JONATHAN:
YOUR COUNTDOWN TO THE OPEN STARTS NOW. >> THIS IS BLOOMBERG THE OPEN
WITH JONATHAN FERRO. JONATHAN:
LIVE FROM NEW YORK, A CMIS LIFELINE IN CHINA. THE U.S.
ECONOMY LOOKING WORSE NOT BETTER AS THE FED ATTEMPTS TO
SECURE A SOFT LANDING. GLOBAL DIVERGENCE. >> IT DEPENDS WHERE YOU LOOK
ACROSS THE MAJOR ECONOMIES. >> ECONOMIES ARE STARTING TO
DIVERGE. >> IT HAS BEEN PROMISING IN THE
DATA. >> THE SOFT LANDING SCENARIO IS
BEING DISCUSSED A LOT. >> GROWTH I WOULD SAY IT IS
MUCH BETTER COMPARED TO EUROPE. >> EUROPEAN GROWTH IS FLAT. >> EUROPE IS WEAKER. >> I DON'T THINK IT'S A GREAT
SET UP. >> WHAT WE'VE SEEN FROM CHINA
IS THIS CONSTANT CHINA HEADLINE DEVELOPMENT OF MORE STIMULUS. >> CHINA RECOVERY STORY HAS
DONE NOTHING. TOM: JOINING US IS MICHAEL COLLINS
AND TIFFANY WILDING. BETWEEN THE UNITED STATES,
EUROPE, AND CHINA. TIFFANY: PMI'S HAVE STARTED TO DIVERGE
WITH EUROPE BEING A LOT WORSE. WE KNEW THAT CHINA ALSO THERE
WOULD BE DOWNSIDE RISK. THE KEY WITH CHINA IS STIMULUS
THAT THE POLICYMAKERS WILL INPUT INTO THE ECONOMY. IT IS GOING TO BE MUCH MORE
TARGETED AND MUCH MORE WIGGLE ROOM FOR DOWNSIDE RISK ON
CHINESE GROWTH GOING FORWARD. THE WEAKER GLOBAL BACKDROP, THE
UNITED STATES HAS BEEN LOOKING RELATIVELY RESILIENT.
CERTAINLY AN INTERESTING DYNAMICS HAPPENING IN THE
GLOBAL ECONOMY. JONATHAN: WE ARE TALKING ABOUT THE FED
ENGINEERING SOFT LANDING, GERMANY IN RECESSION.
WHAT ARE YOU FOCUSING ON? MICHAEL:
THE DIVERGENCE PEOPLE ARE TALKING ABOUT IS GOING TO BE
HARD TO BE SUSTAINED. EUROPE AND CHINA WILL HAVE TO
BOTTOM OUT AND RECOVER OR THE U.S.
WILL LIKELY BE DRAGGED DOWN A LITTLE BIT.
WE ARE FOCUSED ON THE BOTTOM UP, WHAT IS HAPPENING WITH
CORPORATIONS, CONSUMERS, ACTIVITY FROM THE BOTTOM UP.
IN THE U.S., THE SIGNS ARE SO PRETTY GOOD, PROBABLY MORE
COMPANIES THAT ARE DOING WELL. GM REPORTED THIS MORNING AND
THEY KEEP RAISING PRICES ON CARS, INCREASING THEIR
FORECAST. THERE ARE PART OF THE U.S.
ECONOMY THAT CONTINUE TO SHOW TREMENDOUS RESILIENCE. JONATHAN:
HOUSING RECOVERING. YOU MENTIONED GM RAISING THEIR
OUTCOME AND 3M RAISING THEIR OUTCOME.
HAVE YOU BEEN RAISING YOUR OUTLOOK FOR THIS YEAR AND
BEYOND? TIFFANY: YEAH, CERTAINLY THINGS HAVE
LOOKED A LOT BETTER THAN WITHOUT THEY WOULD AT THE
BEGINNING OF THIS YEAR. I WOULD SAY THE U.S.
ECONOMY FACES HEADWINDS INTO THE BACK HALF OF THIS YEAR.
THE FIRST ONE IS THE FACT THAT STUDENT LOAN PAYMENTS ARE GOING
TO RESTART. WE ARE SEEING RESEARCH THAT
SUGGESTS THE PEOPLE THAT DIDN'T HAVE TO MAKE THE STUDENT LOAN
PAYMENTS ACTUALLY TOOK ON MORE DEBT THINKING THEY NEVER WOULD
HAVE TO. THOSE ARE INTEREST COSTS
CONSUMERS THAT THEY WILL HAVE TO WHETHER -- WEATHER.
EARNINGS SEASON HAS BEEN RELATIVELY GOOD NEWS BUT CREDIT
CREATION FROM REGIONAL BANKS TO THE BROADER ECONOMY IS SLOWING
THAT WILL WEIGH ON THE SMALL AND MIDSIZE BUSINESSES WHICH
ARE THE GROWTH ENGINE FROM A LABOR MARKET PERSPECTIVE.
WE THINK THESE THINGS IN THE BACK HALF OF THE YEAR COULD
WEIGH ON THE U.S. ECONOMY AND RESULT IN SNOWING
-- SLOWING. JONATHAN: WE SEE THIS FROM THE IMF,
RAISING THEIR OUTLOOK FOR GLOBAL GDP.
MICHAEL MCKEE HAS THE STORY. MICHAEL M.:
THE UNITED STATES NOT DOING AS WELL IN 2023 AS THEY HAD
THOUGHT. WORLD GROWTH COMING IN WENT TO
PERCENT HIGHER. THE U.S. IS ONLY AT 1.8%.
IN 2024, THE REST OF THE WORLD GROWS FASTER FOR THE MOST PART.
CHINA LITTLE SLOWER. DOES ANYONE CARE WHAT THE IMF
THINKS? THE FED WILL MAKE ITS OWN
DECISIONS ABOUT WHAT IS HAPPENING BUT HERE IS THE
DIFFERENCE BETWEEN WHAT THE IMF SEES FOR THE U.S.
ECONOMY AND THE FED. I THROW IN THE BLOOMBERG
ECONOMIST SURVEY AND THE IMF IS MUCH MORE OPTIMISTIC ABOUT THE
U.S. FOR 20 PUTTING THREE -- 42023
AND ABOUT THE SAME AS 2024 THE ECONOMISTS ARE MUCH LESS SO FOR
2024. TAKE A LOOK AT WHAT THE FED
THINKS IN TERMS OF THE INFLATION RATE GOING FORWARD
AND UNEMPLOYMENT RATE. THE FED IS MUCH HIGHER IN MOST
CASES, EXCEPT FOR IN 2024, ECONOMISTS THINK WE WILL SEE A
HIGHER UNEMPLOYMENT RATE. AT THIS POINT THE FED HAS ALL
THESE NUMBERS TO DEAL WITH AND THE POSSIBILITIES OF A LOT OF
THINGS GOING WRONG IN THE BACK HALF OF THE YEAR.
IT WILL BE AN INTERESTING MEETING.
IT WILL BE INTERESTING TO SEE WHAT JAY POWELL HAS TO SAY
ABOUT IT. JONATHAN: MICHAEL MCKEE ON THE IMF
FORECAST RAISING THEIR OUTLOOK FOR GDP, SUBTLE NUANCES. TIFFANY, YOU TALKED ABOUT THE
PROSPECT OF THE SECOND HALF AND STUDENT LOAN PAYMENTS ARE WHAT
PEOPLE ARE FOCUSED ON. WE HAD THE DISINFLATIONARY
TREND IN THE BACKGROUND. FROM YOUR PERSPECTIVE CAN YOU
IDENTIFY HOW MUCH OF THAT DECELERATION THAT WE HAVE
WITNESSED HAS BEEN A CONSEQUENCE OF THE TIGHTENING
OF THE LAST 12 MONTHS FROM THE FEDERAL RESERVE. TIFFANY:
FRANKLY I THINK VERY LITTLE OF IT HAS.
INFLATION IS ALWAYS A LAGGING INDICATOR.
INFLATION IS LEADING IN THIS CYCLE.
INFLATION COMING DOWN WITHOUT AN INCREASE IN THE UNEMPLOYMENT
RATE WHICH SHOULD JUST THE REASON WHY IT IS COMING DOWN IS
WE ARE GETTING PANDEMIC RELATED SHOCKS TO INFLATION.
WE THINK THAT WILL DEFINITELY BE THE CASE GO INTO THE --
GOING INTO THE FOMC MEETING. FROM A DECLINE IN USED CAR
PRICES, INCREASED THROUGHOUT THE PANDEMIC, YOU HAVE SHELTER
PLACES THAT WILL MODERATE. THE KEY QUESTION IN OUR VIEW IS
WHAT DOES WAGE INFLATION DO BECAUSE OF THAT REMAINS A
STICKY WHICH WE THINK IT COULD AS LABOR MARKETS REMAIN TIGHT,
YOU CAN SYRIAN ACCELERATION IN CORE INFLATION INTO 2024.
JONATHAN: WILL THE FED TOLERATE THAT?
YOU AND OTHERS SUGGEST MAYBE THEY WILL TOLERATE TO POINT
SOMETHING, NOT MAYBE THREE OR FOUR. TIFFANY: CERTAINLY THEY COULD TOLERATE A
LITTLE BIT ABOVE TARGET INFLATION.
THE QUESTION IS HOW MUCH. THEY WILL NOT WANT TO PUSH THE
UNEMPLOYMENT RATE HIGHER IF YOU DO GET INFLATION RUNNING ABOVE
2% OR THEY COULD CONTINUE TO FORECAST MOVING BACK TO TWO AS
A RESULT OF MONETARY POLICY BUT IT NEVER REALLY GETS THERE.
FOR THE NEAR TERM TRAJECTORY OF THE FED, THEY WILL BE HIKING IN
JULY AND MAYBE THE BACK HALF OF THIS YEAR AND MAYBE NOT BECAUSE
THE INFLATION PICTURE COULD LOOK GOOD.
IT DOES NOT NECESSARILY LOOK LIKE THEY WILL CUT RATES UNTIL
THEY SEE MORE EVIDENCE THAT THE LABOR MARKET IS WEAKENING AND
THEY ARE LESS WORRIED ABOUT THE STICKY WAGE INFLATION TRENDS.
JONATHAN: WENT TO THE LAGS START TO BITE?
MICHAEL: THEY ARE HITTING THE MOST
LEVERED, SUSCEPTIBLE CONSUMERS, CORPORATIONS, ANY COMPANY WITH
A FLOATING-RATE LOAN AND IT HITS HARD.
IT IS ALREADY HAPPENING AS ALL OF THIS DEBT WHICH HAD BEEN
REFINANCED OVER THE LAST COUPLE OF YEARS AT LOW RATES START TO
ROLL OVER AND THAT STARTS TO BITE AND YOU ARE SEEING WITH
THE AVERAGE LIFE OF THE HIGH-YIELD MARKET, IT IS SHORT
RIGHT NOW. THEY PUSHED OUT MATURITIES BUT
THEY WILL HAVE TO PAY THE PIPER OVER THE NEXT FEW YEARS.
I DON'T THINK THE FED IS GOING TO ALLOW INFLATION TO STAY
ELEVATED. THEY WILL KEEP THE FUNDS RATE. WAY OF INFLATION THEY WILL
MAINTAIN A HIGH POSITIVE FUNDS RATE FOR POTENTIALLY A LONG
TIME. WE WILL DISCUSS WHAT IT MEANS
FOR THE EQUITY MARKET. THE PROSPECT OF DEFAULT
CLIMBING FROM HERE, IT IS WRITTEN THIS MORNING THAT THE
MARKETS ARE TAKING THE RISE IN DEFAULT RATES FOR HIGH YIELDS
AND LOANS SERIOUSLY. MANY INVESTORS ARGUED THIS IS A
NORMALIZATION OF THESE COMPANIES AND THEY ARE
COMPANIES KNOW THAT HE HAS HEARD ABOUT.
THE REALITY IS THE CAPITAL IS HIGHER, I COST OF CAPITAL IS
HOW IT MONETARY POLICY WORKS BY MAKING IT MORE DIFFICULT TO GET
FINANCING. THEY END WITH THIS LINE.
ALL INVESTORS SHOULD HAVE OF YOU ON HOW HIGH THEY THINK
DEFAULT RATES WILL GO DURING THIS CYCLE.
DO YOU HAVE A VIEW ON THAT AND DOES THAT BACKUP WHY YOU ARE
UNDERWEIGHT IN INVESTMENT GRADE AND HIGH-YIELD? MICHAEL:
WE HAVE A VIEW AND THAT IS THE DEFAULT RATE IS OF FOREGONE
CONCLUSION AND THE QUESTION IS HOW HIGH DOES IT GET AN IT GOES
FROM 1% TO 2% AND IT IS GOING TO GO TO THREE OR 4% WHICH IS
CLOSE TO AND SLIGHTLY BELOW THIS HISTORICAL AVERAGE.
AND WORLD WHERE THE DEFAULT RATE IS AVERAGING LET'S SAY 4%
A YEAR , THE AVERAGE SPREAD ON HIGH-YIELD MARKET YOU NEED TO
COMPENSATE FOR THAT IS 400 BASIS POINTS OVER TREASURIES.
TODAY THAT SPREAD IS AROUND THERE.
IF YOU HAVE THE VIEW THAT THE RISE AND FALL RATES WILL BE
BENIGN, THE MARKET IS A LITTLE EXPENSIVE RIGHT NOW.
THE RISK IS THE DEFAULT RATE GOES TO FIVE OR SIX EVEN FOR
SHORT PERIOD. WE ARE IN THE BENIGN DEFAULT
SCENARIO CAP. JONATHAN:
GOING INTO THE FEDERAL RESERVE MEETING TOMORROW.
EQUITY MARKET SLIGHTLY NEGATIVE ON THE S&P 500. ABIGAIL:
BREAKING NEWS. AMAZON MANY ACQUISITION PRICE
TO $51.75 A SHARE REFLECTING THE IROBOT ENTERING INTO A $200
MILLION FINANCING FACILITY TO FUND THE GOING OPERATIONS OF
THIS NEW PRICE. THE DEBT ON IROBOT IS ON PACE
FOR ITS WORST THIS YEAR. GE PUT UP A BLOWOUT AND LIFTED
THEIR OUTLOOK ON SURGING AEROSPACE DEMAND.
PLUS THE REBOUND IN RENEWABLES. RTX CHANGED THEIR NAME FROM
RADEON TECHNOLOGIES. THAT STOCK IS SLIDING
SIGNIFICANTLY, 9%. THEY DISCLOSED AN ENGINE DEFECT.
FINALLY SPOTIFY DOWN 6%. THE REVENUE OFFSET SUBSCRIBER
FORECAST. THE PRICE, THEY DIDN'T GET IT AND THE STOCK IS
DOWN. JONATHAN: COMING UP, CHINA'S LATEST
INGLES EFFORTS FEELING A BIG RALLY. >> CHINA IS ONE OF OUR
PREFERRED MARKETS. WE THINK EMERGING MARKETS AND
POLICY STIMULUS IS IMPORTANT. LOW EXPECTATIONS COMING INTO
THE MEETING. JONATHAN: THAT CONVERSATION UP NEXT. >> CHINA IS ONE OF OUR
PREFERRED MARKETS WITHIN EMERGING MARKETS.
WE THINK ABOUT POLICY STIMULUS AND IT IS IMPORTANT AND HAS LOW
EXPECTATIONS COMING INTO THE MEETING. I WOULD SAY THE OVERALL
MEASURES WE GOT WERE THE DETAILS WILL COME THROUGH IN
THE NEXT FEW WEEKS AND ARE IMPORTANT TO LOOK OUT FOR.
JONATHAN: HANG SENG REPORTING THE BIGGEST
GAIN SINCE SEPTEMBER. STRONG THIS LEVEL IN MORE THAN
A WEEK. OVERALL WE BELIEVE THIS EXCEEDED INVESTOR EXPECTATIONS
AND EFFECTIVELY GIVES THE GREEN LIGHT TO PROVIDE FURTHER EASING
MEASURES. WHAT KIND OF A MEASURES CAN WE
EXPECT IN THE NEXT FEW WEEKS? EN DA:
IT IS THE TONE THAT IS EXCITING INVESTORS.
HE BROUGHT EXPECTATIONS WE WILL SEE MORE MEASURES TO BOOST THE
HOUSING ARE GET TO MAKE IT EASIER FOR DEVELOPERS TO FINISH
AND BUY NEW HOMES. THERE ARE AFFECTED TO LET THEM
SELL BOUNCE AND ON THE CONSUMER SIDE, MEASURES TO BOOST
HOUSEHOLD SPENDING ON APPLIANCES AND FURNITURE.
THE CRITICAL THING THAT CAME OUT WAS A LINE THAT WAS TAKEN OUT HINTING WILL STATE.
IT IS THE TONE BUT MAYBE THE DETAILS WILL COME IN A COUPLE
OF WEEKS. JONATHAN: A FEATURE OF THIS CONVERSATION
IS THE DIFFERENCES EMERGING BETWEEN CHINA, EUROPE AND THE
UNITED STATES. THERE IS A DIFFERENCE BETWEEN
WHAT CHINA IS GOING THROUGH AND WHAT THE U.S. IS EXPERIENCING. ENDA:'S
FOAM AND SHORT WE ARE NOT SEEING THE SPILLOVER FROM CHINA
TO TRADING PARTNERS AND DEMAND FOR COMMODITIES.
WHEN YOU LOOK AT THE U.S., THE CONSUMER A IS ROBUST AND
HEALTHY . THE TONE HAS BEEN PUSHED BACK.
SPENDING DISAPPOINTED. THEY ARE NOT TALKING ABOUT
INFLATION BUT THEY ARE TALKING ABOUT DEFLATION.
ALL THAT SAID, CHINA SHOULD BE ON TRACK TO HIT 5% GROWTH WHICH
WOULD BE HEALTHY GROWTH FOR AN ECONOMY OF THAT SIZE. JONATHAN:
THANK YOU FOR THAT. A LIVES IN CHINESE EQUITY
MARKETS. EQUITY FEATURES NEGATIVE BY
0.05%. 10 MINUTES FROM THE OPENING
BELL. THE TO DATE MEETING BEGINS TODAY.
FOR THE FINAL WORD, TIFFANY WILDING AND MICHAEL COLLINS ARE
BACK. IS THIS FED ONE AND DONE OR IS
THERE MORE TO COME? TIFFANY:
EARLY, MY CRYSTAL BALL IS AS CLOUDY IS YOURS.
BUT IT WILL DEPEND ON INFLATION AS WELL AS THE GROWTH
TRAJECTORY. WE THINK THAT WILL LOOK VERY
DIFFERENT THAN THE FIRST HALF. FIRST HALF WE SAW GROWTH WE
ACCELERATING ON A REAL BASIS AS CONSUMERS HAD REAL SPENDING
POWER AND ENERGY PRICES FALLING DOWN.
WE ALSO SAW INFLATION A LITTLE MORE STICKY THAN MANY PEOPLE
WERE THINKING. WE THINK INFLATION STARTS TO
DECELERATE AND THERE ARE REAL HEADWINDS TO ECONOMIC GROWTH AS
A RESULT OF TIGHTER CREDIT CONDITIONS AND THE STUDENT LOAN
ISSUE. WE THINK IT WILL PROBABLY BE
ENOUGH FOR THE FED TO HOLD RATES STEADY AFTER THIS MEETING
BUT THINGS CAN CHANGE AND WE WILL GET MORE DATA BETWEEN NOW
AND THEN TO FIGURE IT OUT. JONATHAN:
MICHAEL COLLINS, SAME QUESTION. MICHAEL:
THEY ARE GOING TO HIKE TOMORROW OBVIOUSLY AND THAT WILL
PROBABLY BE THE LAST ONE FOR THE CYCLE.
IT IS DIFFICULT BUT OUR GUESS IS GIVEN THE LEADING INDICATORS
ROLLING OVER THAT THEY ARE DONE AFTER TOMORROW.
AND A YEAR FROM NOW THE FUNDS WILL BE LOWER, 50 TO 100 BASIS
POINTS LOWER BUT PROBABLY NOT AS LOW AS THE MARKETS HAVE BEEN
PRICING IN. JONATHAN:
DO YOU SEE EVIDENCE THE ECONOMY CAN TOLERATE THE HIGHER LEVELS
FOR LONGER? TIFFANY: IT GETS BACK TO HOW MONETARY
POLICY IS WORKING AND ARE THEY AT LONGER OR SHORTER THIS TIME.
VARIOUS FEDERAL RESERVE OFFICIALS WOULD ARGUE THEY ARE
SHORTER. THE BALANCE OF EVIDENCE IS THAT
MAYBE THEY ARE A LITTLE LONGER AND MAYBE THE PANDEMIC RELATED
STIMULUS AND BACKLOGS FROM BOTTLENECKS IS CREATING MORE
RUNWAY. THAT SUGGESTS KEEPING IT HIGHER
FOR LONGER. THE QUESTION IS WHAT HAPPENS
THEN AND DOES THAT MAKE THE ECONOMY WEAKEN IN A
SURPRISINGLY STRONG WAY. ECONOMISTS ARE TERRIBLE AT
PINPOINTING WHEN RECESSIONS OCCUR.
ULTIMATELY THESE ARE THE THINGS WE ARE LOOKING AT GOING INTO
2024. JONATHAN: IT HAS BEEN WONDERFUL TO CATCH
UP. IT IS A COUPLE OF DAYS. EARNINGS AFTER THE CLOSE OF THE
FEDERAL RESERVE TOMORROW, BOJ ON FRIDAY.
EQUITY IS NEGATIVE IN THE LAST 20 MINUTES OR SO. TREASURIES, TWO-YEAR UP BY FOUR
ON A TWO-YEAR. OR 10 YEAR AT 391.
COMING UP, MORNING CALLS. AND KRISHNA MONEY -- MEMANI, WE
WILL CATCH UP WITH HIM. THAT RESULTS COMING UP LATER. JONATHAN:
FIVE MINUTES AWAY FROM THE OPENING BELL.
EQUITIES DOWN BY 0.06%. NOT MUCH AT ALL.
A LITTLE LIFT .2%. INTO THE FX MARKET, THE EURO
NEGATIVE FOR A SIXTH CONSECUTIVE SESSION.
THE LONGEST GOING BACK TO SEPTEMBER OF LAST YEAR. THE DATA OUT OF EUROPE, GERMANY
NOT GREAT. EURO-DOLLAR WHEN 10.
UPGRADING WALMART TO OVERWEIGHT WITH A PRICE TARGET EXPECTED TO
BENEFIT FROM THE INFLATIONARY ENVIRONMENT. A CHALLENGING BACKDROP FOR
INVESTMENT BANKING. NEW RESEARCH, HIGHLIGHTING
POSITIVE FEEDBACK AND RECENT AI EFFORTS. STOCK UP BY 1%. COMING UP, KRISHNA MEMANI
JOINING US. JONATHAN:
ON A FOUR SECONDS AWAY FROM THE OPENING BELL. COMING UP ON MICROSOFT AND
ALPHABET. MICROSOFT 44% UP. GOOGLE OF 38% -- GOOGLE OF UP 38% -- GOOGLE UP U 38%.
THE DOLLAR SHOWING STRENGTH, EURO-DOLLAR 1.1027.
THE LONGEST LOSING STREAK FOR THE EURO AGAINST THE DOLLAR
OWING BACK TO LATE SEPTEMBER OF LAST YEAR WHEN KING DOLLAR WAS
ACTUALLY CRUSHING THE EURO AND STERLING AS WELL. CRUDE A LITTLE SOFTER.
78 DOLLARS AND ABOUT $.64 WTI. EQUITY MARKET SLIGHTLY NEGATIVE.
THE NASDAQ, SLIGHTLY POSITIVE. 3M TOPPING EARNINGS ESTIMATES
AND RAISING THE OUTLOOK AFTER IMPLEMENTING SWEEPING
COST-CUTTING MEASURES LAST YEAR. THE CEO SAYS THE ACTIONS WE
TOOK TO STRENGTHEN AND RESTRUCTURE LED TO LOWER COSTS
AND BETTER THAN EXPECTED MARGINS. ABIGAIL: THE STOCK IS HOPPING.
IT WAS BASICALLY A BLOWOUT QUARTER.
THEY BEAT REVENUE BY 6% AND BE ADJUSTED EARNINGS BY 25%. $2.17 ON 8.3 BILLION DOLLARS.
THIS SELLS EVERYTHING FROM TAPE TO AUTO PARTS, ELECTRICAL
COMPONENTS AND SO MUCH MORE. A BROAD READ ON THE ECONOMY. THERE WAS A REASON FOR THE
EARNINGS BEING SO OUTSIZED HAVING EVERYTHING TO DO WITH
COST-CUTTING MEASURES YOU WERE TALKING ABOUT.
SALES DECLINE, A POSITIVE, MUCH BETTER THAN THE EXPECTED
DECLINE. THEY TOOK A $10.3 MILLION
CHARGE TO SETTLE A FOREVER'S CHEMICAL CASE.
THE COMPANY SAID THE GOAL IS TO POSITION THE COMPANY FOR THE
FUTURE. ERASED THE OUTLOOK AND ARE
LOOKING FOR A REACH OF $8.60 TO $9.10 ADJUSTED EARNINGS UP FROM
THE PREVIOUS RANGE. BECAUSE OF SOME OF THE
LITIGATION HANGING OVER THE COMPANY, THE STOCK IS DOWN 10%.
BUT WITH THIS OUTLOOK, MAYBE IT IS A MOVE TOWARD POSITIVE.
JONATHAN: SPOTIFY DELIVERING A MESS ON
REVENUE WHICH OVERSHADOW THE MONTHLY ACTIVE USER FORECAST
BETTER THAN EXPECTED THANKS TO YOUNGER LISTENERS. >> USER NUMBERS COMING IN HOT,
STUNNING BLOOMBERG INTELLIGENCE. TOTAL ACTIVE USERS OF 551
MILLION, ESPECIALLY BECAUSE OF GEN Z.
WEAKER FINANCIALS WEIGHING ON THE STOCK, SHARES DOWN AROUND
9% AFTER FALLING SUBSTANTIALLY IN THE PREMARKET.
REVENUE SLIGHTLY BELOW THE WALL STREET FORECAST AS WELL AS THE
COMPANY'S OWN ESTIMATES. THERE ARE ALSO WORRIES ABOUT
THE EMERGENCE, GROSS MARGINS AT HONEY 4.1 PERCENT LEVEL EVEN
THOUGH THE COMPANY IN THE LONG-TERM WANTS TO GET TO 30%
GROSS MARGINS. ANALYSTS NOT SURE HOW THEY ARE
GOING TO GET THERE. WE HAVE SEEN A SELLOFF SINCE
JULY 19, A SELL OF JP MORGAN SAYS IS OVERDONE.
THE STOCK IS UP 90%. WE WILL SEE HOW TRADERS TRY TO
PARSE THE DATA. JONATHAN: THE BIGGEST ONE-DAY DROP GOING
BACK TO DECEMBER OF LAST YEAR. THE WORST PERFORMANCE.
SPOTIFY FOURTH DAY OF DECLINES IN THE STOCK.
GM OUT WITH EARNINGS, RAISING THE OUTLOOK I'M IN -- AMID
INCREASED DEMAND. >> I AM NOT SURE WE WILL BE
ABLE TO RAISE PRICES ACROSS THE BOARD APPEARED WE SEE STABILITY
IN THE MARKET. WE ARE TAKING IT ONE DAY AND
ONE MONTH AT THE TIME AND WATCHING RESULTS COME IN.
WE HAVE TO BE FOCUSED ON QUALITY AND GETTING PRODUCTION
IN THE VEHICLES CUSTOMERS WANT. JOINING US IS DAVID WALSH.
DAVID: THEY HIT IT OUT OF THE PARK FOR
BEATING ESTIMATES AND IN TERMS OF READING -- RAISING GUIDANCE.
PRICE INCREASE IN THE FIRST QUARTER TO THE SECOND QUARTER.
WE ARE TALKING ABOUT PRICES AT HISTORICALLY HIGH LEVELS.
THE SCENE IS SET FOR GM TO MAKE A LOT OF MONEY.
I THINK THERE IS AN OVERHANG ON THE STOCK WITH INVESTORS THAT
THERE COULD BE A STRIKE THIS FALL IN LAST TIME THAT HAPPENED
IT COST GM $2 BILLION. I THINK THERE IS A WAIT AND SEE
ON GM'S ELECT -- ELECTRIC VEHICLE PROGRAM WHICH IS STUCK
AT THE MOMENT. THE COMPANY IS CUTTING COSTS ON
THE INTERNAL COMBUSTION SIDE BUT THERE ARE A FEW THINGS
INVESTORS ARE TAKING A WAIT AND SEE APPROACH. RITIKA: JONATHAN:
WHAT WOULD YOU -- JONATHAN: WHAT WOULD YOU POINT TO.
LOOKING AT THE STOCK DOWN BY 4% OR 5%, NOT WHAT I EXPECTED WHEN
I FIRST SAW THE NUMBERS. DAVID: BECAUSE GM HAD A GREAT SECOND
QUARTER AND THAT DRIVES UP THE DEBILITY. SOME OF THIS WAS ALREADY
MAINTAINED. THEY KNEW IT WAS GOING TO BE A
GOOD QUARTER SELLING TRUCKS. I WONDER IF THE FACT THAT THE
CEO SPECIFICALLY CALLED OUT LABOR NEGOTIATIONS AND IF THAT
REINFORCED FEARS AMONG INVESTORS THERE COULD BE A
STRIKE THIS YEAR AND MAYBE THEY PROTEST TOO MUCH ABOUT THE
MARKET FEAR OF A LABOR CONTRACT YEAR. IRATE REDDICK ABOUT HOW MUCH
MONEY THEY ARE MAKING. THE EV STORY IS NOT FULLY BAKED
ENOUGH TO GARNER A LOT OF ENTHUSIASM. IT COULD ALSO BE AN ISSUE OF
THIS IS AS GOOD AS IT GETS IN TERMS OF GM'S PROFITABILITY.
THAT IS ALWAYS BEEN KIND OF AN ISSUE WITH THE CARMAKERS.
JONATHAN: THE STOCK IS DOWN 4%. LET'S TURN TO THE HOMEBUILDERS. PULTEGROUP WITH THE REVENUE
FORECAST THANKS TO CONTINUED DEMAND WITH THE CEO SEND WATER
REMAINS AN EXTREMELY LIMITED SUPPLY OF EXISTING HOMES, A
MUCH IMPROVED SUPPLY CLAIMS THAT RACES AND POSITION TO GO
FORWARD. >> SHARES ARE 3% HIGHER.
PULTEGROUP BE ON SECOND QUARTER ESTIMATES, REVENUE, ADJUSTED
APS AND HOMES CLOSE CAME IN HIGHER THAN ESTIMATES.
UNIT BACKLOG INCREASED TO $8.2 BILLION AT THE END OF THE
SECOND QUARTER, UP FROM THE VALUE OF $7.9 BILLION AT THE
END OF THE FIRST QUARTER. ALSO THE CEO SAID PULTEGROUP
WAS IN POSITION TO MEET THE DEMAND GOING FORWARD AS
EXISTING HOME SUPPLY IS LIMITED. A SIMILAR MESSAGE WE ARE JUST
LAST WEEK THAT THERE IS NOT A LOT OF HOUSING SUPPLY.
IT HAS BEEN A TAILWIND FOR THE HOME BUILDERS ALL YEAR FROM THE
DEMAND STANDPOINT AND NOW THEY HAVE TO CONTINUE TO DELIVER
THAT SUPPLY. PULTEGROUP HIGHER THAN 3%.
IT IS ALREADY UP 76% THIS YEAR. JONATHAN: GAINS ARE PHENOMENAL. KRISH KRISHNA
MEMA SAID MANUFACTURING DATA RECOVERING AND VALUATIONSNI AND
ARRANGE BUT MAKES THE LONG END OF THE BOND OR GET VULNERABLE
WHICH MAKES EVERY PART OF THE MARKET VERY VULNERABLE. LET'S SET -- LET'S GET STRAIGHT
INTO IT. WHEN YOU SAY VULNERABLE, WHAT
ARE YOU THINKING, 50 OR 100 BASIS POINTS? KRISHNA: I THINK 4.5 IS THE TOP END OF
THE RANGE. I THINK STORIES YOU JUST TALKED
ABOUT HIGHLIGHT WHY THE LONG END OF THE BOND MARKET MAY BE
VULNERABLE. LOOK AT HOUSING. IT IS DOING SPECTACULARLY WELL. I THINK IN THAT SORT OF
ENVIRONMENT, THE RISK OF RE-ACCELERATION IN THE ECONOMY
IS SUBSTANTIAL. IS THAT RISK THAT MAKES THE
LONG END OF THE MARKET MORE VULNERABLE.
THE TALK OF RECESSION HAS BEEN POSTPONED AND PROBABLY GETS
POSTPONED TO EARLY 2024. THAT IS NOT THE DRIVE TO TAKE
RATES LOWER. ANY WHIFF OF ACCELERATION AND
WE GET THROUGH 4% VERY QUICKLY. JONATHAN:
WE CAUGHT UP WITH TIFFANY WILDING AT PIMCO WHO SAID AS
STUDENT LOANS PAYMENTS RETURN SHE IS LOOK FOR DECELERATION
AND ECONOMIC GROWTH BECAUSE OF THAT AND OTHER THINGS.
WHAT WOULD YOU PUSH BACK AGAINST? KRISHNA:
THERE ARE TWO BASIC DRIVERS, ONE IS EMPLOYMENT.
EMPLOYMENT IS NOT SHOWING ANY SIGN OF SLOWING WHATSOEVER.
AS LONG AS THAT IS THE CASE, INCOMES ARE INCREASING AND THAT
IS SUPPORTIVE. THE SECOND THING IS THE
CYCLICAL PART OF THE ECONOMY, WASN'T REMAINS EXTRAORDINARILY
STRONG AND MANUFACTURING, WHICH WE WERE COUNTING ON, DROVE THE
SLOWDOWN AND IS STABILIZED. WITHOUT THE FISCAL STIMULUS IN
THE SYSTEM AND LIKELY TO REMAIN IN THE SYSTEM FOR AN EXTENDED
PERIOD OF TIME, I DON'T THINK IT IS REALISTIC TO EXPECT A
MODEST REACCELERATION AND THAT IS ALL WE NEED FOR THE LONG END
OF THE MARKET. JONATHAN: IS THAT GOOD OR BAD FOR STOCKS?
KRISHNA: I THINK STOCKS ARE OK. WE ARE STILL IN A STIMULATIVE
ENVIRONMENT FOR FISCAL POLICY. STOCKS PROBABLY HOLD THEIR OWN.
I THINK THEY CAN HOLD THE MIDDLE FOR THOUSANDS RANGE FOR
AN EXTENDED PERIOD OF TIME. IF RATES GO MEANINGFULLY
HIGHER, THEN EVERYTHING BECOMES FAR MORE QUESTIONABLE. JONATHAN:
DO YOU ANTICIPATE THE CHAIRMAN OF THE FEDERAL DESERVE HAS TO
MANAGE RISK AND ULTIMATELY THAT COULD SHAPE THE MESSAGE WE GET
TOMORROW IN THE NEWS CONFERENCE? KRISHNA:
THE FIRST THING IS THEY ARE GOING TO TIGHTEN BUT THERE IS
NO REASON FOR THE CHAIR TO TONE DOWN ANYTHING.
THAT DOESN'T SERVE ANY PURPOSE WHATSOEVER AND INCENTIVIZES
PEOPLE ON THE COMMITTEE. HE WILL STAY ON MESSAGE WHETHER
THEY TIGHTEN IN NOVEMBER ARE NOT, A LOT OF TIME TO FIGURE
THAT OUT. IRRESPECTIVE OF THAT, AS
COMPLETION COMES DOWN, REAL RATES ARE INCREASING.
THAT IS DOING A LOT OF WORK FOR THE FED, EVEN WITHOUT THEM
RAISING RATES. I THINK THEY ARE AT A REALLY
GOOD SPOT AND THINGS ARE WORKING OUT ACCORDING TO THEIR
PLAN. JONATHAN: HOW DIFFICULT IS IT TO KEEP
EVERY BUDDY HAPPY ON THAT COMMITTEE?
-- EVERYBODY HAPPY ON THAT COMMITTEE? KRISHNA: THEY ARE STILL WORRIED ABOUT
INFLATION AND THE FACT THAT IT IS NOT COMING DOWN SOON ENOUGH.
LIMIT REMAINS RELATIVELY ROBUST. THAT CERTAINLY CREATES
RATE FOR CERTAIN MEMBERS. AS INFLATION CONTINUES TO COME
DOWN THEY CAN'T RELATE RAISE TOO MUCH RUCKUS BECAUSE IF THERE IS TOO MUCH RUCKUS, THE
POLICIES TIGHTEN SIGNIFICANTLY MORE AND THAT INCREASES THE
RISK OF THE SOFT LANDING EVERYONE IS HOPING FOR,
INCLUDING THE HAWKS. JONATHAN: THANK YOU AS ALWAYS. LOOKING AHEAD TO THE FED
TOMORROW. 13 MINUTES INTO THE SESSION.
UNDERPERFORMANCE AND THE NASDAQ OVER THE LAST SEVERAL DAYS.
THE NASDAQ 100 HIGHER BY PUT 4%. A BIG AFTERNOON FOR THE NASDAQ,
BIG TECH EARNINGS WITH MICROSOFT ANNOUNCING AFTER THE
CLOSE. >> EVERYONE STUNTS -- WANTS TO
START THE ROLLOUTS OF GENERATIVE AI AND WERE PAYING
TOP DOLLAR. THIS IS A SUPER CYCLE.
I THINK WE MAY BE A LITTLE AHEAD OF REALITY. JONATHAN: THAT CONVERSATION IS UP NEXT
WITH MARK MAHANEY. COMING UP, SKYBRIDGE FOUNDER AT
2:30 EASTERN MONDAY. THIS IS BLOOMBERG. >> THE RALLY IS AND HAS BEEN
BROADENING OUT. THROUGH THE SPRING, IT WAS
UNDOUBTABLY THE SO-CALLED MAGNIFICENT SEVEN AND THERE IS
REVISIONIST HISTORY THAT SOMEHOW THE BROAD RALLY HAS
ALWAYS BEEN THE CASE. FOR A LONG PERIOD OF TIME WAS
THAT. YOU HAVE TREMENDOUS CATCH-UP ON
SMALL AND MID-CAPS AND THE REST OF THE INDEX IS PLAYING
CATCH-UP AS WELL. JONATHAN: 40% OF THE S&P 500 REPORTING
EARNINGS THIS WEEK, A CRITICAL DRESS FOR BIG TECH LOOKING TO
JUSTIFY VALUATIONS FOLLOWING THE NASDAQ BIGGEST RECORDS. ALPHABET AND MICROSOFT AND THEN
META ALPHABET. WE VIEW THE STREET AS REVENUE
ESTIMATES AS REASONABLE SUGGESTING SEARCH AT SPEND
GROWTH AND ROBUST TRAVEL TO MAN AND POTENTIALLY THAWING ADD
WINTER AND FX ATTORNEY TO A TAILWIND. MARK MAHANEY JOINS US.
LET'S GO TO GOOGLE WHAT ARE YOU LOOKING FOR IT LATER? MARK: I THINK THE QUOTE YOU CITED
DOESN'T CHANGE OUR VIEW. WE ARE SEEING SMALL BITS AND
PIECES OF EVIDENCE THAT THE ADIT DEMAND IS STARTING TO
IMPROVED BUT THEY ARE SMALL, TENTATIVE PIECES OF BINANCE.
I AM NOT SURE THAT GOOGLE IS GOING TO OUTPLAY THE
IMPROVEMENT. SEARCH GROWTH WE SHOWED AS
STABLE VERSUS Q1. THE COMPANY ON THE YOUTUBE SIDE
OF THE BUSINESS HAS BEEN WORKING THROUGH A COUPLE OF
EXECUTION ISSUES RECENTLY AND IS STILL LAGGING IN TERMS OF
RESPONDING TO THE APPLE PRIVACY CHANGES AND THE IMPACT THAT HAS
HAD ON MARKETING CAMPAIGNS. I THINK INVESTORS WOULD LOVE TO
SEE REAL SIGNS OF GREATER COST DISCIPLINE.
I DON'T THINK YOU WILL SEE THAT FROM GOOGLE. GOOGLE, WE PREFERRED META OVER
GOOGLE. ON GOOGLE, ALPHABET AND AIA, WE
HAVE HEARD SO MUCH FOR SO MANY PEOPLE ABOUT THE AI INVESTMENT
CYCLE BOOM. IS IT TOO EARLY TO SUGGEST IT
WILL GO BEYOND? I THINK IT IS TOO EARLY BUT I
THINK YOU ARE CORRECT THAT WE WILL SEE BROADER AND BROADER
GENERATIVE AI APPLICATIONS AND IT WILL BE THE COMPETITIVE
INTENSITY RISING AND FEAR OF MISSING OUT IN TERMS OF
GENERATIVE AI. CIOS WILL BE RESPONDING TO CEOS AND BEING ASKED THAT MEANS YOU
WILL SEE OVERALL RISING TIDE FOR ALL MAJORS, AWS, GOOGLE
CLOUD, BUT GOOGLE CLOUD SHOULD BENEFIT FROM THIS.
IT WILL LEAD TO GREATER NEED FOR CLOUD COMPUTE AND CLOUD
STORAGE. IT WILL BE A SECULAR TIME FOR
CLOUD THAT HAS SLOWED. YOU WILL SEAT REACCELERATION OF
GROWTH. THREE STOCKS -- JONATHAN:
THREE STOCKS ON THE SCREEN. ALPHABET AND MICROSOFT. YOU KNOW NUMBERS WELL, UP 146%.
TO SEE YOU SAY YOU LIKE THIS AFTER GAMES LIKE THAT IS
INTERESTING. TO TALK ABOUT MAYBE THE CURRENT
MULTIPLE PROVIDES DOWNSIDE PROTECTION.
FOR THE PEOPLE WHO HAVE NOT HAD THE LUXURY OF RIDDING YOUR
RESEARCH, CAN YOU ASK FIND TO PEOPLE? MARK: META WOULD CORRECT EARLY.
SAME WITH GOOGLE. THE BAR IS LOCAL FOR GOOGLE.
EXPECTATIONS ARE LOWER. AFTER THE DRAMATIC RISE IN META SHARES, IT IS SHE AT A SLIGHT
DISCOUNT -- IT IS AT A SLIGHT DISCOUNT. I THINK META DESERVES 20 TIMES
GAP EARNINGS ON THE YEAR'S NUMBERS BECAUSE I THING THAT IS
CLOSED WITH THE EARNINGS GROWTH OUTLOOK IS FOR THE NEXT COUPLE
OF YEARS. THAT MASSIVE RISE IN THE STOCK
YEAR TO DATE, THE CONTEXT YOU HAVE TO HAVE IS OVER LAST YEAR
APPEARED FUNDAMENTALS ARE IMPROVING.
YOU WILL SEE MARKET EXPANSION, BUYING BACK A LOT OF STOCK.
THAT MAYBE GIVES YOU A LOT OF SUPPORT FOR THE STOCK.
WE HAVE SEEN THAT WITH THINGS LIKE SPOTIFY AND NETFLIX.
IT IS HARDER FOR STOCKS TO TRADE UP ON EARNINGS BUT COURT
VALUATION IS STILL HIGHLY ATTRACTIVE DESPITE THAT IN THE
STOCK YEAR TO DATE. JONATHAN: WEEKS AGO I WAS TOLD IT WAS
BOOMING AND NOW I'M TOLD IT IS FAILING? WHICH IS IT? MARK:
I THINK IT IS GROWING PIER 1 HUNDRED MILLION USERS IN A
FIVE-YEAR PERIOD, THAT SHOWS YOU THE POWER OF INSTAGRAM'S
ABILITY TO TURN ON FEATURES. THERE IS A LOT THEY NEED TO
IMPROVE THE PRODUCT BUT THERE IS A LOT OF OPPORTUNITY FOR IT
TO BE BIGGER NOW THAN IT IS TODAY. JONATHAN:
A BUSY COUPLE OF DAYS. MARK MAHANEY OF EVERCORE.
LOTS TO LOOK FORWARD TO. ABIGAIL:
LOTS OF SECTORS TO LOOK AT. THE S&P 500 UP SLIGHTLY.
THE TRAILS HELD UP BY 3M. TECH BEING HELD UP BY A LOT OF
THOSE YOU WERE TALKING ABOUT PLUS NVIDIA.
I KNOW WE GENERALLY DON'T TALK ABOUT THE DOW, UP, THE LONGEST.
JONATHAN: THANK YOU. JONATHAN:
THE OUTPERFORMANCE ON THE NASDAQ, UP 5%. PRICE ACTION, TRADING DIARY,
META ON WEDNESDAY. CHAIRMAN POWELL NEWS CONFERENCE
TOMORROW. HE SEE ME RATES ON THURSDAY.
ROUNDING OUT WITH THE BOJ AND EARNINGS FROM EXXON AND OTHERS.
FROM NEW YORK CITY, THAT DOES IT FOR ME.
THANK YOU FOR CHOOSING BLOOMBERG TV.
THIS WAS THE COUNTDOWN TO THE OPEN.
