Bloomberg Markets: The Close 11/17/2023

Bloomberg Markets: The Close 11/17/2023

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A new day or a false dawn. Live from Studio two here at Bloomberg headquarters in New York. I'm Romaine Bostick and I'm Katie Greifeld. We're kicking off to the closing bell here in the US. You take a look at where we stand with

about 2 hours to go, very small gains. You're looking at an S&P 500 up about 2/10 of a percent. You take a look at big tech, up about 1/10 of a percent, shaping up to be a quiet end to a busy week.

Meanwhile, you take a look at the bond market. It's pretty much unchanged as well. But that follows an epic rally. You take a look at where the ten year is trading right now, 4.42%. Of course, we were above 5% not too long ago. And I want to talk about crude as well, because an amazing reversal that you've seen there actually rising a little bit today.

Up 4% had been heading to what was a fourth straight week of losses remain. Yeah, yeah, fourth straight week of losses here. But you try to look at some of the positive sides that we've seen this week here. And it has been a big week for several sectors in the equity space, a big week for retail and apparel stocks. That's on the back of some encouraging earnings reports as well as that official government data we got a few days ago that investors interpreted as signs of consumer resiliency. Williams-Sonoma having its best week

going back to May of 2022, Macy's having its best week since 2020 and Target posting its strongest week since 2019. Next week brings results from other high profile retailers. That includes Nordstrom, Kohl's, Best Buy, Urban Outfitters, as well as Abercrombie and Fitch. It's also been a big week for financial stocks as well, driven by big moves downward in benchmark Treasury yields that drop in borrowing costs intertwined with an easing in concern that the Fed will push the economy won't push the economy into recession. I should say that drop in borrowing costs also pointing to lower deposit expenses further down the road. RBC Capital analyst Gerard Cassidy writing in a note on Wednesday that historically reaching the terminal rate for the Fed funds has been a catalyst for bank stocks to start outperforming the market.

Those bank stocks heard that message. Jp morgan this Friday, sitting on a third straight week of gains. Wells Fargo rallying back above its 200 day moving average and regional lenders, including BankUnited, having their best week since 2020. But not everyone out there is popping the echo this week. Bank of America strategist Michael Hartnett instead warned a bit of cold water on the market. Enthusiasm out there. Look in the equity rally in the mouth

and saying investors Katie should offload risky assets is a lot of the technical. The macroeconomic indicators in his view, are still pointing to the downside. And one of the technical factors that he's looking at, Bank of America has a number of different indicators. And this one is saying that now that the S&P 500 is at 4500, it's time to fade. What Michael Hartnett says is an epic rally. And you think about the journey that we've taken, of course, at the end of last month, getting close to 4100, just kissing that now all the way back to 4500.

Bank of America is basically saying too far, too fast. Fade this. You take a look at where investors are heading to. It seems like the bid for cash is still

alive and well even with this epic rally. You take a look at what is sitting in money market funds right now, hitting another record high of $5.7 trillion remain. And what's remarkable, you take a look at this chart, particularly starting in 2022, even as stocks soar and fall and soar again, that bid for cash just continues on. Let's get some insights out of our first guest as if to kick you off to the close here on this Friday afternoon. Brian Levitt joining us right now, global market strategist over at INVESCO. And Brian, let's start off here with

some of the moves that we've been seeing in risk assets and for that matter, riskless assets as well. There's a lot of, I guess, pontificating about how much further these rallies have to go. And I guess that depends a big part on where you actually think we are in this cycle to begin with. Where do you see us right now?

Yeah, it felt pretty late cycle, but in actuality, this economy has been resilient and the Federal Reserve is. Yeah, well, at least for now, seeming like they're they're reasonably sticking the landing in terms of the inflation rate having come down significantly and the unemployment rate still staying low. Now that might not persist indefinitely, but in our opinion, that's offered that's opened up an opportunity for risk assets here. And it's why you're seeing cyclicals outperform defensive small over large value over growth, very much what you would expect in a risk on environment. And we expect it to continue through the end of the year or into the beginning of next year. Some of the outperformance that we've seen in cyclicals and the Russell and as well as S&P 400 mid-caps here, is this also a bit of a valuation play as well? The idea that Microsoft and the other big cap tech stocks have run so far so fast that now you kind of have to go down a step to find true value? Well, I'm not so sure that value as a timing tool. I mean, we saw growth stocks that were

quite elevated for a decade compared to value stocks from nine through 2019. So just because something's cheap doesn't mean it doesn't stay cheap. You need a catalyst. And what?

That catalyst is is a more resilient economy and inflation that has come down quickly. I mean, Americans report not feeling good about the economy. But the reality is the misery index, unemployment plus inflation is down at 7.1%. That's well below the historical average and very much in line with what cyclical assets would want to see this environment where inflation has come down. The economy is still chugging along. I mean, that's that's a good backdrop for value in cyclicals. I want to talk, though, about cash, because really the march into cash has been one of the most remarkable market events to watch over the past year.

The past two years, we're sitting at $5.7 trillion in money market funds right now. What is the read there? It feels like obviously we've evolved far beyond cash just being a safe haven asset. But where are these new continued funds coming from? Well, some of it's coming from bank deposits. So investors wake up and say, you know, I'm getting not as much here. I might as well go to money markets.

Other parts of it, as we all know, is just a risk off trade for investors. They're concerned about things that may happen in the future. Usually, investors don't time these things. Well, by the time you get to pretty elevated money market rates, it suggests that the markets are likely to climb. And that's where we bid markets climbing

the wall of worry that investors have been so worried about. But what I think is what is really interesting is the move you've seen in short and longer rates recently. You know, for a lot of investors, we've been saying, look, don't just enjoy these rates for 30 days. You have reinvestment risk, go further out, lock them in. Actually, I was just talking to my father and father in law about this, the early 1980s. And what they were saying is and we

talked about this, said you could have gotten 18 in seed money markets or 16 going out further, everybody like 18 and you would have been a lot smarter going further out. So it's good news that the investor is not euphoric, although I would like to see them start locking in some of these yields that are presenting themselves to them. I feel like there's some sort of indicator in there.

I'm going to try to work on a name. When you talk to both your dad and your father in law about that. But when it comes to the bond market, obviously we've seen some amazing moves, a lot of volatility.

First up in yield and now down in yield. Where do you think fair value is when you're thinking about the long end of the Treasury curve? Well, if you look at long term, you want to think about what the nominal growth potential of this country is. And, you know, the ten year inflation expectations around two and a quarter, real GDP expectations projected around two. So, you know, let's figure a low 4% rate, which means the Fed has some work to do in order to normalize the yield curve. Now, don't get me wrong, we'll have

patches of weakness in the next decade where rates are in the threes and perhaps bounce up above the low fours at different points. But nonetheless, it's not an environment that should favor a 5% Treasury yield or anything above it. You would have to envision a significant pickup in inflation or a significant pickup in real economic activity, neither of which make particular sense to me at this stage of where we are in the business cycle. Then this gets us back to the whole data dependency of the Fed and for that matter, the market here. And when you start to piece together those data points here, does it give you at least some bit more confidence that what's being priced in now is appropriate? Yeah, it gives me confidence that what being priced in now is appropriate. The Fed, the Fed is done and they they should be done again. The economy is is going to show some

signs of weakness. Doesn't mean it's it's crashing into a recession shows some good signs of of growth but but will moderate a little bit in inflation. I mean we seen the super core PC come way down. We've seen the headline inflation number

down in the low threes. The inflation expectations are very well contained. The ticks break even. So I think the Fed has done their job and I think if anything, the next move from the Fed could be to start to ease policy as we move through 2024 in order to try and navigate manage this environment that will likely see a growth slowdown as we move out in 2024. All right, Brian, always great to talk to you. Brian Levitt.

They are global market strategists over at INVESCO helping kick things off to the close here on this Friday afternoon as we turn our attention back to geopolitics, with President Joe Biden closing out the APEC summit after three days of huddling with world leaders in San Francisco, most notably the leader of the second largest economies, Jinping, What's the path forward for the two superpowers? That conversation coming up. Plus, we'll talk to the CEO of online grocer Misfits Market about whether the sector is still bearing fruit against the backdrop of persistent inflation. And all the talk, of course, is about Novo Nordisk, Eli Lilly, and there are weight loss shops, but now we're touting pills, oral version. Of their blockbuster weight loss drugs. But some of the details about their

efficacy and side effects might actually surprise you. That conversation and so much more coming up in a bit. This is the close on Bloomberg. I'm.

Well, we had a new slate of Fed speak out today. We're talking daily collins and are all out with comments. Bloomberg US economy reporter Steve Matthew joins us now to break it all down. And probably my favorite comment that came out of the parade of fed speech was from Mary Daly saying that it's easier to communicate with the public than it is with markets. We know that the markets have been eager to price in rate cuts next year. What have the Fed members actually been saying about that? Yeah, that's right. I mean, and on Wall Street and even

among Bloomberg columnists like Connor Sutton, there, everyone is talking about rate cuts. The Fed is not there. The Fed is like doing everything they can to say we are not at mission accomplished. You heard Michael Barr, the vice chair for supervision today, say to the odd lots crew that, you know, we are at or near a peak in terms of rates. But but the wording there is really critical. What they're saying is that they may have to go a little bit higher. They may not have to go higher, but they want to keep the option open to go higher.

And they're not even thinking about rate cuts right now. And I spent, you know, six days over six days, I was in like five or six different states and with a bunch of Fed speakers and they all said the same thing. Nobody is thinking about cuts. Everybody is leaving the options open for more hikes if necessary. This gets to the idea, though, to I mean, kind of what the more I mean, I know some of what the market is pricing in is just their own wishful thinking here. But when you look at the data, Steve, and when you listen to the commentary that we've gotten out of these Fed officials, where is this daylight, if at all this daylight that the market seems to be finding for rate cuts? Well, I mean, the inflation news this week was unquestionably really, really good news. But it's only a month. And as Chair Powell said at the last

press conference, you know, the path to this inflation and to the 2% target for inflation is going to be bumpy. You know, it's going to take some time. So the fact that we have one good doesn't mean the next month is going to be good. And it's like if the next month is surprisingly bad, people may have to reprice their their view on the Fed rate path. So there may be a little bit of over enthusiasm about one good month of of inflation.

And Steve, there was a great story out about how given this fraught environment that really has prevailed throughout the Fed chair's reign, Jerome Powell, his reign, he's suffered remarkably few dissents, especially when you take a look at what some of his predecessors saw, when you think about just how tense it's been. First, the pandemic was just the hottest inflation that we've seen in generations. How surprising is that that we really haven't seen Fed members break rank with the Fed chair? Yeah, it's really interesting story.

And one of the things that is remarkable about it is Chair Powell has really strong political skills. So you see that when he deals with Congress. But you see that when he deals with the committee as well, he calls each of the committee members all of the 12 Fed presidents and all and and meets with all the governors in person before each meeting. And he builds that consensus and you make sure the language is going to get approval from everyone. So some of that is is is internal politics.

There's also a sense that right now the economy is cooperating. You're seeing disinflation. The inflation rate was 9%. It's now, you know, in the threes. And so inflation is coming down and

unemployment is below 4%. So you're getting a good labour market. Inflation's coming down. That is not requiring hard choices where you have to choose one or the other. And that will make it more difficult if that happens. All right, Steve MATTHEWS, our man down

out there in Atlanta, Keep an eye on, I guess, all the wishful thinking right now in the swaps market and I guess the data and more importantly, Fed speak. That doesn't seem to support it. All right. We're going to pivot back to geopolitics right now as we await the start of of an event there with all of the APEC leaders. Of course, this is coming on the final day here of the big APEC summit taking place out there in San Francisco. Of course, we're waiting to hear from Joe Biden, of course, leading this summit here in the U.S. and a handoff to his counterparts here who will take the APEC summit forward in the years to come. Annmarie Horden is still out there in

San Francisco. Joining us right now from our Bloomberg bureau in memory, I'll give us a sense here as to whether the summit that we had this year really produced anything, I guess, anything commensurate with what these leaders came in to, hoping to have. Well, I think two things, and we'll hear from President Biden as he passes the torch on to Peru. This is the first time in 12 years that the US has actually hosted it. And I think what has been very obvious throughout this entire summit is the other summit that took place, and that's between Biden and Xi Jinping and really all the attention and coverage.

When you speak to other leaders. That's what they were focused on. Where does this where is this relationship going and what did that meeting produce? I would say that with that meeting came not so much a warmer of ties, but the fact that ties potentially won't get any worse. So they are trying to put a floor under this relationship, especially for the Biden administration, as we go into an election year. And I'd say for Xi Jinping, the real win

here was less so meeting of world leaders, but meeting America's most important chief executive officers. He had this standing ovation at an event where he gave a very warm speech. The New York Times is talking about an interview they had with one of the founders that put that event together that said the Chinese had prepared three speeches for that CEO speech, an event. And after the Biden XI meeting Biden, Xi Jinping went with the friendliest of speeches he could have given.

And then he had another address that we have the transcript for. He didn't actually give the speech where he talks about heart warming. Welcome of the business community. So right now, it's a lot of soft, warm words. But let's see, Ramin and Katie, if that

turns into action. I like that phrase soft, warm words. It sounds very comforting. And of course, the word deal struck on military communications, but no, etc.. But leaving this meeting, I mean, we're still the most distant between these two major power economies. That's right. There was a number of deals on the

fringes. Again, I think a lot of that we need to see the proof in some of those deliverables, especially when it comes to fentanyl, is trying to really going to go after some of those chemical producers, the military, to military cooperation. That received a huge applause. And I was there at the speech President Biden gave yesterday to CEOs at the Apex CEO Summit. But, Katie, when it comes to what's left, you have to imagine Xi Jinping really was pushing in this meeting for tariffs to be released, for export controls to be rolled back. The United States is not going to touch any of those economic penalties if they infringe on US national security.

So I think a lot of this relationship right now is about taking the heat out of it. But as we get ever closer to the election next November, that rhetoric is going to start to get hot again coming out of the United States. All right, Anne-Marie, really appreciate your time and your reporting this week. That is Bloomberg's Anne-Marie Hordern. Now coming up, much more ahead. This is the close on Bloomberg

and. Welcome back to the close. You're looking right now at the Xi Jinping, the president of China. They are sitting down there at the APEC leaders retreat. Their president, Joe Biden, here in the

U.S. is hosting this, of course, taking place alongside the official Asia-Pacific Economic Cooperation forum in San Francisco, which has been playing out all week long here. Of course, the big meeting just a couple of days ago between those two men, Xi Jinping and Joe Biden, the handshake that a lot of people anticipated would lead to some sort of fruitful progress in the relationship between the U.S.

and China. And at least so far, there does appear to be some progress made on that front. We're going to keep an eye on this and, of course, bring you any sort of details and news that we get as soon as they arrive. We do want to pivot, though, to the oil market here, which is headed for what is now going to be a fourth straight weekly losses after sinking into a bear market, a development that actually poses a bit of a headache for OPEC. Plus, leaders who are set to review their production targets later this month. Bloomberg managing editor for energy and Commodity Simon Casey, joins us right now to talk a little bit more about this.

And the pullback that we saw in crude oil was pretty interesting. And I'm wondering sort of what's driving it, because it gets to this idea of what these OPEC leaders are really going to have to address. Are they going to have to address the supply side or is do they need to be much more concerned about demand? I mean, OPEC can't do much about demands. They were right to be worried about

demands here in the US. You're seeing some macro signs. You're seeing unemployment data suggesting maybe we're at a sort of peak for demand. It's really unclear what's happening in China.

I mean, the real estate situation doesn't completely bleed over into what we're seeing in terms of gasoline demand. But again, it's looking a bit softer. Refinery orders were down in October. Having said that, jet fuel demand is picking up. So it's a very mixed on the on the supply side.

Well, we know OPEC cut production earlier this year by a million barrels per day. The speculation has been even going back a couple of weeks or so before this meeting that's coming up the weekend after next. They're probably going to extend that out into the end of next year. They've already said they're going to sorry for the end of this year. Right.

They've already said that. But could they extended beyond that? I think increasingly people are saying that. I saw a survey earlier today from Bloomberg Economics and the expectation was, yes, that is going to happen. Let's talk about this divergence of outlooks when it comes to the supply side, because you have the IEA, the IEA, that's a lot of letters on one hand, and then you have opec+ and it seems like there's some distance between them. Very much so. I mean, the IEA historically has represented the consuming nations.

So there's maybe a maybe a bias there. They are projecting a deficit of a million barrels a day on average next year. So that means demand is exceeding production. Therefore, inventories will fill that gap. OPEC is much more bullish, I think, if memory serves, they're talking about 3 million barrels next year. I mean, both of those things cannot be

right. But OPEC is being very bullish. They the Saudi oil minister earlier this week was blaming speculators not for the first time hedge funds, speculators in the financial markets for driving the oil price down. Yeah. All right. Simon Casey, who helps lead our energy coverage here at Bloomberg. A closer look here at the ructions that

we've been seeing in the commodities space. Meanwhile, let's go back out to San Francisco here. We are awaiting the latest retreat here of the APEC leaders. Now seated at the table there, Joe Biden, the president of the United States, leading this year's summit here. He will actually pass the baton to the

leader of Peru who will take over for the next big summit here. But I think, Katie, we talk about sort of what the expectations were going into this. I don't think anybody was paying attention to the other countries in this. This was all about the US and China. Yeah, that's the thing.

I was trying to read up on some of the other happenings, but obviously the focus is Xi Jinping and Joe Biden. And as Mary Anne Marie Hordern said to us, a lot of soft, warm words in terms of actual deliverables. There's still a lot of Gulf there. And we should point out, too, I mean, we kind of joke about no one really caring about these other names, but there was some great Bloomberg reporting about how all of these other countries have really put a lot of pressure on both the US and China to actually get back to the table to normalize relations to some degree here, because, of course, this affects them too as well. They're dependent not only on China, but they're dependent on in a big way on the US as well.

Stick with us. A lot more coverage coming up here on the close. This is Bloomberg. This is the countdown to the close here on a Friday afternoon with a good week for US equities, a relatively good week for Treasuries as well, at least on a price basis. But if a bit of a mixed bag going on

right now in the commodities space, Abigail Doolittle She's standing by right now to explain with our commodities clothes. Abigail. Mixed bag, indeed. Romaine for the Bloomberg Commodity index overall, basically flat down slightly. We would take a look at these big moves beneath the surface, especially WTI crude up 4.1%. Goldman Sachs is out saying that they believe that OPEC next week will move to support prices after the big fall from above $90 per barrel. So traders are trading oil higher on the day.

Natural gas, on the other hand, down once again, down 3.3%. Some investors traders are worried about excess supply. Corn down 1.5%. Really a piece of this year's 31% decline, the worst year since 2013. It's not really clear why this decline is in place. In fact, there's some information out

there about weather in Brazil that would support the idea of tightness in supply. And then cocoa up 1.6% at its highest level since 1978, very close to that all time high. There are supply fears on robust European demand and uncertainty remain. Our thanks there to Abigail Doolittle. Let's go back out to San Francisco where President Joe Biden is speaking now with APEC leaders. CY 13 of our partners have also made historic progress yesterday, when in a Pacific economic framework with a first of its kind agreements to strengthen supply chains, accelerate our clean energy transition and combat corruption. As we begin our discussions today, I

want to highlight a few areas that I believe we can do even more, in my view. First, inclusive growth. When everyone in our economies has a chance to contribute, everyone gets a fair shot. We're all we all do better. So today I'm proud to announce that we've launched the Women in the Sustainable Economy Initiative. Partners. Partners in this initiative have already

pledged more than $900 million, $900 million to increase women participation in blue and green industries like forest management, clean energy, fisheries and recycling. And if you wonder why I'm so enthusiastic about this, I got more women, my cabinet than men. So I've got to get this straight. All kidding aside, I think this is a very important initiative, including by creating the first ever facility dedicated to helping women and women led businesses and organizations in developing countries to gain access to climate finance.

We're also supporting programs that expand access to STEM education, to address laws that limit women's equal access to land and natural resources. And we plan to invest in young women and entrepreneurs in the maritime sector and to scale up these projects as well. I challenge us all to find new ways we can see the full picture. And we're listening right now to President Joe Biden speaking here at the APEC summit leaders retreat here, along with his counterparts from the major Asian economies. They're talking a little bit about some of the progress that was made this week at that summit. You can hear those comments in full on live go on your Bloomberg terminal. And of course, if he says anything that

is material to you and the markets, we will bring it to you as soon as we get it. We do want to pivot now and go back to the markets and the private markets and M&A. We've been seeing a lot of it in the grocery space, whether it's Wonder's recent deal for Blue Apron or Kroger and Albertsons still seeking federal approval to merge Misfits Market, it's the online grocer specializing in unwanted organics, unusual meat cuts and overstocked pantry favorites. It recently completed its own acquisition, a company called Imperfect Foods. The CEO, Abby Ramesh, joins us right now

to talk a little bit more about what's going on in the space and some of the consolidation. Nobby, great to have you here on the program. And let's just start off, I mean, for those folks who aren't familiar with misfits, you're kind of taking food that to a certain degree would otherwise be thrown out or certainly not used in any sort of prime way, and finding a better way to repurpose that for folks who are looking to buy their online groceries, right? That's exactly right. And if, you know, the food waste statistics in the US are staggering, you know, roughly a third of what we produce at the farm level doesn't actually make it to the consumer.

And so Misfits Market, our mission is to take all that food that would have gone to waste, bringing in our fulfillment centers and sell it to households at a discount. And so we serve two important value propositions. One is the sustainability they were rescuing food that otherwise would have gone to waste. And two, we're actually providing a more affordable option for grocery delivery compared to a lot of the other options out there.

So we're tackling affordability and sustainability. I mean, you founded this business, I don't know what, but like five years or so ago here, we mentioned in the intro the acquisition of Imperfect. And I'm curious as to why you felt you needed to do that. Well, a couple reasons. One is online grocery, the name of the game is. And, you know, when we kind of talk

about what's going on in the space right now than M&A in general is because companies are realizing, you know, there's a lot of fixed assets, a lot of fixed overhead. And if you can get scale through inorganic methods like M&A, that accelerates your path of profitability and helps the business. So so that was one big part of it for us. The other piece of it was both imperfect and misfits were tackling the same mission. So we were frenemies for a long time and perfect was sort of the our West Coast counterpart and misfits started on the East Coast in Philadelphia. So we looked at and said, Hey, we are tackling the same end goal.

We have the same mission and vision. Why should we continue to compete for customers? Compete on advertising dollars doesn't make more sense to put these two businesses together. So we started that journey a year ago and we just completed our acquisition. We merged operations, logistics team, customer bases and everything, and now we're one unified platform. We're double the scale that we were

before the acquisition. So it's had a meaningful impact on our economics. Let's talk about the competitive landscape a little bit. Just two days ago, there was an article

in the F.T. about too good to go. It's Europe based, but as the article lays out, it has its sights set on entering the US market as well. And I know that you just completed that acquisition, but do you see more M&A in your future as some of these other players enter the US market? Yeah. So, you know, if you asked me that question a year and a half ago, I would have said probably not. But looking at the market now, I definitely think there is more ahead. And we're right.

We're eyes wide open looking at all the opportunities that have presented themselves. And you mentioned too good to go. But there have been you know, you guys covered the Blue Apron Wonder acquisition a week and a half ago, gets here, announced the acquisition of FreshDirect, which is the largest grocery online grocery store in New York. There's a lot of consolidation happening in the space as companies decide either they're going to be acquirers and get scale that way, or there's companies that decide that they need to be acquired. And that's the only path to sort of profitability and stand standalone. So, yeah, there's a lot more to come and we're looking at it actively. Hold that thought for one second in conversation right now with Abby Ramesh. She's the CEO of Misfits Market.

Of course, another big story, though, that we have been keeping an eye on here is some controversial posts made by Elon Musk, of course, the head of SpaceX, the head of Tesla, and the head of X, the company formerly known as Twitter. Several advertisers saying they're now pulling or suspending their ads from X, and that now includes Apple. We learned from several other big major companies, including retail focused companies, that they have either suspended or completely disbanded their advertising on that platform.

This largely is tied to a post that Elon Musk made in response to another post that was widely interpreted as being anti-Semitic. We'll get you some more details on what's going on with that in just a bit. But we do want to get back to our conversation with the CEO of Misfits Market. And you mentioned, of course, that you

see more consolidation in this industry going forward. I want to talk about IPO prospects as well. Of course, we saw Instacart take the stage come out of the pipeline just a couple of months ago. Is that something that could potentially

be in your offing as well? It's it's something we talk about quarterly and it's something that might be on the horizon. We're we're willing to be patient as a short answer. We don't have any pressure to go take the business public tomorrow. I think we're keeping an eye out on the market.

And I think there are there are mixed sentiments right now about what the IPO market looks like, especially for online grocery. So for us, I think we have a path to continue to stay private, grow the business organically and look at a potential additional M&A opportunities. But if the IPO market presents itself as an interesting opportunity, where we'll be looking actively, we'll keep us updated. It's great to talk to you today, though. That is Avi Ramesh. He is the CEO of Misfits Market. Now still ahead, Best Buy expected to

report next week. We'll preview what the company may say about back to school sales and the upcoming holiday shopping rush. This is a close on Bloomberg and.

Let's get a view from the south side with our top calls, the big movers on the back of analysts recommendations. And we start off here with analog devices upgraded to overweight over at Morgan Stanley. The analyst there, Joseph Moore, says the downturn in chip demand isn't over and may not reach a trough until the second quarter of 2024.

But believe it or not, that could be a good thing for Analog devices, which he says has outperformed its peers in previous down cycles. And the company has already guided investor expectations, lower those shares higher on the day by 2%. Next up, let's take a look at charge point. More analysts throwing in the towel on the maker of charging stations following the sudden replacement of the company's longtime CEO and the posting of disappointing quarterly revenue. Oppenheimer among the sell side shops downgrading cutting its recommendation to perform and says it wouldn't be surprised by deeper cuts into operating expenses. Shares having their worst day on record, down more than 30%. And finally, let's take a look at

Deckers Outdoor Choice, starting coverage of footwear and apparel stocks and giving Deckers a solid buy rating and a $735 price target. The analysts cite brand heat for the company's UGG boots and a HOKA running shoe that it says is in the early innings of a robust growth story. The shares have a relatively robust day, up about 1%. And those are some of our top calls. We do want to stay in the sell side

space and stick with retail as well, because we're going to get more retail earnings next week. Best Buy expected to report on Tuesday. And investors are hoping for improvements to same store sales despite consumers cutting back. For more on what to expect, let's turn to Greg Mellish. He's senior managing director over at Evercore ISI. And he's got a in-line rating on Best Buy. All right, Greg, let's start off here. I mean, I was looking at Best Buy. Best Buy is having a phenomenal week, by

the way. And we should point out the backdrop of heading into the holiday holiday shopping season and the big Black Friday events are coming up here in about a week's time here. How much is Best Buy going to be dependent on this season? Well, look, it it's a critical quarter. It's a critical month for Best Buy. And and the real trend that we're watching for is we do think sales got less negative this quarter and hopefully that has continued into Black Friday weekend. Consumers are focused on value.

So best buys certainly lean into a lot of that and some particularly strong offers. But frankly, electronics generally and big ticket consumer discretionary products, it's tough out there. And most of the categories are still falling year on year. So we think it's going to be hard for them to get back to a positive comp this year. Well, that's what I'm curious about,

too. And this isn't just my question isn't just specific to Best Buy, but overall, when you look at a lot of the hard line retailers, there is this idea that there really was kind of a massive pull forward. Obviously, we bought a lot of stuff in 2020 at 2021, but the pandemic but even when you look at some of the spending levels heading into late 2022 and into 2023, I feel like we all have our computers and our refrigerators and all the things that we would want. And there isn't really a much of an appetite to re-up. You make a great point. We just cut our forecasts for next year

for retail sales growth to be 2%, down from 3% this year. And the reason is it's just it's slowing. It's not collapsing. It's just we bought a lot of stuff with all the checks that were sent out during COVID and then after COVID and 21.

And for durable goods, especially now with interest rates up, it's just people don't necessarily need the products. That's why we're focused on areas where we don't see deflation, things like auto parts that are more need based. We think those are the kind of areas where most of our top five names, our top five portfolios need based retailers that are growing traffic. And Best Buy, unfortunately, isn't one of them.

Well, Greg, I was going to say, when we think about what we've heard from the retailers so far, especially over this past week, there seems to be a trend of profitability is improving. But when it comes to same store sales, it's just been a wave of disappointment. What are you expecting out of Best Buy when it comes to comp sales? We think their comps for the third quarter that just ended in October will be negative six. That's a little better. I think about 50 bips better than the

second quarter. And we do think they'll be less negative further in the fourth quarter. But I think if you go back on a very long time horizon, the point is that whole category and Best Buy particular, if you look back to sales growth from 2019, it's de minimis, whereas for overall retail sales are up 30%. So I think Best Buy is doing well in their category, but it's a tough, tough category. One of the things I think we're going to watch in this is to see that how strong is the consumer? And Best Buy makes about a third of their bit from their profit share of their credit card operations.

So that's one thing, sort of under the hood next week when they report, just looking to see are there any cracks in that or are we starting to see some more write offs on their consumer credit book? And Greg, as Romain mentioned in the intro, you have an in-line rating on Best Buy. When we get those numbers, is there anything that you could see that would bump you up to a buy on the heels of it? Well, we always, you know, take the data as it comes in and see what's there. I think what's good about Best Buy as a business is that they might be in a tough neighborhood. But I think they are managing a well. They're holding a growing share. So what they can do in terms of when

relative share and customers and keep those customers loyal, I mean, that's always makes you feel better about any company. The as long as the credit profits don't start coming in. You know, the dividend should be secure at a 5% yield, which isn't too bad. So, I mean, there are attributes to Best Buy for sure.

It's just certainly doesn't it doesn't you know, we do have a buy on it and it doesn't reach the top of our list. All right, Greg, great to catch up with you. Greg Mills there over at Evercore ISI. A closer look at Best Buy and some of the retailers heading into a pivotal week here for retail sales. We at Best Buy on Tuesday and quite a

few others, as well as cool, including Burlington, Kohl's, Abercrombie and Fitch, Lowe's you see there as well, and quite a few others, including, we should point out, Nordstrom and Urban Outfitters. Coming up here, we're going to pivot and take a look at pharmaceutical companies because they are looking for the next big thing in weight loss. And apparently they found it in a little pill. Are you going to take one of these pills, Katie? Probably not really my speed, but we'll talk about it.

Yeah, I hope so. And that's coming up after the break. This is the close on Bloomberg and. Well, weight loss pills, they could be the next big thing in the $100 billion market. Novo Nordisk and Eli Lilly both touting pill versions of their blockbuster drugs that could come as soon as next year. Bloomberg's Madison Miller has the story. When it comes to the pill version of these weight loss drugs, I feel like that's the Holy Grail. Yeah, and that's I mean, that's what the

drug makers think, too. And that's what the drug makers who don't have weight loss drugs also think is the entry point to this market. So we see Pfizer, AstraZeneca, they're saying that pills are going to be the next big thing, and that's their way into this. Look, I get it that most people don't want to do a shot at particularly a self-administered shot here. But I was always in a depression that

oral medications typically had a somewhat different efficacy just because of the way it breaks down in your body. So are these pills actually going to be as good as the shot? Yeah, so that's a really good point. And that's so far what we've seen. That's probably why we don't have a

weight loss pill yet. We have rebels, which is Novo Nordisk Drug, and it's Ozempic in a pill, but it doesn't cause as much weight loss as those epic does. So right now, Novo Nordisk is testing higher versions specifically for weight loss, but it's been harder to get that same efficacy in a pill until now. And the pills that are coming do look to be just as effective as the shots. And I mean, okay, so there's the point on efficacy. But even still, I mean, once these weight loss pills come out, what is the market for the shots going to be? Who's going to use those? Yeah, and that's another good point.

And the Eli Lilly thinks that still there is going to be a market for these injectables. I mean, there's the point of I guess injections are less easy to forget than a pill that's taken every single day. At the same time, you know, it's sort of easier to forget. How often are they taking the shots? The shots are once a week. Yeah. Yeah.

Which is a little bit easier if you're, you know, you're someone that tends to forget a pill every single day at the same time. There's also at least the pill that Novo Nordisk is making. There are some stipulations around, like you have to take it on an empty stomach and then you have to wait 30 minutes to eat after. And it's just a little bit inconvenient for people.

A shot might be a little bit easier. So, I mean, I'm just going through the story that you're a part of, and I'm counting on at least five or six drug makers now that are pushing in this space. And and we were speaking a little bit during the commercial break off air about when Viagra came out. And that was like that was a huge deal for the pharmaceutical company and that thing for the pharmaceutical industry. And it became that big blockbuster drug at the time. And there are people are trying to draw parallels.

But I also remember back then there were really only one or two players in that space. It was Pfizer and I forgot to make Cialis. But yeah, that was pretty much it. Yeah, there's a lot more competition in that space. So does that mean that we are going to start to see more favorable pricing and are we going to see a faster rush to a generic? Yeah, I mean, I think that's the hope and at least that's what AstraZeneca CEO is saying, that the pill versions that they're going to make are going to be a lot cheaper. I mean, that's still several years off.

They're further behind in development. But that is what we think is going to happen as more drug makers enter this. Hopefully the prices will come down because right now the drugs are still extremely expensive and just not affordable for most people. The two major players right now are

still Eli Lilly and Novo and Novo Nordisk and the rest of the drug makers are further behind. But we're starting to see more and more competition sort of come into this space. Well, we know that supply has been a concern, particularly for Novo Nordisk.

Would it be easier to manufacture these pills and basically scale up or how are they thinking about that? Yeah, I mean, ideally, yes, Pills are typically cheaper, easier to store, easier to manufacture, which is why in the next few years we might be able to see cheaper pills. But right now, Novo Nordisk Drug Rebels, this is the same cost as it was epic. It costs 900 $936 a month, which is the exact same as those MPEG. So right now the pills aren't any cheaper.

Over time, it might be able to help these manufacturing issues. However, the drugs that the pills take a lot more active ingredient to make. So it's still that could be an issue if Novo Nordisk doesn't get a hold of their their supply issues. Well, Madsen, it's great reporting as always. I'm sure we're going to be checking in with you very, very soon. That is Bloomberg, like the most popular person at Bloomberg. You know, I know the iron is hot and

she's striking, but obviously this is basically all we're talking about, it feels like. And of course, weight loss drugs dominating the airwaves. Some of our reporters have actually been looking at potential unexpected side effects, namely whether it's bad for your marriage or for my marriage. How so?

Well, if you take a look at bariatric surgery, researchers in the US, they followed 827 married and 614 single people who got bariatric surgery for five years and found that those who weren't married were twice more than likely more than twice as likely to tie the knot after surgery. So I don't know. Do with that what you will. Okay. I don't know.

This is I feel like this is a minefield of conversation, but so so the idea that. People lose weight and all of a sudden they look better in theory and they feel and better about themselves and all of sudden they look at their partner and be like, Hey, I can do better than you. Is that what this is going to trade up here? What did they do? A study where both spouses were on the weight loss drug so that they both lost weight will do that at the same time that maybe they both kind of see each other for what it is. Hopefully, hopefully someone is watching who some of these marriages are a little less superficial than that right now. It's a little bit depressing, but in any case, we'll see. But on that front, shall we talk about

the markets at all? I mean, if you want to if we might. I mean, look, it's an update. It is an update, but just barely. Just barely. But look, it's an up week. And we talk about the rally that we've had and a lot of questions right now, Katie, as the weather continues heading into next week, a holiday shortened week here in the U.S.. Stick with us. This is a close up over. 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 on Romaine Bostick. And I'm Katie Greifeld. Katie Greifeld We're looking at modest gains in the market once again on the day, but on the week, the gains proved to be meaningful once again. Meaningful once again. We had such fireworks to start this week. You think about that CPI print that we

had all the way back on Tuesday. It feels like actually a month ago that obviously really reignited bets on the soft landing. You can see that in the S&P 500 on a weekly basis. You can certainly see it in the bond market as well.

Yeah, certainly see it in the bond market here. You talk about the continued buying and the persistent buying, at least on a weekly basis that we continue to see there here. And then you take a look at crude oil, which is trying to bounce back.

We should point out, despite the fact that it's up 4% on the day, it's still lower on the week, which I think gives you a real sense here of just how wild the week was. Yeah. And it did fall into a bear market at one point. A lot of things going on. There were some technical factors as well. I heard contango bandied about, but it's really supply and demand. Yeah, I mean, contango is great, right? You know, But you want the backwardation.

That's my favorite. I've heard that. That's the thing I do want to point out. And I think you mentioned this a little bit earlier about some of the flows that we've been seeing.

I don't know if we can put the chart up here, but there was a great story here about the commodity trading advisors. These are kind of the the fast money folks, if you will, institutional folks here buying a record $70 billion in US equities in the week. But I was even looking at some of the flows into SPI, into the Triple Qs and here and we're sitting on right now, it's going to be one of the biggest inflows on a weekly basis that we've had all year. I think it's going to be the third biggest to be official that we've seen so far this year. And it's not just buy. I mean you've also seen money come in to

junk bond funds into investment grade credit funds as well. So it really feels, again, that this risk rally, it's extending across asset classes and people are actually putting some muscle behind it. So we'll see how that pays off. But let's look at some of the individual

movers today because we've got a few interesting ones. Chargepoint, What a terrible day this stock is having. It's down about 35%. It basically it missed on sales.

It also announced the sudden replacement of its longtime CEO. So there's a lot of speculation about what that means necessarily. But you can see that investors just are giving it a bad grade.

And we should point out the miss on that revenue was insane. I mean, it was like I think they gave guidance around 130 million. The Street was looking for 150. You do the percentage math on that here and you get a sense of why the stock is down 30%.

Yeah, so they really packaged all that bad news together. But let's move on here. Let's also talk about Applied Materials. Of course, they reported yesterday there was also a Reuters report that broke that they're facing a probe by the Justice Department over whether or not they sold hundreds of millions of dollars of equipment without proper licenses to China's biggest chip maker. That obviously would violate those export controls. And you can see that's sinking the stock down by over 4%. Let's also quickly talk about plug Power also having a bad day. I don't know why it picked all the

losers today, but basically Citi cut its recommendation to neutral from buy that's being punished in the market today down by about 3.2% as a vibes, I think I think something something something's going on underneath the surface here. I wore a red dress. All right. We are one hour away from those closing bell. Sit tight. Our cross-platform coverage of the big stories of the day and starts right now.

Come down to the close. Bloomberg's comprehensive cross. Form coverage ahead of the U.S. market. Close starts right now. This is the countdown to the close. Romaine Bostick alongside Katie greifeld.

We're joined right now by our colleague Scarlet Fu and Bailey Lipschultz. Welcome to our audiences across all of our bloomberg platforms, television, radio, originals and our partnership. Carol Massar of those folks still streaming on YouTube, what did you do? Scarlet Fu with Carol Massar Carol Massar and Tim Stimac are on a forced holiday somewhere. They're taking some time off together. I don't know.

We'll have to find that to come next week. But I'm guessing no. You know, I was taking a look at the market, Scarlett, and I was looking at all those big, magnificent seven stocks.

They're all gone on the back foot on the day. And that includes, I think, everybody's favorite this year, at least on a percentage basis. And that's Nvidia. Yeah. And Nvidia, of course, is going to be

reporting earnings next week. It's not until Tuesday, but it's never too early to look ahead to what those results might bring because barely the numbers that they've posted in the last two quarters, they smashed analyst estimates. Yeah, they beat expectations. But even this last quarter, we saw a huge beat on revenue by more than 20%, but the stock ended up flat. So when you're the best performer in adding more than $800 million in market cap this year, expectations will be sky high and it will be interesting to see what happens in a holiday shortened week. Yeah, I wonder, though, I mean, we talk about the earnings and when they come out, is this really a fundamental story? Is this really about the numbers or is this more so about Jensen Huang and the narrative that he's pieced together for this stock? Yeah, remains to be seen how that goes over. I do wonder how many times we're going to say holiday shortened week next week because I would imagine it's a lot. But let's go against Thanksgiving.

I'm not against it necessarily, but I just see it in print all the time. But let's talk about the housing market as well. There was a really interesting story out in Bloomberg Businessweek that found that almost 40% of U.S. homeowners right now own their homes outright as of 2022, looking at the latest data.

So the share of Americans who are actually living mortgage free, free right now, that's an all time high. It's really interesting. And it speaks more to the fact that many of these are baby boomers who refinanced when rates were super low and now they just own their home. Well, that's all I was going to say, Like, what's the demographic of that here? And I guess that's a good thing. And we've talked about this a lot as to why we haven't actually seen a collapse in the housing market given the big rise in rates.

And look that if you own a house or if you bought one over the last 20 years or so, either you own it outright or you've got a mortgage rate that is probably most likely a below 5%. Yeah, absolutely. And it's interesting, though, that a lot of people wanted to pay down their mortgage even if they did have lower mortgage rates. A lot of people want to hold onto those mortgages because of the mortgage interest deduction for their taxes. But you know, that peace of mind is good, I suppose. Yeah. And the other thing Scarlet Fu is like I mean, don't they always financial advisors always tell you that usually your mortgage is usually the lowest cost thing you have in terms of borrowing relative to credit cards and cars and other things like that. So they always say that's the one you should pay down last. Yeah, right.

Because I mean, if you're sitting on 3% rate and if you've got a credit card that's, you know, in the double digits, you know, you would pay that down first before the mortgage. Yeah, absolutely. I mean, for for those who are capable of doing it, who have the means, spare a thought for the millennials who are not in that kind of position. Thank you, Scarlett. I appreciate that. I was going to say, this is all Greek to me because I don't have a mortgage. I pretty much famously at this point, because Roumain keeps bringing it up, was looking it was in the housing market and rates are just too high.

And do the monthly calculation and it's just too high. And I think that's the story for a lot of people trying to buy right now. Sellers aren't happy and buyers certainly aren't happy.

Bailey Yeah. Katie As someone who just closed and has made, I think, two mortgage payments myself, congratulations, It is a high interest rate environment. And one thing that does stand out to me and is an interesting thing is the number of people selling houses in expensive areas. Think California out here in New York, New Jersey, and moving to the areas like Texas and Florida.

Just given the percentage of new homes that are being sold and paid up. Right? Yeah. To lower cost areas as well. Not just where homes are cheaper, but

where the cost of living is a lot lower, too. All right, guys, that does it for now. We're going to catch back up with you in about 40 minutes time before we take you down to the close. We'll be back together live on television, on radio, and on YouTube and on Bloomberg Originals at 4 p.m.. Our Beyond the Bell coverage begins when we take you through the today's market close. And we continue our coverage right here on Bloomberg Television.

Counting down to the close. Those bells just about 50 minutes or so away. And there's a lot of investor attention right now on artificial intelligence, particularly ahead of those results out of Nvidia next week that we were just talking about. Shares of video have more than tripled over the past year. And our next guest actually has some advice for investors who are looking for a cheaper alternative in that space. Silvia Jablonski Over at Defiance, ETFs

recommends AMD as a way to play the story. Sylvia joins us now for more. A lot of acronyms here, Sylvia, but let's break it down. We talk about the outperformance of

NVIDIA. Now, a lot of people look, I think everyone thinks NVIDIA is going to be at the forefront of the AI boom. But when you look at the run up in that stock, you have to be looking for something that maybe offers a little bit more value. Why

2023-11-20 23:42

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