Big Tech Earnings in Focus | Bloomberg: The Close 7/29/2024
♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. >> HAPPY MONDAY. LIVE FROM STUDIO TWO IN BLOOMBERG HEADQUARTERS, I'M ALIX STEEL. >> I'M KATIE GREIFELD. WE ARE KICKING OFF THE CLOSING
BELL. >> YOU KICKED US OFF TO THE OPENING BELL AND OTHER CLOSING BELL. WE HAVE THE S&P UP BY 1/10 OF 1% . 40% OF THE S&P REPORTING THIS WEEK. A SHOCKINGLY LARGE NUMBER. THE ACTION JUST GETTING STARTED. YOU CAN SEE THE INDIVIDUAL
ASSET CLASSES. NYMEX CRUDE DOWN 1.6%. ENERGY STOCKS GETTING HIT. THE 10 YEAR YIELD GETTING A SLIGHT BID. WE ARE OFF THE HIGHS OF THE SESSION. WE ARE GETTING THE TREASURY
REFUNDING ANNOUNCEMENT IN MOMENTS TIME. THE DOLLAR-YEN UP BY 1/10 OF 1%. IT IS NOT JUST THE FED. IT IS ALSO THE BOJ. KATIE: FASTEN YOUR SEATBELTS BECAUSE CITI SAYS THE OPTIONS MARKET IS PRICING IN OVER A 1% MOVE FOR THE FED WEDNESDAY.
VOLATILITY SPIKING AS TRADERS PREP FOR 32 HOURS OF CENTRAL BANK DECISIONS TOPPED OFF I JOBS FRIDAY. THE 9.5 TRILLION DOLLAR TEST WITH THE MAGNIFICENT FOUR REPORTING THIS WEEK WITH CAP EXPEND FROM APPLE, AMAZON, META AND MICROSOFT IN THE SPOTLIGHT. THE ROTATION TRADE TAKING A BREATHER TODAY AS TECH OUTPERFORMS. THE GOLDEN ARCHES DULL. MCDONALD'S HIT WITH THE FIRST
SALES DIP SINCE 2020. WARNING THAT SALES ARE NEGATIVE IN THE BEGINNING OF THE THIRD QUARTER. THE STREET TAKEAWAY, IT COULD HAVE BEEN WORSE. ALIX:
WE WILL GET TO THAT LATER ON IN THE SHOW. WHAT IT MEANS FOR OTHER FAST FOOD PLACE. LET'S SET UP THE WEEK. WHAT WE CAN EXPECT FROM THE FED IN TERMS OF CUTS. THIS IS SEPTEMBER PRICING FOR A
FED CUT. IT IS ALMOST A 25 BASIS POINT CUT IN SEPTEMBER FOR THE MARKET. THE QUESTION BECOMES HOW DOES THE FED WIND UP SIGNALING THIS ON WEDNESDAY. IS IT GOING TO BE IN SPEECH? IS IT GOING TO BE IN THE PRESSER? HOWEVER WE GOING TO WIND UP GETTING THAT? IF WE ARE GOING TO DO SEPTEMBER ANYWAY, WHY NOT JUST DO IT WEDNESDAY? WHAT ARE WE WAITING FOR TO PULL THE TRIGGER FROM THE FED? KATIE: LET'S GET RIGHT TO IT WITH ALEX PAREN. SHE IS DIRECTOR OF FIXED INCOME AND MANAGING DIRECTOR AT ROCKEFELLER ASSET MANAGEMENT. GREAT TO HAVE YOU ON SET WITH US TO KICK OFF WHAT IS A HUGE WEEK.
WE SHOULD START WITH THE FED. SOMEONE DESCRIBED IT TO ME AS A BACK-TO-SCHOOL SEPTEMBER RATE CUT. IT FEELS LIKE THE ENTIRE MARKET HAS OPENED THE IDEA OF THE SEPTEMBER CUT WITH OPEN ARMS. >> I THINK THAT IS RIGHT. THANK YOU FOR HAVING ME. IT IS ABOUT THAT BACK-TO-SCHOOL CUT.
IT IS ALMOST A SCHOOL KIT WHERE EVERYONE IS WIDELY ANTICIPATING AND KNOWS WHAT IS GOING TO BE IN THE KIT. MANY ARE GOING TO LOOK TO THIS WEEK AS A DOVISH HOLD FROM HERE. THEY ARE LOOKING TO HEAR FROM CHAIR POWELL, WHAT ARE WE DOING NEXT AND IT IS UNLIKELY HE INDICATES THE TIMING BUT I THINK IT IS CLEAR THEY ARE GOING TO FOLLOW THE NARRATIVE THE DATA IS BREAKING IN THE DIRECTION IN WHICH SEPTEMBER SEEMS LIKELY. IT IS FULLY PRICED IN ALMOST AT THIS POINT INTO THE MARKET. LOOKING BEYOND THAT, THE MARKET
IS GETTING AHEAD OF ITSELF IN TERMS OF THE MAGNITUDE OF CUTS PRICED IN THUS FAR THIS YEAR. . REMAINS A LOT TO BE SEEN. WE WILL BE LOOKING TO THE STATEMENT AND THE PRESSER TO GET A BIT MORE OF AN INDICATION. KATIE: WHAT WILL YOU BE LOOKING FOR AND BOND INVESTORS LOOKING FOR WHEN WE GET TO THAT STATEMENT AND AND WE HEAR FROM THE MAN HIMSELF? ALEX: WE ALL LOVE HEARING FROM THE MAN HIMSELF. THAT AS THE MOMENT WHICH YOU EXPECT THE NARRATIVE MIGHT SHIF A LITTLE DIFFERENTLY THAN WHAT WE HAVE HEARD FROM FED OFFICIALS AND THE CERTAINTY OF THE STATEMENT. AT THIS POINT IF YOU LOOK AT WHAT IS PRICED IN THIS YEAR, IT IS NEARLY THREE CUTS BETWEEN NOW AND YEAR END. THE MARKET IS POISED FOR THIS
IDEA THE FED MESSAGE WILL BE A DOVISH. IF YOU GET ANYTHING DIFFERENT FROM THAT, THE MARKET WOULD BE SURPRISED BY ANY TYPE OF HAWKISH MESSAGING. ALIX: I WENT TO BRING BREAKING NEWS IN TERMS OF TREASURY REFUNDING AND THE BORROWING ANNOUNCEMENT. THE U.S. ACTUALLY CUT IT'S JULY SEPTEMBER BORROWING ESTIMATE TO JOINTER $40 BILLION FROM 847 BILLION FROM OCTOBER TO DECEMBER. LOOKING TO BORROW $565 BILLION. WE ARE GOING TO GET WHERE
THEY'RE GOING TO ISSUE ON THE CURVE ON WEDNESDAY. NOW WE HAVE THE TOTAL AMOUNT LOOKING AT THE ESTIMATE COMING TO 740 BILLION FROM 847 WHICH PAIRS INTO WHAT WE ARE EXPECTING IN TERMS OF THE CURVE. WHERE IS THE MASSIVE AMOUNT OF BORROWING WE ARE EXPECTING THAT IS GOING TO KEEP THE HIGH END RATES HIGHER FOR LONGER? ALEX: THE MARKET IS GOING TO LIKE THAT ANNOUNCEMENT. THAT GIVES ADDED FUEL FOR RATES
TO COME DOWN A BIT FURTHER. THE MARKET IS GOING TO SEE WHERE ON THE CURVE THERE IS JIM MENDEZ DEMAND ON THE FRONT END. LOOK AT MONEY MARKET FUNDS. 6 TRILLION IN ASSETS TODAY. THAT IS ASTONISHING. WHAT YOU HAVE SEEN THE TREASURY DO IS LEAN INTO THAT. IT IS THE POINTS IN TIME WHERE
WE HAVE HAD FEAR AND CONCERN THAT REFUNDING WAS GOING TO BE THE LONGER END OF THE CURVE THAT HAS LED TO THE STEEPENING. WE ARE GOING TO BE PAYING CLOSE ATTENTION TO WEDNESDAY AND WERE ON THE CURVE YOU SHOULD EXPECT. ALIX: TO RETHINK WE ARE GOING TO SEE THE STEEPENER CONTINUE? OR DO YOU THINK THE STEEPENER WHERE WE SEE THE LONG END SELLOFF CONTINUES? ALEX: IT IS DEPENDENT ON SO MANY FACTORS TO UNPACK. LET'S UNPACK THAT.
WHEN YOU'RE TALKING ABOUT THE DIRECTION OF TRAVEL FOR THE FED, THAT LENDS TO THE FRONT END COMING DOWN FASTER. YOU GET THE STEEPENING IMPACT. OTHER FACTORS WE ARE THINKING ABOUT IS THE REFUNDING. IF YOU GET TO A MOMENT IN WHICH
PEOPLE START TO TAKE A STEP BACK AND LOOK PAST THE NEAR TERM EXPECTATIONS OF THE FED OR SOME OF THE FACTORS WE ARE THINKING THROUGH WITH THE ELECTION AND YOU LOOK FURTHER OUT TO DEFICITS THAT ARE RISING, YOU HAVE THE POTENTIAL FOR SOME PRESSURE ON THE LONG END. EXPECT SOME STABILIZATION FROM HERE. KATIE: IT SEEMS LIKE WHEN WE ARE TALKING ABOUT THE DEFICIT AND HAVING THIS CONVERSATION WITH 99 DAYS TO GO -- BURNED IN MY BRAIN HERE. IT SEEMS LIKE NO MATTER WHAT HAPPENS, WHO TAKES CONTROL IN NOVEMBER, ONE OF THE THINGS YOU CAN BANK ON IS THE DEFICIT IS GOING TO CONTINUE TO GROW FROM HERE. ALEX: THAT IS RIGHT. I THINK WE AGREE REGARDLESS OF THE OUTCOME OF THE ELECTION AND 99 DAYS DOES NOT SOUND THAT LONG BUT THERE IS A LONG TIME AND A LOT THAT CAN HAPPEN IN BETWEEN. DEFICITS ARE GOING TO IMPACT MARKETS ON A GO FORWARD BASIS.
YOU NEED SOME LEVEL OF FISCAL RESTRAINT. WHETHER WE GET ON A GO FORWARD BASIS IS A DIFFERENT ISSUE. NEAR TERM, MEDIUM TERM, LONG-TERM, I THINK OF DEFICITS AS HAVING A MINI FULL MATERIAL IMPACT OVER THE MEDIUM AND LONG-TERM. IN THE NEAR TERM I WOULD BE FORECAST ON SLOWING GROWTH -- I WOULD BE FOCUSED ON SLOWING GROWTH. COOLING LABOR MARKETS, WHERE WE HAD FROM HERE. A FED THAT HAS BEEN CLEAR THERE
IS A PATH TOWARD FURTHER EASING. THE GAP BETWEEN FED FUNDS RATE, CPI AND PC IS QUITE WIDE VERSUS THE HISTORIC GNOMES -- HISTORIC NORMS. THERE IS A LOT OF ROOM FOR ADDITIONAL EASING. DO WE GET IT HERE? ABSOLUTELY NOT. AS A SEEM LIKELY OVER THE LAST 12 DAY TEAM IS THE KEY DRIVER OF RIGHTS IS GOING TO CONTINUE TO BE THE FED AND THEIR ACTION, I THINK SOME. KATIE: WHEN IT COMES TO THE DEFICIT, THE QUESTION WE ALWAYS OR I ALWAYS TEND TO ASK IS CAN YOU INVEST AROUND IT? WHAT IS INVESTABLE AROUND IT? WE WERE HAVING A CONVERSATION WITH STEVE EISMAN A FEW WEEKS AGO ANY BECAUSE THEM THE OA DEFINITE -- OA DEFICIT PEOPLE.
WHERE DOES IT ACTUALLY SHOW UP IN MARKETS? ALEX: THE DEFICIT A CAN CREATE SOME OPPORTUNITIES AND VOLATILITY. WE SOLD IN THE THIRD QUARTER OF LAST YEAR IN WHICH ALL THE BOND VIGILANTES TO MEANT HIGHER RATES AND WE SAID THIS IS AN OPPORTUNITY TO ADD TO DURATION. THAT REVERSED IN DECEMBER. IF YOU LOOK AT THE MARKET RIGHT NOW, WE ARE LOOKING AT WHERE THE BEST OPPORTUNITIES WITHIN FIXED INCOME. IF YOU ARE TAXPAYING INVESTOR TODAY, YOU WANT TO BE IN THE MUNICIPAL MARKET. IF YOU REALLY LOOK AROUND, YOU WANT TO BE IN HIGHER-YIELDING MUNICIPALS. WHY?
YIELD IS GOING TO BE A KEY DRIVER OF RETURNS ON A GO FORWARD FACES. HIGH-YIELD INDICES 545 TAX-EXEMPT YIELD. IS 9% PLUS TAX-EQUIVALENT. WILL BEYOND WHAT YOU CAN SOURCE IN THE CORPORATE MARKET. MEANINGFUL SPREAD EARLY 190 BASIS POINTS VERSUS INVESTMENT-GRADE RISK. YOU LAYER ON TOP PUT A STRONG CREDIT FUNDAMENTALS AND BACKDROP IN THE SPACE. . IT IS A WONDERFUL OPPORTUNITY ON A GO FORWARD BASIS.
RATE VOLATILITY WILL MATTER. IT IS LOOKING INTO AREAS OF THE MARKET THAT REMAIN ATTRACTIVE IN TERMS OF ALL IN YIELDS, TAX-EQUIVALENT YIELDS AND WITH RESILIENT CREDIT FUNDAMENTALS FROM HERE. ALIX: I SPEND SO MUCH TIME ON RADIO TALKING ABOUT MUNIZ. ALEX PETRONE, FIXED INCOME AND MANAGING DIRECTOR AT ROCKEFELLER ASSET MANAGEMENT. COMING UP, AS EARNINGS SEASON OILS ON, YOU BLOOMBERG OPINIONS CONNOR SENDS SAYING COMPANIES ARE ONLY KEEPING HEADCOUNT STEADY IN ANTICIPATION OF A SEPTEMBER RATE CUT.
IF WE DON'T GET THAT, WHAT HAPPENS? KATIE: GETTING AN UPGRADE TO BY OVER AT DEUTSCHE BANK. WHY THE A LIST IS SO EXPECT -- JOANNE PRESSED BY THE NEW CHIEF EXECUTIVE. ALIX: CRYPTO STOCKS ON THE MOVE AFTER FORMER PRESIDENT TRUMP TURNS FROM SKEPTIC TO BITCOIN CHEERLEADER. ALL THAT AND MORE COMING UP. THIS IS THE CLOSE ON BLOOMBERG. ♪ >> WE HAVE HEARD FROM POWELL THE DUAL MANDATE STABLE PRICES HAVE COME INTO BETTER BALANCE. THEY'RE GOING TO BE FOCUSED ON BOTH OF THOSE MANDATES AS OPPOSED TO JUST REINSTATING PRICE STABILITY. ALIX:
DISCUSSING THE FED'S DUAL MANDATE. OUR BLOOMBERG BIRGIT JENNEN COLUMNIST WAS OUT WITH A PIECE THAT DELVED INTO THE UNEMPLOYMENT SIDE SAYING BUSINESS SIGNALS TO THE FED RATE CUTS OR BIG LAYOFFS. THE CLEAR MESSAGE FROM THE EARNINGS SEASON IS COMPANIES ARE ONLY KEEPING HEADCOUNT STEADY IN ANTICIPATION OF LOWER ROWING COSTS AHEAD. CONOR JOINS US NOW. IF THE FED DOESN'T CUT THEY ARE GOING TO LAY OFF A BOATLOAD OF PEOPLE? CONOR: A LOT OF THEM THOUGHT WE WOULD GET A RECOVERY BY 2024. THEY THOUGHT HOME SALES WERE UNSUSTAINABLY LOW.
BUT WE HAVE SEEN THE LAST COUPLE MONTHS AS WE CAN SUSTAIN THOSE FOR A LITTLE WHILE LONGER IN TERMS OF LEVEL HOME SALES. COMPANIES RANGING FROM WHIRLPOOL APPLIANCE MAKERS TO BOATS TO CARS HAVE NOT SEEN THE RECOVERY. ANALYSTS HAVE ASKED THEM WHAT IS GOING ON. THESE COMPANIES SAID WE THOUGHT WE WOULD SEE RECOVERY THIS YEAR. IT HAS NOT HAPPENED BUT THE FED IS GOING TO CUT.
WE SEE BRIGHTER TIMES AHEAD. THAT MESSAGE OF OPTIMISM IS WHAT IS HOLDING STOCK PRICES SOMEWHAT IN TACT WHICH KEEPS PRESSURE OFF OF LAYOFFS THAT OTHERWISE WOULD BE COMING. KATIE: WHEN YOU THINK THE RUBBER MEETS THE ROAD HERE IN TERMS OF HOW FAR RATE CUTS CAN BE PUSHED BACK? LET'S SAY WE GET CRAZY DATA POINTS. SEPTEMBER DOES NOT HAPPEN BUT THE BOND MARKET PUSHES IT BACK. PUSHES BACK EXPECTATIONS. HOW MUCH FURTHER CAN THIS RELIEF BE DELAYED? CONOR: FOR A LOT OF COMPANIES THAT ARE TIED TO THE HOUSING CYCLE, THEY ARE LOOKING IN TERMS OF SPRING AND SUMMER IS WHEN THEY EXPECT TO MAKE THEIR HAY. THINGS ARE WE KIND OF AND AND DECEMBER THAT IS ALREADY A SEASONALLY SLOW PERIOD.
THEY NEED TO SEE IT BY NEXT SPRING. FIELD, IN NEXT SPRING'S HOUSING SEASON. . IF THAT WERE TO BE SHATTERED, WE WOULD SEE LAYOFFS THESE MARGINS ARE NOT GREAT. REVENUES ARE NOT GREAT. THEY ARE HOLDING STAFFING LEVELS WAY TOO HIGH FOR CURRENT ACTIVITY LEVELS. ALIX: WHY ARE THEY HOLDING ONTO STUFF? CONOR: THEY FEEL LIKE IT HAS BEEN TWO YEARS OF A DOWNTURN. THEY SEE THE RATE CUTS COMING. BRUNSWICK THE MAKER OF BOATS CALLED OUT SEPTEMBER AS WHEN THE FED WOULD START CUTTING RATES.
IS ALMOST LIKE COMPANIES TIED TO HOUSING BOATS AND CARS ARE WATCHING THE FED AS CLOSELY AS BANKS DO. IT IS UNUSUAL SITUATION. IN PRIOR RATE CUT CYCLES IT HAS BEEN A RESPONSE TO A RECESSION WHEN NOBODY IS BUYING ANYTHING.
HERE IT IS MUCH MORE TACTICAL COME INFLATION BASED AND COMPANIES ARE TRYING TO STAFF IN ADVANCE OF DEMAND THEY EXPECT TO COME. ALIX: IT IS LESS ABOUT THE ACTUAL CUT BUT THE IDEA WHEN THE CUT HAPPENS DEMAND IS GOING TO COME ROWING BACK AND THEY WANT TO BE STAFFED FOR IT. DOES THAT ALSO ROAR BACK WAGES? CONOR: A LOT OF THEM ARE CURRENTLY OVERSTAFFED FOR HOW MUCH DEMAND THEY HAVE. SO THEY FEEL LIKE DEMAND COULD RISE 10 OR 20% WITHOUT INCREASING STAFFING LEVELS. BUT A SUMMIT TO WATCH AFTER RATE CUTS PRESUMING WE GET THEM.
IF THE FED IS WORRIED ABOUT A HIRING TAKEOFF. A LOT OF THESE COMPANIES FEEL VERY STAFFED ALREADY. IT WOULD TAKE A LOT TO GET HIRING TO RAMP UP. IT IS WHAT WE NEED TO SEE HAPPEN BECAUSE THE UNEMPLOYMENT RATE HAS BEEN RISING. HIRING RATE HAS BEEN LOW. WE NEED TO O TO SEE A PICKUP IN HIRING. KATIE: WHAT IF WE DO GET A RATE CUT A TERMS INTO THE START AND STOP RATE CUTTING CYCLE? DOES THE MAGNITUDE MATTER HERE? CONOR: I THINK COMPANIES ARE SAYING WE DON'T HOW MANY CUTS WE ARE GOING TO GET.
HOWEVER MANY CUTS WE EXPECT IT WILL BOOST OUR DEMAND. WE ARE GUESSING HOW MUCH WILL THE HOUSING MARKET RESPOND. HOW MUCH WILL THE AUTO MARKET RESPOND. WE ARE NOT GOING TO KNOW INTO THE CUTS START. WE WILL SEE IF MORTGAGE RATES COME DOWN AS MUCH AS PEOPLE ARE EXPECTING. IT WILL SHAKE OUT IN THE FIRST HALF OF NEXT YEAR. WILL WE GET THE BOOST COMPANIES
ARE EXPECTING? IF WE DON'T COME EITHER THE FED HAS TO DO MORE WORK COMPANIES WILL START LAYING OFF PEOPLE THEY FEEL THEY DID NOT GET THE DEMAND BOOST EXPECTED. ALIX: IF WE GO MORE THE WAY OF THE ECB WHICH IS ONE CUT, HOLD FOR A BIT, THAT IS A DIFFERENT KIND OF WORLD. IN THE MEANTIME, WHAT ARE WE LOOKING AT IN TERMS OF MARGINS? WHEN IS THAT GOING TO GET MARGINS RELIEF? CONOR:CONOR: WE ARE GOING TO SEE A BIG PICKUP IN DEMANDS IN ORDER TO GET THAT RELIEF. ANY KIND OF DEMAND INCREASE COULD FLOW THROUGH TO THE BOTTOM LINE WHICH IS ONE OF THE REASONS WHY A LOT OF THESE STOCKS ARE DOING WORSE -- ARE NOT DOING WORSE. IT IS INTERESTING CAP MOUSE CAME OF DEMAND IS WEAK. INVESTORS ARE TRYING TO GAME
OUT HOW MUCH WILL DEMAND GROWTH AFTER SOME NUMBER OF CUTS. WE DON'T HOW MANY WE ARE GOING TO GET. YOU DON'T WANT TO BE THE ONE THAT SOLD THE BOTTOM BEFORE THE RATE CUT STARTED. KATIE:KATIE: TO WRAP IT ALL TOGETHER, THE TITLE OF YOUR PIECE IS BIG BUSINESS SIGNALS TO THE FED RATE CUTS OR LAYOFFS. DO YOU THINK THE FOMC MEMBERS ARE HEARING THAT MESSAGE? YOU THINK THEY ARE POURING THROUGH THEIR EARNINGS CALLS LIKE YOU ARE AND HAVE ALSO PICKED UP ON THIS? ALIX: CONOR OBVIOUSLY -- THEY ARE READING CONOR OBVIOUSLY. CONOR: FED MEMBERS ARE FOCUSED ON TALKING TO BUSINESSES ON THE GROUND. WE HAVE HEARD THEM TALK ABOUT
THE LABOR MARKET BE MORE BACK IN BALANCE. I SUSPECT THEY ARE ONTO IT. I THINK WEDNESDAY BE THE TEST OF THAT. IS THE FED WILLING TO ACKNOWLEDGE WHAT PEOPLE ON THE
GROUND ARE SEEING IN TERMS OF THINGS ARE IN BALANCE COME INFLATION HAS SLOWED, IT IS TIME TO CUT? IF NOT C, H NOT, THEY HAVE SOME HARD CHOICES TO MAKE. KATIE: A GOOD REMINDER IT IS NOT JUST FED ON WEDNESDAY. WE DO GET AN UPDATE FROM THE LABOR MARKET ON FRIDAY. IT IS A BUSY WEEK. ALIX: I HEARD BACK IN THE DAY WHEN YOU WERE HOUSEHUNTING AND YOU SAID NO. WITH -- IF RIGHTS GET CUT, IS KATIE GREIFELD PULLING THE TRIGGER HERE OR NOT? KATIE: TO EXTRAPOLATE, IT IS A GOOD QUESTION. A MUCH PENT UP DEMAND IS THERE
ON THE SIDELINES? I JUST SIGNED A TWO YEAR LEASE SO I AM OUT OF IT FOR A WHILE. THE HOUSING MARKET IS GOING TO BE FASCINATING WHEN YOU GET THE DROP IN RATES. ALIX:ALIX: ALL OF A SEVEN SUPPLY COMES ON. OUR RATES TOO HIGH? THAT MAKES IT MORE DIFFICULT. LET ME KNOW. KATIE: I WILL KEEP YOU UPDATED. COMING UP I'M A WE ARE WATCHING
CRYPTO STOCKS FLIP-FLOPPING AFTER FORMER PRESIDENT TRUMP'S KEYNOTE SPEECH AT THE BITCOIN CONFERENCE OVER THE WEEKEND. WE ARE GOING TO BREAK DOWN SOME OF THE MOVES. THIS IS THE CLOSE ON BLOOMBERG. >> THIS AFTERNOON, I'M LAYING OUT MY PLAN TO ENSURE THE UNITED STATES WILL BE THE CRYPTO CAPITAL OF THE PLANET AND THE BITCOIN SUPERPOWER OF THE WORLD. WE WILL GET IT DONE. ALIX: THAT WAS FORMER PRESIDENT DONALD TRUMP SPEAKING OVER THE WEEKEND ABOUT HIS PLANS FOR CRYPTO IF HE IS TO BE REELECTED.
CRYPTO STOCKS IN THE WAKE HAVE BEEN ON THE MOVE SINCE THOSE COMMENTS. ABIGAIL DOOLITTLE HAS BEEN TRACKING THE CRYPTO STOCKS. WE SAW A LITTLE BIT OF A REVERSAL TODAY. WHAT ARE WE SEEING IN THE EQUITIES? ABIGAIL: WE ARE SEEING A REVERSAL AS WELL. BITCOIN HIGHS ABOUT 3% ON THE DAY. NOW DOWN 1%. FEELS LIKE A CELL IN THESE
MOMENT. MICROSTRATEGY, COINBASE AND SOME OF THESE OTHER STOCKS LOWER. THIS SPACE UP IN HUGE WAY ON THE YEAR. STRATEGY UP 167% ON THE YEAR EVEN WITH TODAY'S DECLINE.
BITCOIN OFF OF THE APRIL LOWS UP ABOUT 40%. EXCUSE ME, THE JULY FOR FLOW OF 40%. SOME OF THIS WAS PRICED IN. THIS POSITIVE SHIFT FROM DONALD TRUMP. IT IS NEW FROM HIS FORMER
POSITION. IN TERMS OF THE IDEA HIS CAMPAIGN, THE MAGA AGENDA IS GOING TO TURN PRO CRYPTO, THAT ITSELF IS NOT NEW. SOME OF THE DETAILS OVER THE WEEKEND ARE A LITTLE BIT MORE FIERY I WOULD SAY. ALIX: HERE ARE TWO THINGS I DON'T GET. WHY ARE WE BELIEVING PRESIDENT TRUMP ON WHAT HE SAYS ANYWAY BECAUSE WE KNOW THINGS GET REVERSED AND I CAN IMAGINE ON AN AGENDA CRYPTO IS NOT FIRST IF HE GOES BACK IN THE WHITE HOUSE.
AND TWO, ARE WE JUST LOOKING FOR A CATALYST? THERE IS NO CATALYST IN THE CRYPTO MARKET RIGHT NOW. WE WENT THROUGH THE HALVING. NOW WE ARE JUST LOOKING FOR SOMETHING ELSE. ABIGAIL: YES, TO SOME DEGREE WE ARE
LOOKING FOR SOMETHING ELSE TO WHAT DONALD TRUMP MAY OR MAY NOW DO IF HE IS ELECTED INTO THE WHITE HOUSE. RELATIVE TO HIS AGENDA, I CANNOT ANSWER THAT. HE HAS COME OUT WITH A STRONG STANCE IN TERMS OF SAYING HE IS GOING TO GO FOR GARY GENSLER. HE IS GOING TO PUT SOMEBODY PRO CRYPTO INTO THE SEC. ARE GOING TO HAVE A STOCK PILE OF CRYPTO. I THINK HE USED THE WORLD -- THE WORD THE PLAN, THE U.S. CRYPTO CAPITAL OF THE PLANET.
IN TERMS OF LOOKING FOR SOMETHING, YES. . THERE'S NOT A LOT FUNDAMENTALLY THAT DRIVES BITCOIN OR CRYPTO. FOR SOME OF THE CRYPTO STOCKS, COULD BE THERE EARNINGS REPORTS. FOR BITCOIN ITSELF, IT IS HEADING UP AGAINST RESISTANCE AGAINST 70,000. MAKING IT ABOVE THAT LEVEL.
WE ARE GOING TO NEED SOMETHING SURPRISING. I WOULD ARGUE WE ARE GOING TO GO BACK DOWN INTO THE RANGE. THE LONGER-TERM TECHNICALS LOOK LIKE WE ARE GOING TO GO BACK DOWN TOWARD 40. COULD WE POP HIGHER IN THE NEAR ON SOME FROTH? ABSOLUTELY. THEY COIN IS GOOD OVER THE LONG TERM OF GOING HIGHER BUT CONSOLIDATING IN BIG CAPS DOWN AS IT DOES SO. KATIE: WE JUST HEARD FROM DONALD TRUMP
SPEAKING AT THIS CONFERENCE. WHAT DO WE KNOW ABOUT THE DEMOCRATIC STANCE ON CRYPTO? ABIGAIL: I HEARD JUST RECENTLY KAMALA HARRIS AS BECOME A LITTLE MORE POSITIVE. KATIE: TWO ETF'S GOT THROUGH. ABIGAIL: THAT IS EXACTLY RIGHT. I THINK SHE IS GOING TO BECOME A LITTLE MORE OUTWARDLY POSITIVE FROM WHAT I HAVE BEEN READING SO THAT IS NOT GOING TO BE SOMETHING THE CRYPTO PEOPLE OUT THERE COULD HOLD AGAINST HER. HE APPARENTLY HAS A LOT OF MONEY COMING TO HIM LIKE THE WINKLEVOSS TWINS. I GUESS THERE ARE SOME PACS BEING FUNDED BY CRYPTO.
I THINK SHE IS TRYING TO PROVIDE THE SENSE HER POTENTIAL ADMINISTRATION WOULD BE SOMEWHAT CRYPTO FRIENDLY AS WELL. KATIE: A LOT OF THESE CRYPTO PEOPLE, THERE ARE SINGLE ISSUE VOTERS ESPECIALLY IF YOU TAKE A LOOK AT SOCIAL MEDIA. IT MAKES SENSE THEY WOULD BE DONATING. ABIGAIL: THAT MAKES SENSE TO ME ALSO BECAUSE I THINK OF CRYPTO FOLKS AS THE GOLD BUGS. VERY EMOTIONAL. IT COULD BE BINARY. ALIX:
REALLY APPRECIATE IT. COMING UP, HAVE A NEAR COLLISION IN ONE OF TESLA'S AUTONOMOUS CARS LEFT AND ANALYST BEFUDDLED IN ITS FUTURE. FASCINATING CONVERSATION. THE SAME DAY, YOU HAVE MORGAN STANLEY UPGRADING TESLA TO THEIR TOP PICK. ALIX: IT IS JUST ABOUT 3:30 IN NEW YORK. THIS IS THE "COUNTDOWN TO THE
CLOSE." I AM ALIX STEEL. KATIE: AND I AM KATIE GREIFELD IN FOR ROMAINE BOSTICK. ALYX: BASICALLY SAYS THAT THE EV MAKER IS NOT CLOSE TO SOLVING AUTONOMY.
WILLIAM STEIN RECALLED HIS WILD DRIVE IN THE MODEL Y CAR SAYING IT ACCELERATED DOING AT INTERSECTION "WHEN THE CAR IN FRONT OF US HAD ONLY COMPLETED A RIGHT TURN, MY QUICK INTERVENTION WAS ABSOLUTELY REQUIRED TO AVOID AN OTHERWISE CERTAIN ACCIDENT." THAT STOCK IS UP BECAUSE MORGAN STANLEY UPGRADED IT TO TOP PICK. "BLOOMBERG TECHNOLOGY" HOST A AT LUDLOW JOINED US. ED: HE WAS USING VERSION 12.3.6 OF FULL SELF-DRIVING SUPERVISED.
IT IS ABSOLUTE. THE NEW VERSION CAME OUT OVERNIGHT. I GOT IT FRIDAY. I USED 12.5 SATURDAY AND RECORDED MY EXPERIENCE ON THE SOCIAL MEDIA WEBSITE X. IT'S AN IMPROVEMENT. THE MAIN POINT TO CLARIFY IS THAT WHAT WILLIAM STEIN AT TRUIST IS DOING, IS TAKING A SPECIFIC COMMENT ELON MUSK MADE TO THAT FIRST AND SECOND QUARTER EARNINGS CALLS, WHICH IS INVESTORS SHOULD JUDGE TESLA'S ABILITY TO SOLVE FULL AUTONOMY BUT GOING OUT AND EXPERIENCING THEMSELVES. IF HE IS SAYING, MY EXPERIENCE BASED ON THIS NOW OBSOLETE VERSION OF THE SOFTWARE IS THAT IT IS NOT READY TO SOLVE AUTONOMY.
THAT BY EXTENSION, HE DOESN'T SEE THE JUMP. IF WE WENT TO THE ROBOTAXI EVENT ON OCTOBER 10, IT IS HOW DO WE GET THIS CONSUMER CAR SOFTWARE THAT HAS EXPERIENCES LIKE THIS TO A FUTURE WHERE TESLA VEHICLES DRIVE US AROUND IN THE BACKSEAT. HE DOESN'T SEE THAT JUMP. HE WILL BE ON MY SHOW TOMORROW AND I WILL ASK HIM A LOT OF TOUGH QUESTIONS THE AUDIENCE HAS ASKED ME TO ASK HIM. KATIE: LOOKING FORWARD TO THAT
CONVERSATION. OF COURSE, TESLA SHARES ARE UP 5% TODAY SO THIS IS NOT EXACTLY DENTING THE STOCK. NEW YORK, IT'S A BIG WEEK FOR TECH EARNINGS AND A LOT OF FOCUS ON IT I. THE NAMES REPORTED, THERE HAS BEEN A LOT OF SKEPTICISM, A LOT OF SHOW ME THE MONEY WHEN IT COMES TO YOUR ROI ON AI SPEND. WHAT ARE YOU LOOKING FOR? ED: YOU HAVE TO LOOK FOR COMMONALITY BETWEEN THE AI NAMES. AS A BIT LAST WEEK.
THIS WEEK, META, AMAZON AND INTEL. SO THEY WANT TO BE TOLD, TELL US THAT EVERY DOLLAR YOU HAVE INVESTED INTO AI, HOW MANY DOLLARS ARE COMING OUT. OUTSIDE THAT SAID, YEAR TO DATE WE HAVE MADE BILLIONS OF DOLLARS ON GENERATIVE AI AND AI INFRASTRUCTURE WITHOUT CLOUD BUSINESS.
BUT THAT WAS NOT ENOUGH FOR MANY. THEY WANT SOMETHING MORE IN LAYMAN'S TERMS FOR THE FORMULA ON THAT. ALIX: SHOW ME THE MONEY! [LAUGHTER] KATIE: THAT IS WHAT EARNINGS SEASON IS ALL ABOUT. ED, GOOD TO SEE YOU. YOU WILL BE A BUSY MAN THIS WEEK. THAT IS BLOOMBERG'S ED LUDLOW. IN ADDITION TO TECH EARNINGS THIS WEEK, INVESTORS WILL GET A KICK OUT OF TONIGHT'S FIRESIDE CHAT ON AI BETWEEN NVIDIA CEO JENSEN HUANG AND META'S CEO MARK ZUCKERBERG. JOINING US IS OLIVIER
BLANCHARD, DIRECTOR OF THE FULL-TERM GROUPS. NVIDIA MAKES THE CHIPS. META MAKES PRODUCTS THAT USE THE CHIPS. WHAT DO YOU THINK THE CONVERSATION WILL SOUND LIKE? OLIVIER: IT ECHOES WHAT ED WAS TALKING ABOUT, WHICH IS SHOW ME THE MONEY. IT'S IMPORTANT AT THIS JUNCTURE FOR NVIDIA AND FART META TO START TELLING A MORE COMPLETE STORY ABOUT THE TRAJECTORY OF BOTH THEIR COMPANIES AND THE INTERSECTION OF AI AND HOW AI CAN ENABLE THE USE CASES, USER EXPERIENCES AND PRODUCTS AND REVENUE STREAMS THAT THEY WILL BE WORKING ON AND INVESTING IN FOR THE NEXT TWO YEARS. LIKEWISE, IT'S IMPORTANT FOR
NVIDIA TO SHOW A BROADER STORY ABOUT HOW IT'S NOT JUST ABOUT THE CHIPS, ULTIMATELY, IT'S ABOUT THE EXPERIENCE AND CAPABILITIES THAT NVIDIA AND OTHER CHIPMAKERS CAN BRING INTO THE ECOSYSTEM AND HOW AI CAN ENABLE A LOT OF THE USE CASES. NOT NECESSARILY WHAT WE THINK OF AS AI, BUT ARE. ALIX: DEFINITELY AI ENABLED THAT IS INTERESTING IN TERMS OF META. GOOGLE AND MICROSOFT AT LEAST
HAVE CLOUD OFFERINGS THEY CAN INCORPORATE WITH AI. AT LEAST THEY HAVE A REVENUE STREAM. I DON'T KNOW WHAT META HAS TO SHOW FOR THAT. OLIVIER: SO FAR, NOT QUITE A LOT. ON THE ONE HAND YOU HAVE MADE OUR AND ITS LLAMA 3.1, A LANGUAGE MODEL TO BEGIN WITH WHICH IS OPEN SOURCE.
MARK ZUCKERBERG TALKED ABOUT IT AT LENGTH LAST WEEK AND WAS INTRODUCED AS A BIG OPEN SOURCE VERSION OF LARGE LANGUAGE MODELS TO COMPETE AGAINST SOME OF THE MORE PRIVATE ONES. THAT IS ONE ASPECT OF IT. AND ANOTHER ONE IS, LET'S NOT FORGET META ESSENTIALLY OWNS THE EXAR BUSINESS. THE XTERRA SPACE. YOU HAVE VIRTUAL REALITY, MIXED REALITY, VIRTUAL REALITY, AND GLASSES. ON THE UNDERHANDED WILL BE ENABLED BY VOICE DEMANDS, AND AI ASSISTANTS ALLOWING YOU TO GO HANDS-FREE ON THESE DEVICES WHICH I THINK WILL MAKE THEM MORE ACCESSIBLE TO A LOT OF CONSUMERS AND USERS. BUT ALSO THERE IS THE CONTENT
CREATION. THE ENTERTAINMENT. THE GAMING. THE VIRTUAL ECOSYSTEMS THAT WILL NEED TO BE BUILT. AI PLAYS A PART OF THAT. THERE IS THAT REVENUE PIECE THAT RESETS MARK ZUCKERBERG'S VISION FOR THE METAVERSE, WHICH I THINK WAS LACKING AND NOT PARTICULARLY A SHORT TWO YEARS AGO WHEN IT FLOPPED. BUT FIVE OR SIX YEARS FROM NOW,
WE WILL BE ABLE TO GET BACK TO THAT AND I THINK IT WILL SHOW HOW MUCH AI WILL HELP BUILD THAT. THE THIRD PIECE IS THE ROLE THAT AI PLAYS IN ENTERTAINMENT U AND FORUX KATIE: BROUGHT UP TIMELINES. WHEN IT COMES TO ESPECIALLY SOME OF META'S PRODUCTS LIKE YOU MENTIONED THE GLASSES. EVEN IF YOU PUT AI ON IT, HOW LONG WILL IT TAKE FOR THAT TO PENETRATE INTO THE BROADER PUBLIC WHERE PEOPLE REGULARLY USE THESE THINGS? I THINK OLIVIER: WE ARE ALREADY STARTING TO SEE THAT. LAST YEAR ONE OF THE STANDOUT PRODUCTS DID NOT MAKE A HUGE FLASH, BUT IT WAS SORT OF A HARBINGER OF WHAT IS TO COME. IT WAS THE SMART GLASSES THAT MET OUR FOOT OUT WITH RAY-BANS -- META PUT OUT WITH RAY-BAN.
THEY ENABLE SOME OF THESE USE CASES IN XR PLATFORMS. IT'S ESSENTIALLY THE ABILITY TO TELL YOUR DEVICE TO DO THINGS AT THE TALK TO IT MUCH IN THE WAY THAT NOW TALKING TO DEVICES WHETHER IT IS YOUR PHONE OR SMART SPEAKER, INCREASINGLY YOUR PC, WILL BE A REGULAR PART OF HOW WE DO THINGS, HOW WE TELL OUR DEVICE TO DO SOMETHING FOR US AND ESSENTIALLY CAN ENABLE AGENTS AND ASSISTANTS THAT ARE VOICE ACTIVATED. ALL OF THAT WILL PENETRATE THE XR SPACE AS WELL. ONE OF THE ISSUES WITH XR IS THAT IT SEEMS COOL. WE SEE IT IN MOVIES. BUT IT IS DIFFICULT TO ACTUALLY
CREATE VALUE FOR EVERYDAY USERS BECAUSE YOU STILL NEED A KEYBOARD. YOU NEED TO BE ABLE TO TALK TO IT AND IT NEEDS TO BE ABLE TO UNDERSTAND YOU. HAVING MUCH MORE ADVANCED AI CAPABILITIES, NOT JUST THROUGH CONNECTIVITY WITH ACTUALLY LIVING IN THE DEVICE, WILL ENABLE THIS. IF YOU CAN TALK TO YOUR DEVICE
AND ASK IT TO DO THINGS, YOU DON'T NEED TO BE HOLDING YOUR PHONE AND TAPPING THE SCREEN TO TALK TO IT, YOU CAN TALK DIRECTLY TO YOUR GLASSES AND IT CAN INTERFACE WITH YOU. I THINK THAT IS WHERE WE ARE GOING TO SEE THAT SPACE KIND OF ACCELERATE A BIT IN THE NEXT THREE TO FOUR YEARS. ALIX: WHAT HAPPENS IF I PUT MY GLASSES DONE AND I CAN FIND THEM? HOW CAN AI HELP ME FIND MY GLASSES? YOU KNOW WHAT I AM SAYING? [LAUGHTER] HAPPENS A LOT. THANKS A LOT, OLIVIER BLANCHARD, RESEARCH DIRECTOR AT THE FUTURUM GROUP. COMING UP, 3M'S NEWEST CEO IS IMPRESSING ANALYSTS AT DEUTSCHE BANK.
WE WILL TALK ABOUT THAT NEXT IN TOP CALLS AND GET DETAILS ON HIS LONG-TERM STRATEGY. THIS IS "THE CLOSE," ON BLOOMBERG. ALIX: TIME FOR OUR TOUGH CALLS, AND LOOK AT THE BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. TODAY WE WANTED TO HIGHLIGHT 3M, THE CONGLOMERATE THAT MAKES EVERYTHING FROM TAPE TO OFFICIAL MUSTS. AN ANALYST AT THE STUDY SAYS SHE WAS IMPRESSED WITH CEO BILL BROWN WHO STARTED IN MARCH. SHE CALLED HIS FOCUS STRATEGIES WELL THOUGHT OUT. YES, SHARES ARE DOWN 1.5
PERCENT TODAY, BUT THEY WERE OF A RECORD AMOUNT FRIDAY. JOINING US WITH MORE IS ANALYST BEHIND THAT CALL, NICO THE BLOUSE, MANAGING DIRECTOR AT DEUTSCHE BANK. IT'S BEEN A WHILE SINCE WE HAD AN INDUSTRIAL CONGLOMERATE ACTUALLY START TO REALLY SHINE. WAS THIS SURPRISING TO YOU? NICOLE: YEAH. I MEAN, I THINK WE HAD HIGH EXPECTATIONS GOING INTO FRIDAY BECAUSE WE HAD HEARD GOOD THINGS ABOUT BILL BROWN FROM HIS TENURE AT THE COMPANY EARLIER BUT WE WANTED TO HEAR HIS MESSAGE FROM HIMSELF AND HIS KEY PRIORITIES BEFORE MAKING A DECISION ABOUT WHAT TO DO WITH THE STOCK. KATIE: INTERESTING TO READ THROUGH YOUR REACTION, YOUR ANALYSIS AND ALSO WITH THE REST OF THE STREET IS SAYING. YOU HAVE J.P. MORGAN HIGHLIGHTING HIS
CONSERVATISM. YOU HAVE RBC SAYING PERHAPS HE IS SETTING UP A STRATEGY OF UNDER-PROMISE AND OVER-DELIVER AND WHEN IT COMES TO MANAGING EXPECTATIONS. DID YOU GET THAT SENSE AS WELL? NICOLE: I COMPLETELY AGREE. STARTING WITH JUST THE GUIDANCE FOR THIS YEAR. THEY BEAT EARNINGS BY 18% . ONLY RAYS OF THE FULL-YEAR
GUIDANCE BY 2%. IF THEY HAVE BEEN EXECUTED OVER THE WORLD. TOP LINE WAS BETTER THAN EXPECTED. THE OPPORTUNITY FOR MARGINS TO
VENT AND IMPROVING FROM THE SECOND HALF. WE WOULD ARGUE THAT EVEN THE GUIDANCE FOR 2024 LOOKS VERY GOOD. ALIX: TOO CONSERVATIVE SO THERE IS THAT OF SAID. THE CORE BUSINESSES ARE SUFFERING. HE'S IS TO FOCUS ON AUTOMOTIVE -- AUTOMATION AND CLIMATE TECH. WHAT DO YOU THINK THE RESULTS LOOK LIKE FROM THOSE SECTORS? NICOLE: I THINK WE MORE EXCITED ABOUT THE COST OPPORTUNITY HERE WITH BILL BROWN AS CEO. FROM AN ORGANIC GROWTH
PERSPECTIVE, 3M IS AN EXTREMELY DIVERSE COMPANY. EVEN BILL BROWN WILL ADMIT THAT THIS IS MORE OF A GROSS DOMESTIC PRODUCT GROWER. WE THINK THEY COULD POTENTIALLY REINVIGORATE ORGANIC GROWTH TO THE 3% RANGE RELATIVE TO A 1% AVERAGE IN THE LAST DECADE. KATIE: REFLECTING ON HOW MUCH FEET 3M JUMPED ON FRIDAY, 23%, BIGGEST ONE-DAY GAIN SINCE, WHAT, THE 1980'S? EVER. SO WHEN HE THINK ABOUT THE REST
OF THE INDUSTRIAL COMPANIES THAT YOU COVER, IS IT POSSIBLE SOME OF THE BOARDS AT THE OTHER COMPANIES ARE TAKING A LOOK AT WHAT HAPPENED AT 3M AND SAYING MAYBE WE SHOULD SHAKE UP THE C SUITE? OR AM I GETTING TOO AHEAD OF MYSELF. NICOLE: I THINK WE ARE RUNNING OUT OF TRADITIONAL CONGLOMERATES IN THIS SPACE. WE HAVE SEEN COMPANIES. THINK OF GE. MANY EXAMPLES OF COMPANIES THAT HAVE GONE FROM BEING HUGE, CLEVER RATES CLOSER TO PURE PLAY'S AND FOR A LOT OF THEM THAT STRATEGY, FOR 3M, IT SPUN OFF ITS HEALTH CARE BUSINESS EARLIER THIS YEAR. BECOMING MORE FOCUSED IS SOMETHING INVESTORS REALLY WANT TO SEE NOW AND I THINK THAT IS DEFINITELY SOMETHING THAT OTHER CONGLOMERATES SHOULD BE THINKING ABOUT. ALIX: ALRIGHT, NICOLE, WE APPRECIATE IT, NICOLE DEBLASE AT DEUTSCHE BANK.
AND HONEYWELL COMING FRONT AND CENTER ON THAT. IT IS A HUGE KOBLEVO AND HAS REALLY STOOD BY ITS CONGLOMERATE STANCE, DESPITE PRESSURE FROM INVESTORS AND SHAREHOLDERS TO SPIN ITSELF OFF. COMING UP, WE WILL CONTINUE TO COUNT YOU DOWN TO THE CLOSING BELLS.
NANCY TENGLER IS CFO AND CIO AT LAFFER TENGLER INVESTMENTS, AND WILL BE BREAKING THINGS DOWN AS WE GO. S&P IS JUST UP 0.3%. >> MANY ARE GOING TO LOOK TO THIS WEEK IS A BIT OF A DOVISH HOLD FROM HERE AND THERE ARE NOT GOOD TO HEAR FROM JAY POWELL WHAT ARE WE DOING NEXT. IT IS UNLIKELY THAT HE
INDICATES THE TIMING. I THINK IT IS CLEAR HE WILL FOLLOW THAT THE NARRATIVE THAT THE DIRECTION IN WHICH SEPTEMBER SEEMS LIKELY. SO THE>> MARKET IS REALLY POISED FOR THIS IDEA THAT THE FED MESSAGE WILL BE DOVISH, SO IF YOU GET ANYTHING DIFFERENT FROM THAT, I THINK THE MARKET WOULD BE SURPRISED, THAT TYPE OF HAWKISH MESSAGING FROM HERE. ALIX: ALIX: THAT WAS ALEX PETRONE, DIRECTOR OF FIXED INCOME AT -- ASSET MANAGEMENT.
IF THE NOTHINGBURGER TODAY. YOU'RE SEEING ENERGY IS THE WORST PERFORMING SECTOR ON THE S&P, BUT WE ARE OFF THE SESSION. SEEMS TO MAKE SENSE. KATIE: ABSOLUTELY. YOU LOOK AT THE ROTATION, IT'S NOT JUST LARGE TO SMALL. IT'S ALSO SECTOR TECH SECTOR.
BASICALLY HEDGE FUNDS ARE UNWINDING THEIR BETS IN INDUSTRIALS AT INSTEAD, GOING TO ENERGY AND MATERIALS. THERE IS A LOT OF ACTION UNDER THE HOOD. ALIX: GOOD POINT. LET'S GET MORE ANALYSIS WITH NANCY TENGLER, CEO AND CIO OF LAFFER TENGLER INVESTMENTS. DO YOU BUY THE ROTATION, SMALL CAPS AWAY FROM TECH, OR IS IT WITHIN THE S&P SECTORS? NANCY: IF YOU LOOK HISTORICALLY AS YOU HAVE DONE, OVER THE LAST 20 YEARS, SMALL CAPS HAVE UNDERPERFORMED BY 250 PERCENTAGE POINTS. IN 2000, THEY STILL UNDERPERFORMED OF THE A LOT LESS. I THINK YOU NEED REALLY AGGRESSIVE RATE CUTS FROM THE
FED WHICH I DON'T THINK WE WILL GET, TO SUSTAIN THAT TRADE INTO MORE OF AN INVESTMENT. IF YOU WANT TO ROTATE WITHIN THE S&P WHICH IS WHAT WE HAVE BEEN DOING. ALIX: ROTATE TO WHERE? GOLDMAN WAS LOOKING AT HEDGE FUNDS SELLING INDUSTRIALS AND BUYING THINGS LIKE ENERGY AND COMMODITIES. WHAT DO YOU THINK? NANCY, WE WERE ALREADY THERE. SO WHAT WE HAVE BEEN DOING IS FOLLOWING OUR THEME.
WHICH I HAVE TALKED ABOUT ON YOUR SHOW AT TIMES, OLD ECONOMY COMPANIES EMBRACING THE DIGITIZATION OF THE ECONOMY AS WELL AS CLOUD COMPUTING AND GENERATIVE AI. SO WE LIKE A NUMBER OF SPECIFIC STOCKS WITHIN SECTORS, AS WELL AS THE SUPPLIERS OF THE PICKS AND SHOVELS. SO WE RECENTLY ADDED EMERSON. WE ADDED TO OUR POSITION IN QUANTA SERVICES. OUR POSITION IN PROLOGIS THESE REPRESENT THE. . OLD ECONOMY COMPANIES THAT ARE IN THE SWEET SPOT OF THE MOVEMENT INTO GENERATIVE AI. SERVICENOW IS ONE OF OUR BIGGEST HOLDINGS IN OUR 12 BEST IDEAS PORTFOLIO. KATIE:. KATIE: THAT IS THE SECOND TIME IN A
WEEK SOMEONE HAS BROUGHT UP AT. THEIR PERFORMANCE IN THE PAST YEAR HAS BEEN VERY IMPRESSIVE. BUT I WANT TO GO BACK TO THAT THEME, OLD ECONOMY NAMES EMBRACING AI. IT HAS BEEN INTERESTING SO FAR THERE'S EARNINGS SEASON, SHOW ME THE MONEY IMPULSE. WE WANT TO SEE THE RETURN ON INVESTMENT FOR WHAT YOU ARE SPENDING IN AI. WHEN YOU LOOK AT THE NAMES THAT YOU LIKE, HOW PATIENT DO YOU HAVE TO BE? NANCY: I HAVE DRAWN AN ANALOGY FOR ALMOST TWO YEARS NOW TO THE 1990'S WHEN I WAS MANAGING MONEY, AND THIS IS SO MUCH DIFFERENT THAN THAT, BUT ANALOGOUS IN SO MANY WAYS.
WHAT I MEAN BY DIFFERENT IS, THIS IS A MUCH MORE ROBUST COLLECTION OF TECHNOLOGIES THAT WE ARE CONTENDING WITH. WE ARE IN EARLY INNINGS OF REALLY SEEING THE USE CASES AND BENEFITS FOR GENERATIVE AI. SO IF GOOGLE HAS TO SPEND 48 MILLION DOLLARS IN CAPEX AND THEY STILL GENERATE $70 BILLION IN FREE CASH FLOW, I AM OK WITH THAT AS LONG AS EVENTUALLY THEY DO MONETIZE IT. AND WE SAW SOME GREEN SHOOTS IN THAT REGARD DURING THE LAST EARNINGS REPORTS. SO I THINK THIS IS AN OPPORTUNITY TO ADD TO GOOGLE. WE WILL SEE WHAT MICROSOFT HAS TO SAY TOMORROW.
BUT IF YOU JUST LOOK AT THE LARGE CAP TECHNOLOGIES NAMES, THEY HAVE THE BEST BALANCE SHEETS, THE BEST FREE CASH FLOW, IN THE BEST EARNINGS AND THAT IS THE FORESEEABLE FUTURE. I WOULD CONTINUE TO USE WEAKNESS, AS WE DID IN THE SUMMER OF 20 WHEN WE WERE TOLD THE TECH TREND WAS OVER, RIGHT BEFORE CHATGPT. AND AGAIN THIS SUMMER. WE HAVE BEEN SELLING IN JULY AND WILL BE ADDING BACK IN THE COMING WEEKS AND MONTHS. KATIE: SO CONVICTION THERE WHEN IT
COMES TO TECH. HE SAID SMALL CAPS BEING A TRADE AND INVESTMENT. WHAT WOULD TURN IT INTO AN INVESTMENT? DO YOU NEED TO SEE AGGRESSIVE RATE CUTS? IF YOU SAW SOMETHING TRULY IMPRESSIVE ON THE EARNINGS FRONT, WOULD THAT BE ENOUGH? NANCY: YES, FUNDAMENTALLY THAT IS WHAT WE WOULD LIKE TO SEE. IF YOU LOOK AT THE FLOATING-RATE DEBT IN MANY OF THESE COMPANIES, IT IS SUPER HIGH. YOU NEED TO SEE IT NOT JUST ONE RATE CUT IN SEPTEMBER, OR TWO BY DECEMBER. DO YOU NEED TO SEE A SERIES OF RAPID RATE CUTS, I THINK, FOR THESE, STOCKS FOR THE FUNDAMENTALS TO IMPROVE.
BUT THAT DOESN'T ALWAYS INFLUENCE WALL STREET. THERE IS A LOT OF TRADES GOING ON WITH ALGORITHMS AND HEDGE FUNDS. YOU SEE THESE MOVES IN AND OUT. I WROTE A PIECE ABOUT HOW IF NOT OWNING NVIDIA, THERE WAS A QUOTE IN THE WALL STREET JOURNAL, IT WAS LIKE HAVING A ROOT CANAL WITHOUT NOVOCAIN. IT'S NOT EVEN CLOSE.
THAT STOCK HAS SOLD OFF PRETTY SERIOUSLY SINCE THEN. YOU DON'T WANT TO CHASE THESE THINGS. IF YOU WANT VOLATILITY TO BE YOUR FRIEND AND BUY WHEN THINGS ARE WEAK. ALIX: WHY WOULD YOU WANT A ROOT CANAL WITHOUT NOVOCAIN? [LAUGHTER] NANCY: BAD DENTIST. I WAS A KID. MY PARENTS. -- IT WAS CRAZY ULTIMATELY YOU JUST PASS OUT. KATIE: OH MY GOD!
[LAUGHTER] ALIX: THAT SOUNDS TERRIBLE, NANCY. GOING TO SMALL-CAP NAMES. IT'S INTERESTING, THAT ANALYST WAS TALKING ABOUT THE FACT THAT USUALLY FOR SMALL CAPS TO TRULY OUTPERFORM AND MAINTAIN THAT, YOU NEED TO HAVE A RECESSION. IF THAT IS THE CASE AND WE HEAD INTO MORE TURBULENT ECONOMIC TIMES, WHAT WORKS IN THAT ENVIRONMENT? NANCY: DEFENSIVE NAMES. SHE IS RIGHT ABOUT THAT. THAT IS WHY IF YOU GO BACK AND LOOK AT THE SMALL CAPS BEFORE THE MARKET CORRECTED IN 2000, YOU SEE A MUCH DIFFERENT CUMULATIVE RETURN THAN YOU DO OVER THE LAST 20 YEARS, FOR EXAMPLE, BUT YOU WOULD WANT TO OWN DIVIDEND NAMES. DIVIDEND-GROWERS.
AND DEFENSIVE NAMES. SO, REITS, AND ELECTRIC UTILITIES AND CONSUMER STAPLES BEGIN TO LOOK ATTRACTIVE AGAIN. WE GOT A BRIEF IN THAT RALLY IN THE FALL AS WE DID IN SMALL CAPS, BUT I JUST DON'T SEE THE FED CUTTING THAT RAPIDLY AND I DON'T SEE RECESSION.
SO YOU WANT TO STAY IN THE RELIABLE EARNINGS GROWERS AND THAT IS THESE NAMES I JUST MENTIONED, AS WELL AS THE OLD-ECONOMY COMPANIES I MENTIONED AS WELL. ALIX: NANCY, WE APPRECIATE YOU. CEO AND CIO OF LAFFER TENGLER INVESTMENTS. THANK YOU VERY MUCH. ON TOP OF THAT STOCK YOU GET 40% OF OUR NECKS FROM THE S&P THIS WEEK AND ABOUT $15.3
TRILLION IN MARKET CAP FOR THE WHOLE WEEK REPORTING. KATIE: IN THE EMBARRASSMENT OF RICHES, TOO, YOU THINK ABOUT THE FED I PICTURE AND THE ECONOMIC DATA, IT'S A BUSY WEEK. ALIX: WE ARE LOOKING AT THE OPTIONS MARKET. CITI WAS LOOKING AT A 110-BASIS-POINT MOVE FROM THE S&P. WE ARE GETTING CLOSER TO THE CLOSING BELL. FULL MARKET COVERAGE RIGHT HERE ON BLOOMBERG. ♪ >> "THE CLOSING BELL,"
BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ALIX WE ARE ABOUT TWO MINUTES AWAY FROM THE END OF THE TRADING DAY ON THIS MONDAY OF A VERY BUSY WEEK. ALIX STEELE AND KATIE GREIFELD HERE TO HELP YOU TAKE YOU THROUGH THE CLOSING BELL. WITH OUR GLOBAL SIMULCAST, WE ARE JOINED BY TIM STENOVEC AND EMILY GRAFFEO BRINGING TOGETHER OUR TELEVISION, RADIO AND YOUTUBE AUDIENCES WORLDWIDE TO PARSE THROUGH THE MOST CRUCIAL MOMENTS OF THE TRADING DAY. BUT, IT'S OF THE LUMBAR AND RIGHT NOW. TIM: I AGREE. BUT IT'S BORING FOR A REASON. WE HAVE THE FED KICKING OFF ITS
TWO DAY WE'VE GOT JULY EMPLOYMENT FIGURES COMING ON FRIDAY. WE'VE GOT A HUGE NUMBER OF EARNINGS THIS WEEK INCLUDING FROM-FOR-OF -- FOUR OF THE MAG SEVEN. SO I THINK THE MARKET IS TAKING A STEP BACK AND SAY LITTLE WILL WAIT AND SEE WHAT JAY POWELL SAYS.
EMILY: AND REALLY TAKING A STEP BACK FROM THE RUSSELL 2000, INVESTORS MOVING OUT OF MEGACAP TECH STOCKS INTO SMALLER NAMES, IT WAS NOT PLAYING TODAY WITH THE RUSSELL DOWN OVER 1%. KATIE: YES, IT'S REALLY INTERESTING. WE WERE JUST TALKING TO NANCY TENGLER WHO SAID THAT BASICALLY THIS ROTATION INTO SMALL CAPS IS A TRADE. YOU WOULD NEED TO SEE AN AGGRESSIVE RATE CUTTING CYCLE OR IMPRESSIVE EARNINGS. WE WILL SEE IF THAT
MATERIALIZES. BUT TODAY THE ROTATION TRADE IS REALLY TAKING PAUSE. ALIX: WHAT'S INTERESTING IS I KEEP GETTING NOTES TALKING ABOUT SYSTEMIC FUNDS LIKE VOLATILITY FUNDS, CTA'S , THAT THEY WILL HAVE TO KEEP SELLING IF VOLATILITY WINDS UP PICKING UP. YOU HAVE TO WONDER WHERE THAT BUILDING WAS TODAY. [CLOSING BELL RINGING AND CHEERS] THERE IT IS.
NOTHING TO SEE HERE, GUYS. MAYBE TOMORROW WILL BE MORE EXCITING WHEN I GET MICROSOFT. VOLUME ALSO VERY LIGHT. THE S&P LOOKS PRETTY FLAT, JUST UP BY FOUR POINTS. DOW JONES OFF BY ZERO POINT 1%. NASDAQ PRETTY MUCH FLAT, AP BY 12 POINTS. TIM: MAYBE FOLKS ARE ON VACATION. MAYBE THEY'RE JUST WAITING FOR WHAT HAPPENS LATER THIS WEEK.
TO THE S&P 500, TWO 77 STOCKS MOVED HIGHER. LET'S -- 276. 273 DECLINED. KATIE: LET'S LOOK AT SECTOR LEVEL. WE HAD MORE GREEN THAN RED. SEVEN SECTORS IN THE AGREEMENT LED BY CONSUMER DISCRETIONARY, UP BY 1.4%.
HELPS WHEN YOU HAVE TESLA UP ONE POINT -- 5.6 PERCENT. TESLA IS THE CONSUMER DISCRETIONARY STOCKS, A REMINDER. ENERGY LEADING THE WAY TO THE BOTTOM, DOWN ABOUT 0.9 PERCENT. FOLLOWED QUICKLY BY TECH, OFF BY 0.3%.
TIM: OK, STUXNET MOVED HIGHER. YOU MENTIONED CONSUMER DISCRETIONARY STOCK TESLA, SHARES FINISHED THE DAY HIGHER AND MORE THAN 5%. THE REASON THEY RALLIED TODAY SO IT IS BECAUSE MORGAN STANLEY NAMED THE COMPANY AS IF NO TOP PICK WITHIN THE U.S. AUTO SECTOR, REPLACING FORD.
ADAM JONAS AT MORGAN STANLEY MAINTAINED HIS OVERWEIGHT RATING AND HAD A STREET HEIHIGH $310 FOR RATING ON TESLA. COST CUTS AND RESTRUCTURING HAVE HELPED RESTRICT THE DOWNSIDE OF TESLA'S EV BUSINESS ACCORDING TO THE ANALYST AT MORGAN STANLEY. SHARES ARE HIGHER BY 6% TODAY. SEMI CONDUCTOR SHARES, RISING DOUBLE DIGITS, ON SEMI IS UP MORE THAN 11%. THE COMPANY REPORTED SECOND-QUARTER ADJUSTED EARNINGS PER SHARE THAT CAME IN AHEAD OF ESTIMATES. THIRD-PARTY GUIDANCE WAS MIXED. INVESTORS SHRUG IT OFF THAT MIXED ELEMENT OF THE SENATE SHARES HIGHER BY 11.5%. MCDONALD'S OUT EARLY BEFORE THE BELL THIS MORNING. WITH ITS LATEST REPORT.
INVESTORS SHRUGGING OFF THE COMPANY'S FIRST SALES DROP IN FOUR YEARS. EXECUTIVES PLEDGED PROMOTIONS TO HELP STEM THE DECLINE IN CUSTOMER VISITS. COMP STORE SALES FELL FROM 1% FROM A YEAR PRIOR IN THE SECOND QUARTER AND SHORT OF ANALYST EXPECTATIONS.
EACH OF ITS GEOGRAPHIC SEGMENT ALSO SAW SALES DECLINES, THOUGH THE DECLINE IN SAME-STORE SALES SEEMS TO HAVE BEEN BETTER THAN WALL STREET EXPECTED. SHARES FINISHED THE DAY HIGHER BY 3.7% BUT THEY DID RISE MORE THAN 4% IN INTRADAY TRADING. ALIX: ARE WE NOT ENTER MCDONALD'S? LET'S NOT A THING FOR YOU? TIM: I HAVEN'T BEEN TO MCDONALD'S AND MANY YEARS. APPARENTLY THE FIVE DOLLAR MENU
IS BACK. THE AVERAGE CHECK WITH THAT COMES IN AT $10. SO IT IS DOING ITS JOB WITH GETTING PEOPLE IN. REMAINS TO BE SEEN HOW THEY ADD TO THE VALUE MENU TO KEEP BRINGING FOLKS IN. I DON'T KNOW HOW THEY DO IT FOR SO LITTLE MONEY.
ALIX: IT'S THE CLASSIC'S COMPANY THING, YOU HAVE VOLUME VERSUS MARGIN AND IF YOU GET ENOUGH PEOPLE IN THE DOOR THEY WIND UP HELPING YOUR MARGINS AT THE END OF THE DAY? TIM: YOU JUST HOPE THEY KEEP BUYING MORE AND MORE SODA BECAUSE THE MARGINS ON SODA ARE SO GOOD. [LAUGHTER] EMILY: TALKING SODA AND BURGERS. I AM TALKING BEERS. ADRS DROPPING OVER 10% TODAY, WORST SINCE 2020 AFTER THE COMPANY SAID IT TOOK A ONE TIME IMPAIRMENT OF ROUGHLY $949 MILLION FOR THE DECLINE IN VALUATION OF ITS STAKE IN CHINA'S LARGEST BROWER. THAT DR. BREWER CITED A FALL IN
ITS STAKE IN CHINA RESOURCES BUREAU FOR THIS COMPANY DUE TO CONCERNS ABOUT CONSUMER DEMAND IN CHINA MAINLAND THAT HAVE AFFECTED ITS SHARE PRICE. THEY ALSO SAID CONSUMER SPENDING IS UNDER PRESSURE IN BOTH THE U.S. AND EUROPE. ALSO LOOKING AT SHARES OF CHARLES SCHWAB. THAT STOCK IS DOWN ABOUT 2%
AFTER IT WAS DOWNGRADED TO NEUTRAL FROM OVERWEIGHT AT PIPER SANDLER. THE ANALYST SAID THE TENETS OF HIS BULLISH ARGUMENT HAD NOT MATERIALIZED, AND THAT HE EXPECTS UNCERTAINTY AROUND THE FARM'S STRATEGIC SHIFT -- AROUND THE FIRM'S STRATEGIC SHIFT TO WHEELCHAIRS. THE FIRM HAD SAID EARLIER THIS YEAR THAT IT WOULD RELY MORE ON PARTNERSHIPS. FINALLY, INTEGRA LIFESCIENCES STOCKS PLUNGING. A LITTLE BIT OF A RECOVERY. THE FIRM ALSO GIVE GUIDANCE FOR
THE THIRD QUARTER THAT FELL SHORT OF ESTIMATES. ALIX: LET'S LOOK AT THE BOND MARKET. IT WAS AN INTERESTING DAY. WE GOT INTERESTING STUFF. NICE TOUCH ON THE VALUE OF THE CURVE. FROM THE BACK END, YIELDS DOWN
AROUND THREE BASIS POINTS. THE FRONT-END COULDN'T MAKE UP ITS MIND ON WHERE TO GO. AT THE TOP OF THE 3:00 HOUR, WE HAD U.S.
TREASURY REDUCED ITS ESTIMATE FOR FEDERAL BORROWING FROM THE CURRENT QUARTER AND PROJECTED THAT GOVERNMENT'S CASH BUFFER TO DECLINE, JUST AHEAD OF A POSSIBLE FRESH RIGHT OVER THE DEBT LIMIT. THE TREASURY DEPARTMENT SAID IN A STATEMENT THAT IT IS TO ITS $740 BILLION IN NET BORROWING FOR JULY THROUGH NOVEMBER SO THAT MIGHT TAKE PRESSURE OFF THE LONG END THAT SOME MIGHT HAVE EXPECTED. TIM: OK, I AM TALKING TESLA. THERE WAS AN ARTICLE TODAY FROM
CRAIG TRUDELL THAT TALKED ABOUT AN ANALYST -- YOU KNOW THAT TESLA FULL SELF-DRIVING? SSD? ALIX: IN THEORY? IT DOES IT FOR YOU? TIM: THEORY IS THAT -- IS A GOOD WORD. SO AN ANALYST OVER AT TRUIST, WILDENSTEIN TEST DROVE -- WILLIAM STEIN, USED FULL SELF-DRIVING AND NARROWLY AVOIDED A CRASH. EMILY: HE SAID THE MODEL Y HE WAS DRIVING EXIT THROUGH AN INTERSECTION AS THE CAR IN FRONT OF HIM HAD ONLY PARTLY COMPLETED A RIGHT TURN. HIS INTERVENTION WAS REQUIRED TO AVOID AN ACCIDENT. IN OTHER WORDS, IF HE HADN'T INTERVENED, THE CAR WOULD HAVE CRASHED. HE STILL NEEDED A HUMAN TOUCH
IN THIS FULL SELF-DRIVING CAR. KATIE: WELL, ONE OF THE FIRST THINGS WE DID WAS TALK TO ED LUDLOW ABOUT THIS. AN IMPORTANT CLARIFICATION, APPARENTLY HE WAS DRIVING THE 12.3.6 VERSION OF FSD. APPARENTLY THAT WAS THE -- THEY HAVE UPDATED IT SINCE. SO HE PUT OUT THIS NOTE AND THEN THEY ROLLED OUT THE NEXT UPDATE I THINK TODAY. SO, I DON'T KNOW, MAYBE THE
PROBLEM HAS BEEN FIXED IN THE MOST RECENT UPDATE. BUT I THINK THE BROADER POINT REMAINS THAT WERE NOT FOR COMES TO SOLVING THE PROBLEM OF FULL AUTONOMY, FULL SELF-DRIVING THAT MAYBE WE ARE STILL A WAYS OFF. ALIX: DID WE HEAR ANYTHING ABOUT THE OLYMPICS? I WAS TOTALLY GLUED TO MY PEACOCK ON APPLE TV ALL WEEKEND. KATIE: I LEAVE IN THE WEEK.
I AM GOING TO THE OLYMPICS. I AM COMPETING. [LAUGHTER] JUST KIDDING. ALIX: I BELIEVE THAT FOR A SECOND. TIM: CAN YOU IMAGINE? KATIE: I AM SO EXCITED. OPENING CEREMONY WAS SUPER WEIRD. I DID LIKE THE HORSE GALLOPING ON THE WATER. THAT WAS KIND OF ITS ORIGINAL.
ALIX: WAS IT THOUGH? I THOUGHT IT WAS SCARY. [LAUGHTER] TIM: I ACTUALLY HEARD THE PEACOCK EXPERIENCE HAS BEEN GREAT. THEY GIVE YOU THE OPTION OF WHAT TO WATCH LIVE AND IT IS KIND OF INTERACTIVE. ALIX: THEY DO AND THAT'S COOL. YOU CAN CHOOSE FROM MANY THINGS.
THERE IS FOUR DIFFERENT SCREENS. BUT I LIKE THE COMMENTARY. I LIKE THE NBC PACKAGES. I LIKE TO FEEL THINGS WILL KNOW WHAT THE OLYMPICS.
EMILY: I ADMIT I AM PLANNING JUST ON WATCHING THE SIMONE BILES GYMNASTICS ROUTINES ON YOUTUBE, BECAUSE ALL OF THESE STREAMING OPTIONS ARE VERY COMPLICATED. TIM: SADLY, I MISSED EVERYTHING AND A LOT OF THIS COMPETING HAPPENS WHEN WE ARE AT WORK. KATIE: YOU CAN DO BOTH! [LAUGHTER] TIM: I CAN DO BOTH. HARD TO DO BOTH.
ALEX BATTY, I WILL SWING BY YOUR DESK AND WE CAN WATCH THE OLYMPICS. THAT WILL DO IT FOR OUR CROSS-PLATFORM COVERAGE ON THE MARKET CLOSE ON BLOOMBERG TV, RADIO, YOUTUBE AND BLOOMBERG ORIGINALS. WE WILL SEE YOU AGAIN SAME TIME, SAME PLACE TOMORROW. ALIX: COMING UP, WE WILL PREVIEW THE BIG WEEK AHEAD FOR CENTRAL BANKS. IT'S NOT JUST THE FED.
JENNIFER LEE, FROM BMO JOINS US. THIS IS "THE CLOSE," ON BLOOMBERG. ALIX: WELCOME BACK TO "THE CLOSE" ON BLOOMBERG. I AM ALIX
STEELE. KATIE: THE FIRST TRADING DAY OF A LONG AND BUSY WEEK. I AM KATIE GREIFELD. PRETTY QUIET ACROSS THE BROADER EQUITY MARKETS. THE S&P 500 FINISHING 0.1% HIGHER.
BIG TECH LEADING THE CHARGE. SMALL CAPS, THE RUSSELL 2000 IS OFF BY 1%, A PAUSE OF THAT ROTATION. YOU DID SEE A BIT OF A RALLY ON THE LOW-END OF THE YIELD CURVE, 10-YEAR YIELDS FALLING ABOUT THREE BASIS POINTS. ALIX: BIG MOVER AS WE DID WANT TO HIGHLIGHT, ONE IS ON SEMI. WE HAVE NOT SEEN THIS KIND OF MOVE SINCE 2022 FOR THE COMPANY. SECOND-QUARTER ADJUSTMENTS ARE
NICE -- ADJUSTED EARNINGS-PER-SHARE CAME IN ABOVE ESTIMATES. SOLID EARNINGS PLUS GOOD GUIDANCE. THAT IS A POSITIVE SIGN. TESLA IS UP 5%. AND JONAS AT MARCUS SEMIEN INTO THE COMPANY IS NO TOPIC IN THE AUTO SECTOR. SEEING TEST LET ME BE CORNERING THE MARKET OF ZERO-EMISSION VEHICLE CREDITS. ALSO ACCREDITING THE COMPANY WITH SOME COST CUTS AND RESTRUCTURING THAT HAS HELPED RESTRICT TESLA'S DOWN SIDE THERE'S OUR TOP TWO STOCKS.
OUR TOP STORY OF THE HOUR IS MCDONALD'S. THE COMPANY REPORTED ITS FIRST SALES DIPPED IN FOUR YEARS, SHOWING JUST HOW STRETCHED PEOPLE'S BUT BUDGETS ACTUALLY ARE. THE COMPANY SAYING IT WILL RAISE PRICES LESS THAN THEY ARE. YOU GOT LOW INCOME DINERS HURTING. THE STOCK ENDING THAT DAY HIGHER, PUTTING PRESSURE ON OTHER FAST FOOD CHAINS. YOU HAVE WENDY'S AND STARBUCKS ALSO REPORTING THIS WEEK. KATIE: JOINING US FOR MORE, WE HAVE OUR GUEST. LET'S START WITH MCDONALD'S.
THE STOCK INITIALLY FELL IN THE PREMARKET, THAT IT IS A DEFINITION ALMOST 4% HIGHER. FEELS LIKE A LOT OF HOPES AND DREAMS ARE BEING PINNED ON THIS FIVE DOLLAR VALUE DEAL. DANIELA: THAT IS A GOOD WAY TO PUT IT. IT WAS SURPRISING BECAUSE SALES ARE NOT ENCOURAGING. IT WAS LESS PRONOUNCED THAN SOME ON WALL STREET HAD EXPECTED SO THAT IS GOOD TO TAKE INTO ACCOUNT THAT ON FRIDAY THE STOCK HAD ONLY FALLEN 15% ALREADY, SO MAYBE INVESTORS WERE, LIKE, MAYBE THAT IS ENOUGH. BUT LOOKING AHEAD, EXECUTIVES HAVE REALLY EMPHASIZED THE IDEA OF MCDONALD'S FOCUSING ON VALUE AND AFFORDABILITY AND THEY HAVE ALMOST TERMED IT THE SUMMER OF VALUE STARTING WITH THE FIVE DOLLAR MEAL DEAL. IT HAD STARTED TO YIELD SOME
RESULTS. BUT WE HAVE TO SEE WHAT IT WILL BE LIKE FOR THE REST OF THE YEAR. ALIX: YOU ALSO HAVE BTIG'S ANALYST, HE HAS BEEN FOLLOWING THE SECTOR FOR DECADES. HE POINTED OUT THE INTERNATIONAL SIDE WAS WEAK AND IT WAS A SURPRISE, AND THAT MAY BE THAT CONTINUES FOR THE FORESEEABLE FUTURE, AS WELL. NANCY: SEEMS TO BE THE CASE. THE CHIEF FINANCIAL OFFICER ON THE CALL SAID TRENDS SO FAR HAVE BEEN NEGATIVE LIKE WHAT WE HAVE SEEN IN THE THIRD QUARTER SO FAR. SOMETHING HE POINTED OUT THAT WAS INTERESTING WAS THAT IN COUNTRIES LIKE FRANCE, BUT BUSINESS IS VERY FOCUSED ON FAMILIES.
ACROSS EUROPE, THEY ARE ACTUALLY SEEING A PULLBACK FROM FAMILIES, THAT CONSUMER GROUP. SO ONE OF THE THINGS PEOPLE DO IS LAUNCH A 4-EURO HAPPY MEAL HOPEFULLY TO BRING BACK PARENTS TRYING TO TREAT THEIR KIDS. IT'S INTERESTING BECAUSE MCDONALD'S IMPLEMENTS A VALUE STRATEGY IN EUROPE EARLIER.
THEY HAD A MENU THAT WAS AVAILABLE IN COUNTRIES LIKE GERMANY AND THEY SAID IT WORKED OUT SO FAR. SO MAYBE THAT IS A SIGNAL THAT AS CONSUMERS START LEARNING MORE ABOUT IT IN THE U.S., IT MAY BE THE FIVE DOLLAR MEAL DEAL HERE WILL ALSO HELP IN THE FUTURE. BUT TBD REALLY. KATIE: SO LET'S PUSH AHEAD REALLY TO WHAT WE WILL HEAR FROM THIS WEEK.
STARBUCKS IN PARTICULAR, HAS HAD A SUPER ROUGH RUN OF THINGS. A LOOK AT THE SHARE PRICE. DOWN 21% SO FAR IN 2025. WHAT ARE WE EXPECTING TO HEAR FROM STARBUCKS? I HAVE TO IMAGINE WITH THAT PERFORMANCE, MAYBE THE BAR IS A LITTLE BIT LOWER HERE? DANIELA: REALLY A VERY SIMILAR STORY. I WILL SAY THAT IN THE BEGINNING OF THIS YEAR, PROBABLY MY WHOLE JOB HAS BECOME VALUE. STARBUCKS HAS BEEN FOCUSED ON THAT.
YOU SAW SOMETHING CALLED THE PAIRINGS MANY THAT THEY LAUNCHED WHICH WAS A BEVERAGE AND A CROISSANT FOR FIVE DOLLARS. ALMOST UNHEARD OF WHEN IT CAME TO STARBUCKS. SO IT'S A SIMILAR STORY, WE EXPECT TRENDS WILL BE PRESSURED BY THE WEAKNESS IN CONSUMER SENTIMENT NOT JUST HERE, BUT IN PLACES LIKE CHINA.
SO REALLY, IT WENT FROM LAST YEAR A FOCUS ON, "WE ARE DOING WELL AND WE WILL BUILD A BUNCH OF STORES TO KNOW, PEOPLE ARE CUTTING BACK ON THEIR LATTES AND BURGERS. ALIX: TOTALLY, THE YEAR OF THE VALLEY. WELL SAID. THANK YOU VERY MUCH, DANIELA SIRTORI. IF YOU ARE FIGHTING THE VALUE WAR, YOU ARE COMPETING FOR A LITTLE SHARE OF THE SAME WALLET, WHAT DO YOU DO? SOME MIGHT TURN TO ARTIFICIAL INTELLIGENCE TO STREAMLINE THE BUSINESS. WORKING MORE AND MORE WITH FIRMS LIKE PRESTO. FRANCHISE OWNERS LIKE HARDEE'S, CHECKERS AND TACO JOHN'S -- NEVER HEARD OF TACO JOHNS.
THEY UTILIZE THE PRESTO VOICE TECHNOLOGY TO STREAMLINE AND DRIVE THROUGH ORDERS. HERE TO OFFER HIS PERSPECTIVE ON THE COST-SAVING SIDE OF AI IS GEE LEFEVRE, INTERIM CEO OF PRESTO. MAKES SENSE RIGHT, YOU ARE GOING TO LOOK FOR EFFICIENCY. HOW DOES AI HELP? ALL THAT I HEAR IS THAT IT DOESN'T WORK FOR DRIVE-THROUGH. GEE: IT'S BASICALLY ON THE REVENUE AND THE COST SIDE. YOU COULD BE CRUSHING YOUR TOP LINE. THE AUTOMATION OF UPSELL IS ONE
OF THE MAIN BENEFITS. HUMANS ARE NOT REALLY CONSISTENT. IF YOU ASK A WORKER TO OFFER FRIES EVERY TIME, THEY WILL DO IT ABOUT HALF.
AI WILL DO IT EVERY TIME. ON THE COST SIDE, IN QUIETER TIMES, WITH AI BEING ABLE TO TAKE THOSE ORDERS, IT FREES UP STAFF INSIDE THE RESTAURANT TO BE DOING OTHER DUTIES SO YOU START TO GET QUITE A SIGNIFICANT COST SAVINGS IN THE RESTAURANT AS THEY ARE ABLE TO DO OTHER THINGS, MAYBE I JUST THE RO -- MAYBE I JUST THE ROTA. OVER SIX WEEKS AGO NOW, WE LAUNCHED OUR SPANISH VERSION IN SOUTHERN CALIFORNIA STORES TO DEAL WITH THE SECOND LANGUAGE BECAUSE THAT WAS AN OBVIOUS BARRIER. EVENTUALLY, ACCENTS ARE EVERYWHERE ON THE SPECTRUM. WE HAVE TWO LANGUAGES. THESE MODELS EVENTUALLY LEARN OVER TIME, SO THE MORE IMPOSITION WE PUT INTO THEM, THE MORE THEY WILL BE ABLE TO HANDLE A MORE LOVING THIS.
WE ACTUALLY DON'T SEE A HUGE AMOUNT OF ISSUES WITH ACCENTS. KATIE: WE WERE JUST TALKING ABOUT TED'S LOVE FULL SELF-DRIVING. YOU STILL HAVE TO HAVE A PERSON THERE OVERSEEING IT. I WAS WONDERING IF IT IS SOMETHING SIMILAR HERE WHERE, OK, USUALLY IS NOT A PROBLEM, BUT SOMETIMES IT IS. DOES THE HUMAN STILL HAVE TO BE
LISTENING AND BE AVAILABLE TO STEP IN? GEE: SOMETIMES. WE USE A MECHANISM CALLED THE HUMAN IN THE LOOP. ALL THE MECHANISMS LEAD WITH A HUMAN BEING ABLE TO TAKE THE ORDER. IF THE AI IS CONFIDENT, IT EVENTUALLY WILL PUT UP A FLAG AND SAY I WILL NEED HELP WITH THIS ONE. IT MAY BE THE PERSON SAID ALLERGY. OR MAYBE THERE WAS A DIFFICULT
ACCENT. THEN THEY WILL BRING IN A HUMAN, WE HAVE AN OFFSHORE CENTER MAKING THOSE CORRECTIONS AND MONITORING. OVERTIME, THAT WILL HAPPEN LESS AND LESS. THIS IS VERY INDUSTRY-STANDARD, NOT JUST RESTAURANTS, VIRTUALLY ALL OF AI WORKS LIKE THIS AND ENTRANCE TO HAVE THE HIGHEST LEVELS OF ACCURACY. AS THOSE AI MODELS IMPROVE OVER TIME, YOU WILL NEED LESS HUMANS JUMPING IT TO MAKE THOSE CORRECTIONS. KATIE: ONE OF THE NOTICE AROUND AI IS THAT ROBOTS WILL EVENTUALLY TAKE ALL OF OUR JOBS.
LISTENING TO THIS KIND OF MAKES ME THINK OF THAT. IS THIS THE COLD REALITY THAT IT WILL GET TO THE POINT WHERE YOU DON'T NEED HUMANS? GEE: YES, ABSOLUTELY. THERE ARE LOTS OF LOCATIONS WHERE WE DON'T USE HUMANS AT ALL. WE HAVE RELEASED THE LATEST VERSION OF OUR PRODUCT CALLED PURE AI AND IT DOESN'T HAVE ANY HUMANS. YOU WILL EVENTUALLY GET TO THE POINT. HOWEVER, IF YOU LOOK AT EVERY INDUSTRIAL REVOLUTION THAT HAS HAPPENED GLOBALLY, HUMANS DON'T ALL GET UNEMPLOYED.
HUMANS MOVE ON TO A DIFFERENT SET OF TASKS. THAT IS WHAT PRESTO IS A GOOD EXAMPLE OF. PEOPLE ARE NOT LOSING THEIR JOBS, THEY ARE MOVING ONTO OTHER SKILLS OR OTHER TRADES WITHIN THE RESTAURANT, MAY BE SPENDING TIME IN THE FRONT COUNTER TO IMPROVE CUSTOMER SERVICE. ALIX: WHAT IS THE ROI FOR A CUSTOMER AT PRESTO? GEE: IT WOULD BE SOME COMBINATION OF THE REVENUE UPSIDE WHICH WE CAN SEE IS ANYWHERE BETWEEN 5% AND 10%. WHEN WE LOOK AT THE COST SAVINGS, IT'S MORE DIFFICULT. IT'S NOT NECESSARILY ADD AI AND TAKE IT WITH A HUMAN.
YOU ARE ADDING AI TO REDUCE THE COGNITIVE LOAD ON THE STAFF AND FREE THEM UP TO DO OTHER THINGS. WE HAVE CUSTOMERS WHO REDUCE THE NUMBER OF SHIFTS, BUT IT IS NOT AS SIMPLE AS A ONE PLUS ONE EQUALS TWO. ALIX: A LOT OF CONCERN WITH HYPERSCALERS IS THAT YOU SPEND SO MUCH MONEY, BUT WHAT YOU ARE ABLE TO CHARGE TO MAKE UP FOR THAT DOESN'T ADD UP YET. IS IT SUPER EXPENSIVE FOR THESE
RESTAURANTS TO GET THAT SERVICE FROM YOU GUYS? GEE: NOT AT ALL. WE WOULD BE SIGNIFICANTLY CHEAPER THAN THE WAGE AND SERVICE OF A WORKER IN A MONTH, THAT IS WHY CUSTOMERS HAVE AN EXTRA ROI. RESTAURANT IS PROBABLY ONE OF THE FEW COMMERCIALLY SCALABLE PLACES WHERE AI IS BEING USED. THERE ARE CUSTOMERS IN OTHER INDUSTRIES WHO ARE BUYING AI BECAUSE THEY WANT SOME BUT IT DOESN'T WORK THAT WELL. WHEREAS IN THE RESTAURANT INDUSTRY, TO GET IMMEDIATE BENEFITS. ALIX: THANKS A LOT. GEE LEFEVRE, JOINING US, INTERIM CEO OF PRESTO AND THAT.
IS THE CONCRETE CASE WHERE YOU CAN SEE IT. PAYING OFF. IT WENT, A TELL MY STORY TO A SHOW ME A STORY THIS WEEK. HOW ARE YOU GOING TO MONETIZE
IT? KATIE: IT'S INTERESTING TO HEAR ABOUT ACTUAL APPLICATIONS. WHEN IT COMES TO ACTUALLY WHERE IS AI BEING USED, WHERE CAN IT BE ADDITIVE? LIKE HE WAS JUST TELLING US THE RESTAURANT INDUSTRY SEEMS RIGHT FOR THAT DISRUPTION. , COMING UP, WE WILL TALK ABOUT THE TOP-THREE, WHERE WE FOCUS ON THE TOP-THREE MOVERS AND SHAKERS OF THE THREE BIGGEST NEWS STORIES. THIS IS "THE CLOSE" ON BLOOMBERG. ALIX: TIME NOW FOR THE TOP-THREE WHERE WE NAME DROP THAT PEOPLE DRIVING SOME OF THE DAY'S MOST TALKED ABOUT STORIES. IT'S KIND OF AN INSIDER RE-THINK.
FIRST OFF IS MORGAN STANLEY'S CHIEF U.S. ECONOMIST LEADING HER POST TO LEAD A NEW INVESTMENT TEAM INSIDE MORGAN STANLEY ON AUGUST 1. SHE WILL BE THE HEAD OF THE THEMATIC UNIT. WE SAY THIS BECAUSE SHE IS WIDELY LOVED AND FOLLOWED BY ANYONE IN THE MARKET AND IT'S INTERESTING TO SEE HER MOVING ONTO A DIFFERENT POST IN THE COMPANY. KATIE: ABSOLUTELY. THE MEMO SAID SHE WILL FOCUS ON
LEADERSHIP ON MAJOR MACROECONOMIC THEMES AS WELL AS ADVANCING ECONOMIC RESEARCH. WE WILL OF COURSE BE SPEAKING TO HER A LOT. I ALSO WANT TO TALK ABOUT BRYAN RANDALL'S. THE ACTOR STARE IN DISNEY'S "DEAD PULL AND RHO VARIANT" WHICH TOOK IN $211 MILLION, THE BIGGEST OPENING OF THE YEAR. I KNOW YOU CONTRIBUTED TO THAT,
ALIX. ALIX: DEFINITELY SAW IT. I AM A HUGE MARVEL SAND. HUGE NORD. DEFINITELY [LAUGHTER] [LAUGHTER] LIKED IT. I LAUGHED SO HARD, I CRIED. FULL DISCLOSURE, IT WASN'T AS GOOD AS DEADPOO>L 1 AND 2. BUT I DID APPRECIATE ALL THE
JOKES ON DISNEY BY PIMM FOX. HOW THEY COULDN'T TALK ABOUT COOKING. [LAUGHTER] KATIE: I AM NOT A HUGE MARVEL SAND. BUT I AM A HUGE LINDA REYNOLDS FAN. ALIX: DOESN'T SURPRISE ME. AND YOU WILL SEE HIS GOOD FAITH [LAUGHTER] , SPOILER -- HIS GOOD FACE. SIMONE BILES.
THIS PLAYER, SERBIAN TENNIS PLAYER BEATING RALPH AND ADELE IN THE SECOND ONE OF THE GAME IS. MEANWHILE, SIMONE BILES IS SET TO COMPETE IN ALL FOUR EVENTS IN TOMORROW'S FINALS DESPITE TWEAKING HER PASS. IF YOU WANT TO BE WERE I WILL BE TOMORROW, I WILL BE ON MY DESK WATCHING SIMONE BILES AS WELL AS PREPPING FOR THE SHOW. [LAUGHTER] KATIE: I AM NOT A HUGE GYMNASTICS FAN, BUT I AM A HUGE TRACK AND FIELD FAN AND I AM EXCITED FOR THOSE EVENTS. BUT I UNDERSTAND THIS IS A COMEBACK FOR SIMONE? ALIX: HUGE. HER POWER WAS INSANE.
IT TO THE POINT THAT SHE OVER ROTATED THE HARDEST SKILLS ON THE PLANET BECAUSE SHE HAD TOO MUCH POWER GOING INTO IT. WE HAVE 20 MEDALS. ONLY THREE ARE GOLD. IF YOU KIND OF HOPE IN THE WOMEN'S GYMNASTICS TEAM WILL HELP MOVE THE NUMBER OF. KATIE: THAT IS A PROBLEM I WOULD LIKE TO HAS, TOO MUCH POWER THAT I OVER ROTATE. [LAUGHTER] IN ANY CASE, COMING UP, AND A BUSY WEEK A CENTRAL AHEAD. WE WILL PREVIEW WITH JENNIFER LEE OF BMO CAPITAL MARKETS NEXT. THIS IS BLOOMBERG.
♪ KATIE: INVESTORS ARE LOOKING AHEAD TO A TRIPLE HEADER OF CENTRAL BANK RATE DECISIONS WITH THE FED AND BOJ DUE ON WEDNESDAY, FOLLOWED BY THE BOE ON THURSDAY. JENNIFER LEE FROM BMO CAPITAL MARKETS JOINS US NOW. WE HAVE THREE BIG CENTRAL BANKS TO PICK FROM.
WHICH OF THE BANKS ARE YOU MOST INTERESTED TO HEAR FROM? JENNIFER: THE ONE THAT WILL BE A COIN TOSS -- FIRST, THANK YOU FOR HAVING ME ON -- IT WILL BE THE BANK OF ENGLAND. THERE IS SO MUCH MIXED OPINION ABOUT WHAT THEY ARE GOING TO DO AND WHAT THEY ARE NOT GOING TO DO. PERSONALLY, I THINK THE BANK OF ENGLAND IS GOING TO STAY ON HOLD AND I THINK IT MIGHT BE A MINORITY VIEW AND I MIGHT BE HUMILIATED WITH MY CALL. I SEE THE RATIONALE BEHIND THE
REASONS WHY THEY WOULD CUT, BUT I THINK THERE ARE REASONS BEHIND WHY THEY SHOULD NOT AND WAIT EVEN FURTHER. SOME OF THESE REASONS ARE BEING FELT BY OTHER CENTRAL BANKS AROUND THE WORLD, NAMELY SERVICES INFLATION WHICH IS STILL QUITE STICKY. KATIE: IT SOUNDS LIKE BANK OF ENGLAND IS VERY MUCH A LIVE M
2024-07-30 15:31
