November and now this is bad and Webb this is Sony in The Spy in the Spider-Man universe. So Spider-Man has been a little bit hotter than the other properties in Marvel. So it's a big test. But yeah, it's going to be a real, you know, the fresh ideas, the new IP where these you know, what are these ideas coming from? The summer isn't going to be that much better in that regard. Inside out, too. You have even the Pixar franchises is a sequel this summer. So Deadpool, three things like that. So yeah, I mean, don't you know these they're big movies, but they're not anything new per se. I know there's a question, too. I mean, as we know, a lot of us have gotten used to just kind of watching movies at home on the streaming services and not having to deal with going out to the theaters here. The strategies that the streaming companies are taking, has it evolved beyond what we've seen over the last couple of years? Are they going to continue to push more of these titles to streaming first, or are they still going to try to straddle that line of doing theatrical release and then streaming later? Yeah. Netflix is the only company still holding on to to streaming premieres for films. Everybody else has now transitioned to theatrical first and then go into streaming. The windows vary a bit by bye company, but Apple with Napoleon and Killers of the Flower Moon this fall, they put them in studios in a film called Argyle, another $200 Million movie from Apple coming out in February. That's coming out from Universal. They partnered with Sony for two more films this summer. So they're they've embraced theatrical first and then a window on Apple. Amazon with MGM has certainly embraced the theatrical window again there as well They haven't yet Candy Cane Lame Eddie Murphy which came out in December, but most of their bigger films are going theatrical first. So people have re-embraced the windows has been big term. So Netflix is the only one that's really double down on streaming films, you know, only being on streaming. So yeah, we'll see how it does. Do you think that the theaters so that I mean there was always kind of this I guess what do you call it, just a kind of this this big moment here where you know, when a new movie would come out, everybody would rush out to the theaters to see it. And you don't really get that now because now these streaming services are so fragmented, so you don't necessarily get that. But I even think about the holidays. There was always that big movie that would come out on Christmas. We'd go see I know we got Color Purple and a couple of other things, but again, that's something I'll just wait till it comes out on streaming here is that era just over as you talk to I mean, you know that it is about evangelizing for sure. And people just don't go to the multiplex on a Friday night and see what's playing. And, you know, that's that that's done. So now at this point, you have to create events around this. We have a Mean Girls musical coming out early January where they put the film Tick Tock in October. They're trying these, you know, unique things to get this to generate interest in this. So, you know, demographics vary. And then a big thing with this fall, though, was the younger demographics did come out for even, you know, big movies from Ridley Scott and Martin Scorsese. You know, 60% of the audience was 18 to 34 year olds showing up. So there is a contingent of this that, you know, it's it's there is, but they're showing up. All right, Sean, great stuff. At least there's something to look for. The mean girls, that doesn't look bad here, I guess. Mean girls. It's a musical. It's a cautionary tale. It's an inspiration, depending on your perspective. It's a generation. Sean McNulty, contributor from the Anklet. Gear breaking down all your movie going habits. Coming up here, we're going get some insight on consumer spending with the CEO of the company that runs Elf on the Shelf. This is Bloomberg. The stock market rally here in the U.S. and quite frankly, worldwide continue for an eighth straight week. The S&P 500 only up fractionally on the day by about 2/10 of a percent, only up fractionally on the week as well here. But I think a lot of folks will take it. And why? Well, that's because the rally really did broaden out. Remember, at the start of this year and really all the way through July, we were just talking about the Magnificent Seven. That small cohort of stocks that really was hogging the entire spotlight. And if those stocks didn't rise, and guess what? The rest of the market didn't? Well, at least for now, it appears that might be behind us. We saw outperformance once again by the Russell 2000 relative to the broader market for yet another week here. And when you look at all the individual names here, they got bids on the weak and more importantly, some of those individual names and the technical levels that they've broken through to the upside. There is some optimism heading into 2024 that the monster rally, the unexpected rally, to be sure that we saw in 2023, Scarlet might actually have been warranted. All right. We will continue to keep an eye on those markets for you and, of course, how people are pricing in what comes ahead in 2024. We know that for 2023, consumers spent happily, they boosted the economy with revenge travel. Taylor Swift tickets or in remains case Beyonce tickets and expensive restaurant meals. The thing is a lot of it was funded with debt. So how does that set us up for 2024? Bloomberg's Paulina Chaparro has been covering the story and she joins us now. When we say it's been funded with debt, give us some numbers around that to better illustrate that development. Yeah. So to put some numbers to those figures, credit card balances in the U.S. have ballooned to 1.08 trillion in the third quarter of 2023. Now that's the highest total. And data going back to 2003 from the New York Federal Reserve. And that's even before the holiday shopping season started in earnest. Those bills are mounting at a time when the April credit cards are also hitting record highs above 20%. Now, if we're looking at the total household debt in the U.S., that also reached a record high of 17.29 trillion in 2023. This gets to an idea, though. I mean, we're talking about aggregate numbers here. When we start to look at ratios relative to household savings ratios, relative to debt servicing costs here. Does it also look as extreme and as dire as maybe that chart that we just saw? So obviously, we're seeing that credit card balances and household debt is reaching a record high. But as of right now, the ratio of credit to household personal income isn't at panic levels quite yet. So that's but that that's not to say that this is something that economists and experts will be watching closely as we head into 2024. So give us a sense here. Then later when we start to talk about whether I guess there is enough in the tank here for consumers to be spending here. Is this going to be something that's broad or are we going to look at a situation where it is just kind of the wealthier folks out there who are going to be kind of keeping consumer spending alive? Yeah, So actually, we already saw that in 2023. I know there's been a lot of talk of the bifurcated economy. So a lot of the consumer spending that we saw in 2023 was predominantly from people who have higher incomes and they were able to hold on to some of the pandemic savings. People on the lower end of income spectrum, however, blew through their pandemic savings and, you know, increasingly turn to credit cards and other consumer credit to be able to make ends meet and to afford those ballooning bills that we're still seeing in 2023. Do we have any sense of how close people are to maxing out their credit limits? I mean, is there room there to continue borrowing and spending, or are people pretty much there and have to just start servicing that debt and and cutting back? So there are pretty early signs that consumers are reaching their financial limit. We're starting to see personal spending cooling from the highs in 2023. And, you know, banks are reducing credit limits and closing unlike unused lines of credit. So that's an indication that consumer debt won't play the locomotive role that it did in driving spending this year. And so that basically leaves wage growth and pandemic savings to continue funding, you know, the spending levels that we've seen. But nearly 40% of Americans have drained those savings. So there's little left to turn to except for buy now pay later services, which we've seen consumers turn to this holiday shopping season already. A lot of folks, of course, always feel the pressure to continue spending this season and in many ways for good reasons. Polling of the journal there a closer look at some of the consumer spending trends here. And this is as does season where folks not only spend for themselves but they spend for others. And you know, for a lot of us, that is the tradition makes us feel good here. I love Christmas and so does our next guest. At least I hope she does. We want to talk to her about the state of the consumer spending and toys in particular. Her name is Krista Pitts. She's the co-founder and CEO of a company called Luma Stella. You may not have heard of that name, but you've certainly heard of the Elf on the Shelf. What was once a single family tradition has now turned into a tradition for millions of families worldwide, at least those of us who have kids and small kids. And we run around every Christmas, Krista, hiding those things out. My son's a little too old for this now, but we did this for several years. And I do want to just kind of talk about just how viral this has become, because this really did start as you and your family just doing this alone and then turning that into a business that is now sold. I don't know how many millions of these are Elf on the Shelf adults. Yeah. Well, thank you so much for allowing me to talk about my family tradition, which was indeed the root of the Elf on the Shelf. So when I was a small child, my mom had an elf from her childhood who had come now to our home and my sister and my brother and I named that elf Fixby. And every morning from Thanksgiving to Christmas, the elf would fly to Santa, provide a report and fly back to our home and perch in a different spot in the house. And so for us, what people now know is the Elf on the Shelf was a family tradition that was magical. It was full of law and it brought such wonder to our family. And that became the seed of what years later would become the elf on the shelf tradition. And as you can see, the Luma Selick company has been quite busy this holiday season and making sure as many scandals of pets and of mates can be adopted as possible. Well, let's talk about the expansion of that business. This is obviously gone beyond just selling dolls here. I mean, anyone has seen some of the partnerships that you have with the various products, catalogs, Netflix and a few others here. When you sort of approach or I assume you were the one their approach or your company was the one that approached those companies or did they come to you? What was the conversation like to get those partnerships up and running? A combination of the two. You know, our hero brand, the Elf on the Shelf, is already incredibly popular during the holiday season, as you might imagine. But we took a very hard look at our corporate vision several years ago, and it went from our elf on every shelf to really telling the stories of Santa is North Pole and how do you best do that? It's about leaning into partnerships. It's about broadening your consumer product offerings, and it's also about adding in experiences in entertainment based content. So in our case, we started leaning into the partnerships that you mentioned, some of them approaching us, Hollywood being one of them. So the Netflix relationship made great sense. We actually have an originals deal with them as well as them having the option on our for other animated specials, three around our pets and one around our classic property and Elf's story. So we're really blessed to have those partnerships because it allows you to do so much more and to be focused on so much more than just that one consumer product against our hero brand. And with these partnerships are able to continue to drive that content. You have middle grade novels related to Elf on the Shelf coming out. You also have the back story of the Scout elves and you'll introduce other characters, so you're driving the content. I'm wondering how you and how with Elf on the Shelf being such a big hit on social media, you see a lot of the your fan base, your customers also driving the content as well. What are they doing with the product that maybe you are incorporating as well? Yeah. So as you mentioned, we have that middle grade's chapter book coming out in partnership with HarperCollins. And as we have grown this company, what we saw was children were calling us directly. They were going to social media and asking us questions. We get millions of letters and calls from around the world. And what we discovered was that kids and families are looking to us to be the seasonal authority. What do the elves eat? What happens when they're back at the North Pole? How did they become magical anyway? What what is the you know, what are what are the elf pets? And so out of those questions, we've been able to now just start answering it. And that middle grade's chapter book will be about that back story, answering many of those questions and leaning in to the content that we've already created and the content we have yet to create. Thank you for explaining that. That's really fascinating how there's that engagement, that give and take. You mentioned seasonal authority. Clearly when it comes to Christmas, people look to that elf on the shelf. How does it feel to be tied to December 25th? Is that something that you want to expand beyond just the Christmas holiday? And do you do that with the Elf on the Shelf or do you do that with another character? Well, we have a wide variety of characters who have come out of our enchanted world of Santa Claus. And one of the best examples of that is our hero character, Nora. So Nora is in our Elf Pants Arctic Fox special that's on Netflix. But nor is also a key character in our Elf Pets consumer product, the Arctic Fox. And she is the mother of all the Fox Cubs and she's got this gorgeous tail and she can create snow with her tail and she can spark the northern lights, which actually pause time and allow Santa to travel the world in one night. And so that's a great example of a core character that's already been introduced. But there's a lot of ways we can continue building on that world, which makes the company. Far more year round because Nora is around all the time. It's also become a much more of an international company as well. It has. We've grown from one product. We started with 5000 units of that core hero brand, the Elk on the Shelf, and we're now in 25 different countries were available in multiple languages and we're continuing to grow with over 75 different licensing partners. All right. Thank you so much, Krista Pitts, for sharing your story, co-founder and co-CEO of the Loom, Estella Company. Of course, they are the company behind the Elf on the Shelf. My kids were a little bit too old for it, but it's a big hit with my nieces and nephews. Coming up, millions of travelers are taking to the planes, trains and automobiles for the holiday travel weekend. We'll talk about the trends that Eric Rosen of the Points Guy is seeing and what it's how it sets us up for the new year. This is the clothes on Bloomberg. And. All right. Ahead of the Christmas holiday, we've talked about holiday entertainment, going to the movies or maybe just staying at home and chilling. We've talked about consumer spending and of course, we talked about that Elf on the shelf. Scarlett. You never going to find where I put it on your desk today. Now, let's move to travel, because there are a lot of folks who are already dealing with the big travel crush here and a lot of folks who still have yet to actually get started. Eric Rosen, director of travel content at the Points Guy, is joining us right now to discuss some of the trends he's seeing. And let's start off, first of all, with the overall trend, Eric. I mean, I know a lot of us are kind of forced to travel because, you know, our families would disown us if we didn't. But are we looking at sort of travel levels that are kind of commensurate with what we would normally see this time of year? Absolutely. According to triple A, we're going to see about 115 million Americans get on the road or to the skies. That's a little less just a tiny bit less than in 2019. But we're basically back to pre-pandemic levels and flights are breaking records. And the airlines expect about 2.8 million passengers to pass through U.S. airports each day this holiday season. So we're looking at nearly 40 million passengers. So things are going to be quite crowded and. Well. And how are the airlines going to deal with that? Because, of course, there was a lot of discussion, of course, about what happened last year with Southwest and the big fine that they got. I mean, are the airlines are they have things a little bit more under control in terms of dealing with this big influx of passengers? The good news is, is that they seem to they seem to have worked out some of their operational wrinkles. As you mentioned, Southwest got issued with a huge fine this week. And I'm sure other airlines are keeping a close eye on that. There have been operational difficulties with other carriers like American and Delta, but for now, the weather seems to be cooperating despite some big storms on the east and west coasts. And we've only seen about 70 cancellations here in the U.S. today. So it's pretty much smooth sailing now. That doesn't mean the rest of the holidays will go as smoothly. But this is a really great start and hopefully means that issues won't snowball over the next couple of weeks. Yeah, and of course, the key caveat there is depending on the weather, I think about what happened with Southwest. Was it last year where people were stranded for days right around the Christmas holiday and Southwest just didn't have the infrastructure to be able to shuttle them or get them backup flights. What is your confidence in Southwest being able to manage through something like that if there should be a weather emergency this time around? Well, understandably, they've been messaging quite a lot. The solutions that they put in place, they put together a task force earlier this year after that meltdown to figure out exactly what had gone wrong and how to work out some of those operational issues. They have upgraded their technology, which was woefully behind last year. So now it's a bit more up to date. And then they've also positioned their crews in such a way that if something is snarled in one part of their network or in one city, it won't have the cascading effect that it did last year. So they have more people in more places to handle things that might go wrong or things that go awry. Okay. And of course, Erika, you at the points guy, which means, you know, you are the authority on how to use credit cards and loyalty programs and the points that we all accumulate when we spend money swiping our cards. What can you tell us about the value of those points this year? Have they been steadily devaluing? And is the outlook in 2020 for for the airlines and for other merchants to continue to give us less value for them? Unfortunately, as we always say at the points guy, you don't accumulate value with mileage currencies. They're not a great long term investment. So if you earn them, think about ways that you can redeem them sooner rather than later. We haven't seen anything major, major happening in terms of mileage, devaluations. We did see a major change, however, to elite status and how you earn it. With Delta back in September, as you might remember, and there was a huge amount of backlash. They made those thresholds for earning status require a lot more spending. Chances are other airlines are looking at how that's going to go for the next year for Delta and considering similar moves themselves. In terms of the mileage programs themselves, though, you know, airlines tend to make incremental changes to them, but they add up over time. You know, earlier this year, Alaska devalued certain awards, too. So I would just say, depending on where you have your points and Miles, and this holds true for hotel programs as well, which have dynamic pricing. Now think about how you can spend them in the short term rather than hanging on to them for that dream trip later. Well, I'm glad you brought up the Delta thing, and I think a lot of people are outraged by it. But underneath it here, there was some rationality to what they were doing. And I want to get to an issue that has been really close to home for me, and that is that for those folks who have bought into a lot of these programs, you do that because there are certain perks beyond just the points of mileage as access to lounges and other things like that, priority boarding. But if everybody has the same card, everybody has the same membership program here, then essentially the convenience that you eventually were paying for starts to become inconvenient. And it does appear that what Delta tried to do and some of the commentary verve with American Express trying to limit who can actually get into their lounges here seems to be addressing a problem that I think we all saw firsthand. Over the last couple of years? Absolutely. If you've stood in line for a Delta Sky Club, you have seen that problem firsthand. We also say, you know, if everyone's elite, no one's elite, if everyone's getting those perks, they're not really something special that you have to work towards. So airlines do have that in mind. Because of the freezes on elite status expiration during the pandemic. A lot of airlines saw their ranks of elite fliers start to swell a lot. And this is one way that the airline is trying to get those numbers back down to the people who are actually flying and spending on the airline. But it seemed to have gone too far. As you mentioned, it provoked a huge consumer backlash, including from their most loyal customers and their highest spenders. So the airline locked those changes back. The other thing that they did wrong, in my opinion, is that they announced them in September for changes that would take effect in January, not giving people enough time to adjust their strategy. Yeah. Yeah, because I'm sorry. Go ahead, sir. No, that would that would make a lot of people angry because, you know, everyone's plotting out how they're going to redeem those points. Speaking of point redemption, Eric, the U.S. Department of Transportation, according to reports, is now looking into frequent flier programs of major U.S. airlines. What does that mean in practice for how these programs are run and whether there is likely to be any changes? How far along in this investigation are they based on your understanding? Not far along at all. Exclusive news just came out yesterday via Reuters that Senators Dick Durbin and Roger Marshall had sent a letter to the Department of Transportation and the Consumer Financial Protection Bureau asking them to tell the Senate how they investigate frequent flier programs or look into them when there are complaints. I believe this was probably sparked by those Delta changes as well because there was such a big public backlash. But we are in the very early phases and it seems like what the investigation is doing so far as likely to do is to understand how airlines make those changes to their programs, evaluate the time frames and the drastic nature of them sometimes, and really think about what that means for consumers. Because, you know, all of us have been in that situation where we've spent a year racking up tens of thousands of miles, only to have a devaluation come as a surprise. And then we don't quite have enough miles for that award ticket that we had our eye on for months and months. So I think that's what they're aiming to prevent. All right, Erika, this is a great conversation and great to catch up with you. Eric Rosen is the director of travel content at the Points Guy and Scarlet. You know, I asked that question because, I mean, the lounge thing really irked me for a lot of reasons because you're paying the premium for this stuff and then you get there and either it's full or the holidays. Thank you. Yeah, happy holidays. And then you can't he still there is off the shelf tickets. So there too. Wow. Or did I just hear that? No, no. Okay. But. But it gets to this idea, though, too, of, you know, you can't really offer a premium product without kind of the I guess, the premium veneer that goes along with it. Right. That's not the point is not to sound snobbish, but there's a reason why people pay for that. But if everyone has it, as Eric pointed out, if everyone's elite, then no one's really. Right. You're just at the gate as opposed to in a lounge where you get access to drinks and some snacks. It's a good point. I've tried to go to a lounge only to be told like we're completely full and, you know, you're kind of like. But that's the whole point. All right, stick with us. We need to take a commercial break so I can get these voices out of my head. But when we come back, there's another chance for what to watch next week. Yes, there is another week left here, please. This is Bloomberg. Well, as we wrap up, what is kind of going to be probably be the last big week for the year here, the markets, let's set you up for what to watch next week. And we start off with, well, a holiday. It is Christmas on Monday, so maybe take that time. You don't want spending with your family to go see a movie. Yeah, you can go spend the time in the movie theater with your family or not. Talk to them. We've got a bunch of movies opening up Aquaman, The Boys in the Boat, The Color Purple and Ferrari. I feel like those movies have already been out because I've seen the trailer a number of times. Yeah. What about migration? I don't know. You got a lot to choose from here. I don't know if any of them are good, but. Well, I guess we'll find out after the Christmas holiday. A little bit more going on as well. Did you know Boxing Day is on Tuesday? Yeah, but how are you going to spend it? No. Okay. Well, I mean, if that day you're off that day. Okay, Well, I like to treat my servants to something every day. Every Christmas, I'll wake into the providence of Boxing Day and Wednesday. Guess what? The Bank of Japan is going to do something big. Yeah. The summary of opinions from the December meeting where they didn't do anything. Okay, you put in here, Put me to sleep here. Is there any good here? Jobless claims, wholesale inventories here in the U.S. this week With that Last Thursday. On Thursday. Yeah. Jobless claims is another one to kind of wrap up the year of this incredibly stable job market, labor market that has held up despite all those interest rate increases. And of course, next Friday is the last trading day of the year. No matter what happens next week, unless something colossal happens, you're sitting on some pretty healthy gains for the year. Thank you for being with us. Merry Christmas to everyone. You'll see Scarlett and I next year.

Channel: Bloomberg Television

Views: 19,087

Keywords: Andrew Jeffrey, Bryce Doty, Kara Murphy, Katherine Greifeld, Kathy Kriskey, Linda Duessel, Romaine Bostick, Scarlet Fu

Id: Br-1OB7zXco

Length: 141min 54sec (8514 seconds)

Published: Sat Dec 23 2023