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00:00The bullish narrative has been made and so has the bearish case, a range bound market as it tries to sort it all out. Forty one hundred and change right now on the S & P 500. Happy Monday, kicking you off to the close Romaine Bostick. A lot to cover here on this Monday afternoon. But U.S. market that continues to remain range bound as we head into what is going to be the busiest week of the earnings season. You thought what else? What we've been seeing overseas as well, a little bit of a hold up. What's going on in Europe, but a little bit of a pullback that we're seeing in China. In fact, the CSI 300 having its worst two day drop that we've seen all year long here. As the bloom comes off, the rose of that trade over here in the U.S., you have Tesla and some of the other big cap stocks still struggling for direction here. Tesla now down testing some of its lows on a year to date basis. Remember, this was a stock that started the year with a 70 percent plus rally. About half of those gains have been given back here on the day. We're going to talk a lot about what's going on in the options space as well, in what's going on in the Treasury's space. But we do want to bring it back to earnings. We talk about one hundred and seventy plus companies in the S & P 500 scheduled to report earnings this week. And if you believe what Mike Wilson over Morgan Stanley has had to say, he says, well, maybe the best has already been priced in. He cites that big rally that we had back at the end of March here, setting us up for what could potentially be, well, too high of expectations if that earnings trough really is in the cards here, at least according to him. He says valuation is still a little too high to twenty five. That's the consensus on earnings per share for the full year here. Earnings per share that a lot of folks have already started to whittle down just a little bit here. A lot else to talk about, including the potential for a recession, that economic softness and maybe that potential for a hard landing. Dana Peterson, chief economist over at the Conference Board, she actually spoke about this a little bit earlier on Bloomberg. Listen to what she had to say. Consumers still expect a recession at some point, and they've been signaling that for the last twelve out of 13 months, and so something is about to happen. And certainly when we ask CEOs, they continue to believe that there is going to be a recession. It won't be long and it won't be deep, but it's going to happen. Recession probabilities, but not necessarily long and deep, though. That's really not enough here to get folks excited in this market. The latest come live poll, survey showing folks still not willing to go out on a limb. Only about 30 percent of the respondents to that survey said they're actually looking to buy equities over the next month. And then, of course, that brings us to what's going on in the Treasury space. Not going to find a whole lot of bulls there, which you will find is, well, quite a few bears. You take a look at the latest CFTC positioning data, particularly when it comes to the leveraged bets, those speculators out there here. And you can see the big red lines going down to the bottom there. This is the most bearish that we've seen in several years here. Now, a market set up for the potential, not only for deeper treasury losses, but, of course, the inverse of that, which is potentially higher yields as well. J. Berry joining us right now. He is the co head of U.S. trade strategy over at J.P. Morgan. And I do want to start there, Jay, with the direction of yields and the expectations that a lot of folks have, that maybe that the spike that we saw earlier isn't over. Yeah, you know, Romain, I think from our perspective, we are certainly over the medium term a bit more bullish on Treasuries. We think the Fed's got one more hike to go at the May meeting and then we think the Fed will be on hold until the second quarter of next year. We also think, as you talked about, that recession risk is rising. Jobless claims are at their highest level in about a year and a half. And any move towards two hundred and fifty K would be a more imminent sort of recession risk. Not to mention that we're at the early stages of a big debt ceiling debate as well, which what we found in the past is that when debt ceiling debates get very late in the game, closer to the date, that ends up perversely seeing a pretty large rally in Treasury. So we think there's a lot of factors that point to lower yields over the medium term as well. Talk a little bit about the debt ceiling, because there are a lot of folks who still think, OK, this is still further down the road. You don't necessarily need to position around it. Now, look here basically at the end of April for something that realistically probably wouldn't occur until maybe July, maybe then later than that. Yeah. So in our minds, we think the sort of X date, the drop dead date is probably sometime in the early to middle part of August. But what we're watching right now is the fact that tax receipts in April came in a bit weaker than they did last year, which we expected. But we're tracking whether it could be maybe an early July date. But the big story there is, as you get within two to three months of this possible X date, you begin to see signs of stress show up in a T bill market. We start to see small pieces of that over the last couple of weeks. And we may be months away, but we think that the debates are only going to get more protracted from here. You've got a Democrat in the White House. You've got a Republican heading the House with a very sort of tenuous grip on the leadership, which to us looks a lot like 2011 or 2013. I think we all know then those were pretty protracted debates that end up having a pronounced impact on the markets, weakening expectations of growth and seeing a bit of a flight to quality as well. So as we get into the late spring and summer, that's something that we'll pay attention to. It's probably the third or fourth thing on the list, but we think it only adds to the pressure when we talk about the pressure out there. All of a lot of focus right now, of course, is on the Fed and the macro conditions here. The idea that the Fed has does have the optionality to pause. And if you believe the pricing and options markets maybe even start to cut rates sometime this year, are you in that camp? So, you know, again, we think the Fed's got one more hike to go next week at the May meeting. And then we think the Fed will actually be on hold until probably this time next year. And the reason being we do see growth slowing and moving into contractionary territory. Ultimately, we see the unemployment rate moving up towards 5 percent as well. But the part of the stickiness here is that inflation, while it's coming down, is probably not going to be back at the Fed's target until maybe this time next year. So for us, we don't see an imminent recession. We do see slower growth. But inflation is going to be an issue and compared with other tightening cycles when the Fed has been quick to pivot. That's going to make it a bit more challenging right now why we see them hold into next spring. Are you comfortable extending duration at all over this, the shorter term cycle? You know, so we've talked about medium term being sort of a bit more bullish on treasuries and on duration here, but very near term. I think there's two things that make us a bit more cautious. The first is the Fed pricing that you talked about and the fact that we're pricing in about 60 basis points of easing over the balance of this year. Second, we've got our own valuation framework for long term treasuries, even adjusting for how the market's pricing. Fed inflation and growth. And in that respect, it looks like 10 year yields right now are probably 25 to 30 basis points too low. So while that's our medium term tilt, we'd prefer to wait for higher yields before adding duration. And we prefer kind of what we would call to be sort of low beta proxies for being long duration curve steepness right now. Well, we'll talk a little bit about what we've been seeing on the curve then, because there are a lot of people that look at the price action in treasuries. They look at the moves in the curve and they're saying that they're a little bit of false signals. I mean, some people would make the argument that, well, if everybody is sort of betting around the same sort of steepening, then you never really get sort of that outcome that most people are Jihye Lee the price. No. And I think it's you know, it's very clear when you get to the end of a tightening cycle, one of the first things that moves is the curve and the curve at the long end. So having everyone lined up in the same direction could be a bit of a flag. But you talked about the short and 10 year treasuries before. I think that short is probably one leg of some sort of iteration of a two is 10 steeper. We're in the camp where we like more long and steep winners because they don't tend to do much at the end of a tightening cycle. But they're the first to go once the Fed is actually on hold and they've got a bit of a better carry profile. So I agree, it's very possible that the curve trade has become pretty well subscribed as it was just prior to Humphrey Hawkins and just prior to the failure of the regional banks. But we sort of preferred a bit of a nuance difference on the curve at the long end rather than at the short end. What about inflation protection? There was a great story in the Bloomberg terminal last week saying that a lot of folks have really sort of abandoned that trade. Is that too soon to do that? Well, you know, we're pretty neutral on break evens here. I think certainly, you know, being long inflation last year with the highest inflation year in 40 years didn't end up being the best protection, but break even valuations look pretty fair to us at the moment. And the evidence that we've had is once the Fed goes on hold, you have pretty limited performance and tips overall. So that doesn't sort of make the case for wanting to be long at the moment. Further from that, as you get into the spring and the summer and the debt ceiling debate intensifies. If that's typically a risk off event, you know, we tend to look at tips through the lens of not just what delivered inflation and commodity prices are doing, but what risk appetite is doing, because it's sort of a less liquid product. And that would be. That may hurt the product as well. But with regards to inflation expectations, I mean, getting down to the Fed started within a year. That seems a little ambitious right now, at least based on, if you believe what some of the economists are saying and how they're reading the economic data. Even if we do get that moderation, most people think maybe a 4 percent is more something we'll have to live with for the next year, year and a half or so. Yes. So I think if you look at it, we think on a sequential basis and this is only on a sequential basis, that core piece, you will be sitting at probably two point two percent by late this year, early next year. OK. Much less on it over a year ago basis. So we agree that we think it's unlikely that the over a year ago numbers get back to the Fed's target that quickly. But I also think you look at what's being priced in into the OAS market of the Fed funds futures market. They're saying is a more decisive set of easing to come, which makes you think that this is a story about growth, which would bring the labor market to loosen more quickly and inflation to come down more rapidly. And we're just not in that camp. How much does the dollar right now factor into your general outlook, if at all? I think a little bit less so than it did a few months ago, because when there was a bigger policy divergence like there was, say, last fall and the dollar was rallying substantially. That was a big impact on how to sort of think about rates because you had reduced foreign official and foreign private demand. And that was clearly decisively, I think, disinflationary sort of impact on the inflation outlook. But now the dollar's been a bit more range bound over the last few months. And we think with the Fed coming to the end of its cycle, the ECB and the Bank of England not too far behind in the months behind it, that the dollar is going to be much more range bound than it's been in the past. So it's important, but just not as important as it was, say, last summer and last fall. All right. Great stuff. Great way to kick off the show here with Jay Barry. He's the co head of U.S. Trade Strategy over at J.P. Morgan. Stick with us. A lot more to cover, including a discussion here about that relentless rally that we did see inequities and, well, some of the folks who are sitting on the sideline and missed out. Millennials, remember, if anything goes wrong, always blame them. We'll break that down for you. Plus, we're gong to talk a little bit about Coca-Cola here and their pricing power coming out of their earnings that we got a little bit earlier today. And a lot more to talk about as well, including, well, the next wave of green investing, big money pouring into climate technology startups. We're going to talk about which areas are seeing the most growth. All that more coming up in just a bit. This is Bloomberg. The S & P 500 is still stuck in that relatively tight training range, in fact, you go back to the end of March here. We've basically been in about one hundred point range and that includes on intra day basis from peak to trough, basically from basically around a forty one sixty nine down to about four thousand sixty nine. Here you do have a few bright spots here on the day, including Apple, Amazon and a few others setting up for what is going to be one of the busiest weeks of the earnings season here. But you talk about the lack of breadth that we've been seeing. Any sort of upside, that lack of breadth continues here. In fact, about half of the S & P 500 right now straddling those 200 day moving averages. But the other half significantly below some of those key moving averages. And that raises a lot of questions about valuations heading in to this earnings week. And it is a big week for earnings. So far, S & P five companies are surpassing analysts expectations on the top and bottom line. You get about 178 companies in that index reporting this week. So we're gonna get a much clearer picture as to what we're seeing on the screen is real or an anomaly. Michael Bloomberg intelligence chief equity strategist Gina Martin Adams joining us right now to give us a little bit more insight into her research and what she's seeing Gina. So far, so good, I guess, on a relative basis. But we got a lot of reports coming up this week, and I'm wondering if that is going to change that basically the share of what we've seen so far. Yeah, it's tough to say. So far we're about a quarter sorry, about a fifth of the earnings season as that is finished. Most of it has been financials company. Its financials have largely beaten very low expectations after certainly sentiment really took ahead on the financial space with the march. That said, the bulk of earnings are in front of us. Analysts expectations are frankly pretty low and usually the companies are able to beat those short term expectations. I think what's most important to watch really is the guide to the outlook and the guidance that comes from companies. We should hear more about cost cutting. We should hear more about margin stabilization as a result of that cost cutting to help the market at large get a little bit more comfortable with the earnings outlook. It's been very uncomfortable now for about six months with persistent downward revisions, but we're seeing scope for those downward revisions to form some stabilization in the first half of this year. We might get some news on that as early as the next week. It'll be interesting to see. I mean, so far, I mean, we've heard from quite a few companies almost across the board that it basically made it clear that if they're not cutting costs, they're certainly keeping a much closer eye on it than they would have in the past. How are those companies being rewarded for those announcements by the market reaction? Yeah. So we certainly saw that in the fourth quarter earnings season with tech and communications companies at the forefront of that. Some consumer discretionary companies also acknowledging cost cutting. We didn't hear nearly as much about it from Penny and Charles. I don't know that financials are necessarily a harbinger of what's to come for that for those other sectors. But recall when we were looking at margins as a predominant risk a year ago, they were really a risk in the consumer space, the communications space and technology specifically. These three groups are also they also happened to be the groups where we're anticipating enormous consensus with anticipating some margin stabilization in the first half of this year, reflecting the slowdown in the pace of inflation growth, as well as the cost cuts that have been increasingly announced by these segments for the last couple of quarters. We haven't yet gotten to the bulk of the earnings season for these companies. So will we get enough announcements in the next couple of weeks to suggest that margins are indeed stabilizing, even if they're saying we've cut costs enough and the outlook for revenue growth is stable? That would be a positive signal for this group. So we just need a little bit more intelligence, a little bit more information come out of this phase, little fly confidence that that margin low is indeed emerging. I want to get your thoughts specifically on the tech sector, Gina, because we're going to obviously get most of those big names over the next three or four days here. And there was interesting research by the folks at Bloomberg Intelligence talking about that rally that we've seen in tech and the idea that basically you're pricing in a pretty significant amount of rate cuts to justify some of those valuations that we have right now. Yeah. It's something we've talked about quite a bit actually over the last year, is tech valuations are far detached from market valuations at large. The tech sector trading at about 25 times earnings versus the broader market, which is well below 20 now closer to 17 without tech cluster to 16. So when we're looking at CAC, it does stand out as somewhat excessively valued if we don't get that reversal in interest rates. Remember, this is a relatively long duration sector. Cash flows are concentrated further out into the future. As a result, you pay less for the sector. Presumably when interest rates are higher now, we would assume then that the reason that tech has helped CAC has been able to rally so much in recent weeks and even months. Is because the market is reducing expectations for interest rates into the future. We won't get any news on this until the Fed starts to announce the full forward path of interest rates certainly in May. We'll be watching for that. But there is some co-dependency between tech valuations and the bond market, which is somewhat uncomfortable just considering how bloated those valuations look relative to the broader equity market. Right. All right. Well said, Gina. Gina Martin Adams over at Bloomberg Intelligence. A great research coming out of that team as we head into the busiest earnings week of the season coming up here. We're going to talk about that rally that we saw off those October lows in the U.S. equity market. And more importantly, some of the folks who missed out on that rally, particularly some of the fearful millennials who poured all their money into cash right as the equity market was taken off. That's coming up after the break. This is Bloomberg. For millennials missing out once again, there's a new survey out by Ernst and Young finds that almost half of millennial respondents turn to cash in the market volatility last year. Sounds like a good idea, except, well, the stock market rallied about 16 percent off that low. Just about 34 percent of Gen Xers and about 24 percent of baby boomers sought out the safety of cash. Joining us right now is Bloomberg's personal wealth and finance reporter Craig Jomana. For a little bit more on this, Craig, let's start off. We always had people come on this program and thought of the big catch phrase is time in the market instead of timing the market. And I thought the great thing about this story was it actually showed how much you would have made had you remained invested with. You had, I think, what, ten thousand dollars that it ends up being about sixty four sixty five grand. But if you were Sadie sitting out even for just ten days, that return got cut. But in about half it's basically it's the most basic personal finance advice you get from people. Do not try to time the market unless you're about to retire. It's almost never a good idea. And this is case in point, it was a little surprising to us that millennials were most likely to go to cash. But it's also very Shery Ahn. They caught this survey right in the middle of the low and millennials were the most likely to go to cash. But this does show I mean, the S & P is up about 16 percent. NASDAQ has rallied, I think 25 percent somewhere in that ballpark. So once again, not a good idea to try to time the market. Not a good idea. In fairness, though, this seemed like every, you know, financial pundit, financial adviser was basically saying, look, you know, why not take go into bonds? Why not go in the money markets? Why not go into something that is lower yielding, but certainly a lot safer? And you're seeing some of that now. There's plenty of every day you'll see a headline about the S & P is going to fall 10 percent on these bad earnings. I mean, that's sort of the stocks are chugging along, chugging along. But going back to the last year and October, when you're hitting the bottom, there's plenty of reasons to be scared. One of the interesting findings is that baby boomers who are closer to retirement, they were less likely to do this, we think, because they are more likely to be talking to a financial adviser. So they have interests, some kind of financial plan in place. Millennials may be not doing it themselves. Maybe they needed the money to buy a house. Who knows? But that's a younger generation, not close to retirement. Really? Again. Not a good idea to try to time the market just to put this in context that people understand. So millennials, the definition we're using is basically between the ages of 21 and 41. Boomers, we're basically talking about folks that are 60 and up. That's right. I mean, everyone's got a slightly different definition of exactly what millennial is for this survey. It was 21 to 41. What about my generation Gen X, the greatest generation? No offense to Tom Brokaw there. What were we doing? You know, not going to cash as much as millennials, slightly more than baby boomers, but not as much as millennials. So I think that was the thing that jumped out at us. Here was, again, millennials, the oldest ones in this survey, 41 years old. That's somebody that should really be staying the course in very broad terms, even when the market was falling like it was. Stay invested and don't miss out on the rallies. There's a big question. I am sure you don't know the answer, but there is a big question here about this flow of money and how this might actually be permanent. That isn't just folks hiding out for a few months or even a couple of years, that this is a structural shift in allocation and portfolio allocation. Well, after years of no interest, there is actually some places to put cash right now. I mean, you can get three point nine percent on Marcus. Apple's new account with Goldman is four point one five percent. There's five percent C.D.. The thing is, that's barely keeping up with inflation. Costs continue to rise. So there's finally places to put cash, which I think is why some people are doing this. Interesting story on the Bloomberg terminal. Craig Yvonne Man helping to lead our personal finance coverage here at Bloomberg. A lot more to cover, including a look back at the broader markets as we count down to the close. This is Bloomberg. This is Bloomberg Markets close almost to thirty here in New York. Let's get you caught up on what's been happening in the commodities space. Coming off what had been its first weekly drop in quite some time on WTI crude and worst weekly drop, really going back to the start of the banking crisis early in March. WTI crude seems to be trying to find its footing here right around seventy nine bucks a barrel as we wait for these numbers to settle a gain of about 1 percent here on the day in New York. Keep an eye on aluminum futures down over in London for a third straight day. Still some macro concerns, particularly when it comes to the health of the Chinese economy and what it means for the health of the rest of the world. Two of the biggest top performing commodities of the year. Coffee and sugar continue to hold up to that sugar. We'll start there is actually off to a phenomenal start here. In fact, that's the best performing major commodity here in 2023, up about 4 percent a year on the day and now up more than 30 percent on a year to date basis in about 40 something percent off that year to date low that hit last July. Meanwhile, coffee futures also starting to reassert themselves. You're looking at robust futures there at 244 and change right now up about two point six percent here on the day. And we should point out at that price, you're looking at the highest level that we've seen in about twelve years. All right. We want to pivot to what's going on, how in the futures markets and get back well to Bloomberg's big take. It's on the back of Earth Day and it takes a dive into the one trillion dollars being invested in startups promising to help the world build a carbon free future. Bloomberg editor Eric Roston joining us right now for a little bit more on the story. And I thought this was an interesting story because it talked a lot, not just about, you know, we always talk about climate change and all the things that need to be done. But this is more about the flow of money, the flow where investor money is going into, quote unquote, climate tech. What exactly is that? Climate tech is a lot of different things that the UN expanding category. And this story was really a way for us to update everybody on this big picture that even we miss sometimes every day. Right. Wind power, solar power, even. These are all mature technologies at this point. They have global markets and you see the impact on commodity prices all over the place. Right. Because climate change is hard to fight in some areas like agriculture, heavy industry. Venture capitalists have moved on from those mature clean energy industries to a really broad sector approach and in hard to decarbonise sector. We're showing a few of these on the screen right now. Carbon resources, data, finance, biosphere. I mean, what is actually there that they're looking for in terms of the opportunity? Well, it's twofold. Obviously, they have to make money. And that's. You know, it's why we're here. But those particular things, right. So when we talk about dealing with climate change, you know, getting off fossil fuels makes sense. IED or solar power or things like that or even some other things, sort of like water treatment, that kind of makes sense to me. But I look at some of those categories and I kind of scratch my head and I think you're. Is that going absolutely well? I think it's really significant to know that for years or decades, observers of the climate space have noted that, like we have a global fossil fuel economy and we need to change all of it. And what we're seeing in that chart is the fact that that's happening like it's it's happening faster than anybody ever thought it would. It's not happening fast enough still. But there is an enormous amount of greenhouse gas emissions that come from agriculture, not just carbon dioxide, but methane. Nitrous oxide and nitrous oxide on steel is very hard to make without carbon there. There's a lot of really interesting technology. But there you go, sector after sector after sector. Every sector is responsible for carbon emissions. The overwhelming majority of it is fossil fuel related energy emissions. But we need cleaner ways to grow food, cleaner ways to make steel, cleaner ways to make cement. And those are the companies that are providing the opportunities you're seeing in those figures. All right. This is a great story on the Bloomberg terminal. I really want everyone to really check it out, how the world is spending one point one trillion dollars on climate technology. Eric Roston, one of the reporters on that byline, a great story and still a lot more coverage ahead here, including a look at consumers and calling it a look at Coca-Cola, which continues to not only lure New Coke consumers, but actually keep them even in the face of price hikes. That's coming up next. CFR ISE Garrett Nelson, this is Bloomberg. All right, let's get a view from the sell side with our top calls, the big movers on the back of analysts recommendations that we start up with, Ally Financial upgraded today to neutral from underperform this over at Bank of America. The analyst Brandon Berman citing an easing in some of those net interest margin pressures shares ally, though, nevertheless, down about five tenths of a percent on the day. Next up, let's take a look at C 3, a high cut to underperform over it. Wolfe Research with a 14 dollar target. The analysts citing significant risk to the software company's revenue growth in 2024 with potential clients cutting their technology budgets. The analyst says consensus estimates right now about 10 percent to high C3 shares down about 11 percent on the day. And finally, let's take a look at First Solar. Downgraded to sell over at Citi. The price target going down to one ninety four from 220 with the analysts saying supply demand fundamentals for solar modules indicate a negative long term outlook. Shares of First Solar down about 4 percent on the day. And those are some of our top goals. We do want to stick in the sell side space and take a closer look at Coca-Cola. They did report earnings before the bell today. And, well, their strategy to raise prices actually paid off, paid off big time. Results were out in a show that consumers kept on buying its products. Organic revenue growth up about 12 percent. And more importantly, price growth, at least here in North America, up about 11 percent. Garrett Nelson, vice president and senior equity analyst over at CFR, a research joining us right now. He currently has a buy rating on the shares. And Garrett, whom I ever doubt, a company as powerful, a brand as powerful. You say, is Coca-Cola. But when I see an eleven percent price increase on average, I think how long can they get away with that type of momentum? Here. Thanks for having me. And I think that's the question everyone's asking. What we saw this quarter was really more of the same of what we've seen from Coca-Cola over the last year or two, and that's double digit price slash mixed increases, very little impact on volume despite the price increases. And you know, another quarter in which the results came in ahead of consensus, driven by a stronger top line. And so, you know, actually, the last quarter that Coca-Cola missed was six years ago. So they were very strong earnings track record. And, you know, this was another solid release. The one thing, you know, they maintained their prior 2023 earnings guidance. But we think that's just them being conservative and that there some room for them to raise that guidance later on this year. I am curious, too. I mean, when we talk about their pricing power, I thought it was interesting. Some of the commentary that we heard out of the CFO today are really talking about those inflationary pressures on itself, meaning the idea that it's commodity costs are higher, whether it's for sweeteners, whether it's for steel and aluminum, for the cans or even lumber for the pallets and things like that. He cited a whole host of things that he doesn't see abating, at least not in the short term. That's exactly right. And they've really leveraged the brand strength. I mean, consumers have not shown a willingness to trade down, for example, to a private label COLA in the face of these higher prices. And Coca-Cola understands that. And so that gives them a lot of pricing power. It's a similar story that we've seen with PepsiCo actually, and other other many other companies with stronger global brand value across the consumer staples sector and so on. And Coca-Cola is very broadly diversified internationally. In fact, last year, 68 percent of their sales were outside of the U.S.. And so they're very international company. That's another thing that helped the company in the first quarter was currency was less of a headwind. The U.S. dollar has had has declined pretty significantly over the last six months. And so currency was less of a headwind than it has been in recent quarters. What was the outlook that they gave, though? I mean, there's been a lot of discussion here about the direction of the dollar. And for companies like you just illustrated, like Coca-Cola, which is so dispersed around the world, that becomes even more of a factor in how you sort of set guidance. Absolutely. And they don't necessarily. You know, I think they're just trying to make sure that analysts like myself and investors understand, you know, what kind of leverage like what kind of earnings impact they have to fluctuations in the value of the dollar versus a basket of currencies in their portfolio. So but no question that decline in the dollar over the last six months or so really helped them on the bottom line and during this quarter. All right, Gary. Great stuff. Going to have to leave it there, Gary. Nelson CFR a analysts, a buy rating on Coca-Cola and relatively decent earnings, though the share is a little bit on the back foot here. A lot more coming up. Coverage coming up here on the program, including a sit down with Howard Buffett, the chairman and CEO of the Howard G. Buffett Foundation, to talk about the lasting effects of the war in Ukraine. And a bit more. That's coming up after the break. This is Bloomberg. Welcome back. Time now for our Wall Street Week daily segment, the host of Wall Street Week David Westin. Joining us as he does every day at this time. And David, I always love having you on the program because you always come with an really interesting. Well, there's a little bit different Ukraine. Obviously, the war keeps going on despite what's going on in the markets and the economy and things. And one of things maybe we haven't covered enough is the effect of that on food and agriculture. We now have somebody as a true expert. He is Howard Buffett. He's the chairman and CEO of the Howard G. Buffett Foundation. Howard, thank you so much for being here. You just got back from Ukraine a week ago. You've been there many times now. Seven times, seven times. But you really have focused particularly on the agricultural ISE quickly, because that's what you're doing. Your foundation, agriculture, food security, as well as concern about conflict. What do you know? Well, I think that, you know, when the war started, it was obvious to me that it was going to have a global impact. And so people talk about global food security, but a lot of times you don't break that down. So if you look at it today, you know, we're going to have the largest shortage in rice that we've had in 20 years. Argentina just had a late frost and then a drought. So their corn production on their train years is going to be down by 15 percent. Soybeans, maybe 35 percent, wheat, 25 percent. You know, China is talking about, you know, they're not going to ship any more fertilizer. So the trickle down effect of Ukraine is trickles understatement. I mean, it's going to have a huge impact. And that last. You can't just bring things back quickly and right away. And so I think, you know, what I've seen in Ukraine is just incredible devastation in terms of the war and its impact on not just agriculture, but, you know, across the board. But you. Ukraine has suffered a lot in their agricultural sector. And it's to be one of the primary areas that we focus on in terms of bringing Ukraine back. So, Howard, and they talk about Ukraine as being the breadbasket of Europe. Basically, if you take the maximum capacity in terms of producing grain and other foodstuffs and whereas operating now, how far off of the maximum are we? Oh, it's in the Ukraine. They're down probably 50 percent. I mean, you can measure it a lot of different ways. But, you know, if you did not have the Black Sea initiative still operating, which is sluggish, but it's operating, you'd see a lot bigger problems than we see today. And in terms of the long term implications, you'd have to think about. You know, you can't just rebuild all the value chains overnight. And so you start from one end to the other and you have to look at what investment is it going to take to bring that back. And then one of the really big issues in agriculture in Ukraine is the mining. There's land mines that are estimated to be across almost 30 percent of Ukraine area. And that can take years. I mean, we're we're very involved and we hope that we can cut it back to, you know, a much lesser time frame. But but, you know, demining is a tough business. So that affects their productivity for a long time, because obviously you can't you can't farmed. All the fields are cleared. What about sort of the environmental impact? I mean, he mentions it as being the breadbasket of the world. There's a reason why it was the breadbasket of the world because of just how fertile the land there, the soil there was for four centuries. Well, so they have this they have soil. It's called turn them soil. And it's it's they are 65 percent of their arable land is made up of the soil. It's the best soil in the world. And it's one of the reasons why they can produce what they do. Landmines are going to have some contamination effect on that, clearing landmines in some areas, depending on what kind of landmines they are, you'll be able to get back to productivity pretty quickly. And then the other issue is there's hundreds and hundreds of thousands of hectares that have been affected by shelling. So you can look at some you can look at a 40 acre field and you can see 50 to 60, you know, holes blown out front from shells. That is really difficult to fix. And when you do fix it, there's only minimal mitigation that you can do to the soil that the damage that you do to the soil when you fix it. So it's hard to estimate how much damage is done or how long it's going to take to come back. But there will be some environmental damage. There's no question about it. Where's the money going to come from? How much interest do you think there's going to be by outside investors, foreign investors, when the war ends and there is more of a talk about how do you rebuild this economy? I'm hoping there's a lot of interest, but, you know, you don't really know that until the time comes. And, you know, Ukraine is such an important country in terms of agricultural productivity, but it's also, I think, an important country to Europe in the future. And so I think if it's looked at, you know, the big picture and long term, then there should be the money to invest. But it's it's going to take, you know, billions of dollars to help you train recover across a broad spectrum of businesses and agriculture and and shipping and a lot of things. So, I mean, I think that. Think it'll be there and I hope it's there. What are the ripple effects of what we're seeing so far in Ukraine? When it comes to agricultural products, I know when this first started, a lot of concern, for example, of sub-Saharan Africa really having shortages not only because of grain, but also some fertilizer issues coming out of Russia. What are we seeing? Well, last year, WFP World Food Program put out a few different numbers and they said that 70 to 100 million people were pushed to the brink of starvation. That's a lot of people. And then they also put out some statistics about eastern Africa, where the the basic cost of your food basket for a family went up. Fifty five percent. You know, the three of us can walk in a supermarket or somewhere. We're gonna have access to the food. We might pay more, but we can buy it. This is going to affect millions of people in different ways. But the price of food has been pushed up. And it's not. I mean, as long as Ukraine's at war and until some of the productivity comes back, you're not going to see those prices go back to normal. And then the other question is access to food. And so you have both these issues. And when you bring up Africa, you have to also think about the fact that a lot of these people that are going to have trouble accessing food and affording food, they are in areas that are already not very stable or maybe have some conflict. So, you know, I've always said food is power. And so this gives those people who are in power in Africa. Another way to try to push their own agenda or to control more people and food is absolutely critical. The end of the day, if you can't control that, the government can't feed people, you're going to have problems. How do you suggest? This is fundamentally a humanitarian issue, but it's also an economic issue. When you have higher food prices, typically the markets might respond by more investment being put into places who could produce some of the agricultural products that we're not seeing now. Are we seeing that? Is there increased investment in some parts of the world? It's not easy to do that. First of all, you can't do it in here and you can't do in two years. You're talking about large infrastructure investments. You're talking about companies that have to get up and running if they're going to provide fertilizers and seeds and all the other inputs, Yvonne Man machinery that has to be in place and that takes years. And you can't do it quickly. And then a lot of companies are not going to invest over a year of war. You know what happens the next year and what happens the following year? And what happens when Ukraine comes out of it. So it's not easy to go somewhere else and make an investment. Say we're gonna make up for what we lost in Ukraine. You can't really do it. What's the future, though? Is it just about growing more? Is it just maybe about growing things in a more efficient manner? Well, the I mean, the first thing is it depends on how the war ends. I mean, you know, and where it ends in terms of who has occupation or what territory and who can bring that back the quickest. I don't think, you know, if you're looking at the future and if Russia has more territory, you're going to see lower productivity. I mean, Russia is not going to make the investment. They don't. They don't. They don't farm in a way that most commercial farmers are going to farm. Ukraine was on the path. I mean, if you start looking I mean, in the top five, there they were they were hitting the top exporters of barley, wheat, corn, soybeans, number one, export sunflower oil. I mean, they were if you look at their trend yields, they were they were just getting better and better. And they still have a lot of room to improve post-war. And we'll stay engaged in that. I mean, we want to be involved in that. But but I think, you know, it's very hard to predict the future. But I think if Ukraine gets all the occupied territory back, they get the demining addressed, there'll be some investment in agriculture. There's a reason to invest in Ukraine after the war. After the war. Several of your answers really gone to after the war. You just got back. As I said, we could go. You've been there seven times. You've been to the frontlines. You have perspective. A lot of us lack. What's it going to take to end this war? Well, the United States has to start allowing Ukraine or helping Ukraine, I should say, helping Ukraine fight it the way they would fight it. I mean, if we're fighting this war, we would have control the airspace. We would be using longer range artillery to take out the the the supply lines to Russia. And the longer range artillery isn't meant to go into Russia. It's an occupied Ukraine territory. And I think you have to keep that in mind. I mean, I met probably a dozen different commanders from the commander of brigades down to the commanders, tank crews. And everyone said we are completely handicapped because we can't fight Russia with the distance that we need to fight them. And of course, you know, they have one Black Hawk, one single Black Hawk in their air fleet. I mean, they don't have the air support that they need. And they also have a terribly difficult time. And this is really where I see it's a war on civilians, but they have a terribly difficult time defending themselves from the attacks that Russia is dropping in all the time and killing civilians. And so, you know, we have to step it up. Europe has to step it up. And we have to start talking about a Ukraine victory. And we have to start talking about how Ukraine wins this war instead of like, you know, this week, we're not going to give you that. And then next week. Well, maybe we'll give you this. And we're not giving it to him at the speed and at the and also we're not giving what they need to win the war. So, I mean, we have to start thinking about this differently. We need a strategy that Ukraine can win. Howard, this has been a really important and valuable perspective. Thank you so much for bringing it to us. That is Howard Buffett. He's chairman and CEO of the Howard G. Buffett Foundation. And so remain. Tomorrow, we're gonna take a big turn to artificial intelligence with Nick Clegg from Better Life. A lot of talk here. And of course, this comes on a week where we're going to hear their earnings and get a little bit more sense here about the strategy that does Zuckerberg. And then Friday and the point where you have we're going to have a Steven Rattner, who's just back from China, talk to who has investments in China. All right. Be sure to catch our David Westin every day right around this time for our Wall Street week daily segment. And be sure to check out this full show every Friday night at 6:00 p.m. Eastern Time. Meanwhile, back here in the U.S., setting you up for the final hour of trading, another tight trading range. Stocks, bonds and all the other cross assets to go. A lot more coverage coming up after the break. This is Bloomberg. Come down to the clues, Bloomberg's comprehensive cross platform coverage ahead of the US marketplace starts right now. This is the countdown to the close. About 60 minutes left to go. Here in the trading session, Romaine Bostick alongside Scarlet Fu joined right now by our colleagues, critic Gupta and Madison Mills. Welcome to our audiences across all of our Bloomberg platforms, television, radio, originals and those folks streaming on YouTube. Another bit of a crab walk here in the markets, creating a bit of a range bound market. And you kind of wonder what's the catalyst going to be that actually breaks us out of this? Yeah. Is it the earnings? Is that the economic data, you know, remain a little fun fact for you and for a global audience? This is the month that has the tiniest trading range going all the way back to 2017. So when we're talking about calm before the storm, I think today's trade really encapsulates it. Matty. Yeah, well, ahead of those big tech earnings, I did want to take a look at the S & P 500 Technology Index because speculation has brought that index to trade at a multiple of 25 times future earnings. And by says that to justify that, the Fed would need to cut by 300 bits. That's five times what the swaps market is pricing in. So we're going to have to see remain if earnings in the coming weeks are going to justify that as well. Absolutely. And the critics point, I was taking a look at the data just over the last three weeks, the trading range on the S & P 500 on an intraday basis, barely 100 points, basically 40 169 on the top end. Forty sixty nine on the bottom in where we stand today, right around forty one. Thirty three unchanged here on the day. The Nasdaq down slightly by about three tenths of a percent. The Russell down about two tenths of a percent. One of the few bright spots out there remains Dow transports and the Dow Industrials industrials up about a tenth of a percent on the day as well. You look at the VIX, it's below 17 and then one day VIX is actually below 10 as well. For anyone keeping track on one day volatility. But I'm looking at the performances of the sector groups and you have energy is the best performer here as oil prices recover. All twenty three members are higher. This group had fallen two and a half percent last week. That's followed by materials and healthcare. On the downside, we've really seen technology pare some of its losses. It's now just a second worst performer as opposed to earlier. And rates have come into to really take the lead on the downside as far as some of the individual move, move is going to get some earnings after the bell, including from Whirlpool, including it from First Republic. First Republic shares up about 9 percent a year on the day as a lot of people start to price out those worst case scenarios that were priced in back in early and mid-March amid that and banking crisis here will be interesting to see how the numbers hold up here for a company and quite frankly, for a deposit base that had been rattled. Meanwhile, well, keep an eye on Albemarle. We talk about some of the materials companies. Interesting story coming out of Chile over the last couple of days and its shift to nationalize some of its lithium production. That could be a boon for some of these privately held companies, including Albemarle, up about five and a half percent on the day that two deals right now are making their way around the Bloomberg terminal. Keep an eye on Getty. Getty shares up about 35 percent right now here. That's on the back of that. Trillium Capital has actually made an offer for the company about 10 bucks a share, which would value added about four billion dollars. The fact that it's only trading at six eighty three maybe gives you a sense here that that might actually not get done, at least based on investor expectations. A global down about 7 1/2 percent. And that's on the back of a story by Bloomberg, citing people familiar with the situation that it's nearing a deal, a 10 billion dollar deal to acquire a basement over in Germany. We go back to the broader story. And Matty, you were just touching on this antique valuations and what support those valuations growth. Is this still a growth story? Is this going to be a cost cutting story? The chart you're looking at on the Bloomberg terminal, that's looking back and what we saw out of those Q4 numbers, that growth did hold up, hold up on a revenue basis. It'll be interesting to see if that happens again for the Q1 numbers as we head into the busiest earning week of this season. Yeah, I. I love this week in tech earnings because not only is it exciting yet to talk about those big names, but really the tech earnings aren't just a micro story. They're a macro story as well. What is Alphabet saying about the broader earnings picture? What is Meadows saying about the labor situation? Those are all going to be major macro indicators. Well, we, of course, had, of course, on Bloomberg TV talking about the Sarah Malik. One of them the chief investment officer over at Naveen. Take a listen to what she had to say. Well, the bulls are excited about is that Q1 earnings look pretty strong, the VIX is under 17. Things look pretty calm out there. A couple of things in bears see you are thinking about is that where 13 months after some significant rate hikes. What does that mean for the economy and also a much tighter consumer credit cycle? What does that mean for the consumer? So when we talk about safety, we look for companies that are consistently growing their dividends. They have quality balance sheets, provide some income, tend to be lower volatility. They should be more resilient during a recession. See, there you go. She's talking about dividends. They're what immediately are your dividends? I think buybacks as well. Scarlet Fu interesting to me when we're talking about instilling confidence in the banking system or instilling confidence in the stock market. Do the members of corporate America take the lead on that and buyback their own stock? I think this week is going to be crucial for that question as well. Right. Is that the best use of cash right now to putting that money into stock buybacks or dividends versus holding it in cash on your balance sheet for a rainy day? Because there have been plenty of rainy days in the month of March. I go back to the idea, though, of volatility and how has it's really died down and how whether that masks trouble or not, it feels like we're waiting for something. And one of the things everyone's waiting for, Mattie, is that pickup in volatility. But what's going to cause that is going to be those big tech earnings. Is it gonna be the data that comes out at the end of the week? Right. Well, as we've been talking about, it's such a tight range. And I love the data point that you pointed out, Kristie, on that. But I have to wonder, too, whether or not as we continue throughout earnings season, we're only about a fifth of the way through this. So as we continue to get some of that data that you mentioned later this week and even in terms of some of those big consumer brands, I'm talking Target, Wal-Mart, when we see more of that consumer data, will it tell a different story than what we're currently hearing when it comes to the health of the American consumer? And more importantly, I mean, what do you think the market reaction is going to be here? I mean, we talk about some of the tepid moves that we've seen, both in terms of beats and misses. I mean, the fact is that a lot of people really did try to front run this earnings season both to the upside and the downside. So if you don't get a real outliers in some of those numbers here, it doesn't necessarily give investors a big reason to shift those positions at all. Yeah. And it's interesting as we talk then about what the actual hedges are, I think the most interesting stories come from the smart money. Scarlett, the idea that in the last couple of weeks and RTS last month or so, smart money, the hedge fund, essentially they're going long dollar and they're hedging against the Treasury market. And that to me is an interesting trade. When you talk about the ripple effects into the stock market, what happened to Carol? Is she not just she just takes off Monday. She you know what? She called me Sunday night and she was like, you know what? I'm not coming into work tomorrow. You have her number. She won't give me her number. I made a reason for that. I'm in a Matt Miller. I don't know why. It's an honor and a privilege to talk Carol Massar. I got to say, I'm getting a well-deserved day off. Yeah, I Carol Massar not going to be around for First Republic earnings when it comes out today. It's an unusual earnings release for the bank, given that usually reports 10 days earlier than this in the thick of a bank earnings season. And also it usually reports in the morning. But it's got a lot to go through, of course, and really explain to investors this time around. Yeah. Less than about an hour until we get those first republic numbers. Certainly something to keep an eye on. That does it for now. We're gonna be back together again live on TV, radio and YouTube at 4:00 p.m. for our Beyond the Bell coverage when we take you through today's market close. And reminder that Bloomberg Businessweek is now on Bloomberg Originals as well. And continuing our coverage here on Bloomberg Markets, the close count you down to those bells and well, we just got about 50 minutes or so to go and a big focus right now, not just on the equity market, but what's really going on in the debt market or rather the lack thereof. Bed, Bath and Beyond. It was looking for that lifeline and apparently hasn't gotten that a failed turnaround attempt and filing for bankruptcy. The home goods chain says it's going to close all of its stores and liquidate inventory just over the next two months. The big question, though, is this just the latest sign of corporate distress warning that a pullback in lending could actually drag down the economy? They have been piling up. But, well, you're not necessarily seeing that and spreads and well, some of the other markers in the credit market when he sees our. Joining us right now, global head of strategy at Credit Sights. And every time I see a failure like this when he at least one that is certainly tied to the inability for a company to get funding, I always go to the terminal. I look at credit spreads, I look at city X. And in this indices and all these other metrics that are supposed to tell me the sky is falling and I don't necessarily see the sky falling. The sky is not falling and adequate in aggregate. But there's definitely some idiosyncratic signs that the sky is falling. We specifically look at the triple the index looking at spreads there and yields there. And it really has dislocated relative few higher rated parts of the leveraged finance market with triple feed now yielding in the 15 percent area that offers some protection against kind of continued downside heading into what we think will be an increased default cycle over the next 12 to 24 months. But there are definitely a lot of very careful steps that you have to make if you're going to be putting cash to work really down in credit quality. Given the mix of headwinds and tailwinds impacting a lot of the companies. So do you hedge where the potential of spread widening right now? Is it going to be that severe? So in the short term, we actually are fairly constructive on threads. April is historically a pretty strong month for both investment grade and high yield spread. This is driven by a number of factors. Sometimes that kind of post earnings enthusiasm where companies are operating a little bit better than expected. You also tend to see a bit of a drop off in new issues that helps the technical side of the picture. And historically, we've seen non U.S. investors step into the market beginning in April, extending purchases through May and June. All of those things kind of fit together. We have a pretty positive impact on Fred. Now, looking further out into the summer months, we would get a little bit more caution with some practical caution around the debt ceiling negotiations or lack thereof to be a bit more precise. But then through year end, we do have a more favorable view on Fred kind of continuing to grind tighter into the last few months of the year. That's really helpful to see how it all plays out over the next couple of months. Wendy, I also wonder, going back to what Romaine was talking about, Bed, Bath and Beyond. It is a stock. It was a mean stock. So even though it eventually filed for Chapter 11 bankruptcy protection, there was also this possibility and had been going on for months that it might be able to secure last minute financing. To what extent does an army of loyal retail investors help a company that is struggling to meet its debt obligations? Does it matter at all? Well, retail is a very kind of specifically challenged factor in the high yield market. We've now had five, 7 years of retail challenges, you know, thinking back for the RadioShack era, which took a similar amount of time to kind of finally circle the drain and ultimately filed for bankruptcy. So one of the things that we have to keep in mind is there's a pretty strong track record of specific sector ending up with higher default concentration, because some of the headwinds that we're seeing in the economy and a lot of the retailers also had some fairly aggressive leverage put on for their capital structure. Well, those two things meeting together did not prove particularly positive in the near-term. Now, there are definitely dedicated investors looking for the special situation type of opportunity. But I think that people are being very specific with where they're putting their capital to work. And in sectors like retail that have kind of a more negative track record, I think that that is a bit of a headwind there. Yes, absolutely. So beyond retail, what other sectors are a lot more vulnerable as we head into the year end or I should say the second half of the year where the economy is expected to slow more and there might be more headwinds. So we are a little bit cautious on the media sector, particularly in high yield, but also in investment grade. Media can be very highly cyclical. You know, lots of discretionary spend associated with media companies and also some kind of specific idiosyncratic issues in media. So that's one place that we're a little bit more cautious. We also have some caution around technology. There's a lot of shifting forces in that sector. Technology has also been kind of ground central for a lot of leveraged buyout activity over the past decade, though within the credit markets were a little bit more cautious on high yield technology as well. One thing I do want to get your thoughts on some of the shortest of short term issues. Let's start off with the Fed meeting about a week and a half or so away from that year. The expectation, of course, for at least one more hike and then maybe the Fed just kind of stays put for the rest of the year. What do you pricing in? Yeah. So we are expecting another 25 basis point rate hike. We had initially not expected that rate hike, but the recent data we do think are probably going to force the Fed's hand to hike at one more time. So they will get some insight, most likely into the April jobs report that the market will not see as they are discussing what they're going to do at the upcoming meeting. They're also probably get that in your loan officer survey information about the market that will have a couple of data points that we won't necessarily have. Most likely in making this decision. And then we've been in the hike chill camp. We expect that the Fed is going to remain on hold for the remainder of 2023. And we still think that that thesis is intact. We think that the cuts that are currently baked into the market are a bit too soon to that, that if you look at historic rate hiking and then cutting cycle, it would be very unusual for the Fed to cut rates as quickly as the market three. You only have about 20 seconds. But does that mean, in your view, when you look at Treasury yields that they tick higher or do they just kind of hang out where they are right now? We do think that they're going to pick a bit higher or we think that there are a bit low for the 10 year. We have a three and three quarters to 4 percent range. All right. Winning always wonderful to talk to you when he sees are there. She's global head of strategy over at credit sights, helping us count down to these closing bells. Slide on deck over at the BMO Family Office CIO. They're also going to be helping us count you down to those fellows just about forty five minutes ago. And, of course, a big week for big tech earnings this week. And, well, a lot of focus on A.I. and what the next growth story is going to be. We're going to break that down for you. And well, Scarlet Fu, if you're planning on quitting, I think in the old days you had to give two weeks notice if you worked at Bloomberg's. Like, you know, two minutes, six months notice. Apparently, JP one J.P. Morgan boy claiming that his company is requiring some employees to give six months notice before leaving. This is a remnant of the talent war, right? I don't know what I'm doing. Six days from. How am I supposed to give him six months, six months notice? We're going to discuss that coming up in a bit. This is Bloomberg. Just about 42 minutes until we get to these closing bell is another tight trading range for the broader market breadth. Not really doing much better here and a lot of concerns here about what the next catalyst may be eking out some gains, particularly when it comes to some of the medical companies, Medtronic and a lot of the device companies which rally last week, rallying again here on the day. Also, some of the managed care companies also moving a little bit higher, like at the and universal health. But keep an eye on big tech because this is their week to shine or it could potentially be, well, their week to drop the ball here. Amazon, Tesla, Microsoft, some of the names on the back foot here on this day are going to get some reports out of some of those companies over the next couple of days that maybe should provide a little bit more clarity. Yields remain elevated here on this Monday afternoon here, but slightly lower than where we were on Friday here. And you take a look at some of the individual stories here. We've been talking a lot here about the ties that bind. And quite frankly, there really isn't a tie that binds. This is still a macro driven market, a market looking for direction and, well, a market, at least right now, a little bit devoid of volatility. That's a good point to bring in Abigail Doolittle, as we do every day at this time for our Options Insights segment. And Abigail, taking a look at the VIX here on the day, still camped out below 17. But I'm told there's a new VIX on the block. Indeed, exciting times and great site where, of course, remain. It's amazing because everybody is talking about the idea that the VIX, whether or not asking, I guess, the question whether or not it's broken. And we do have a new VIX product in town. The first let's focus on this VIX Scott, our Prosper Trading Academy CEO over there. You know, there's this continual talk that there's so much complacency. The VIX is broken, not registering the volatility that could be out there. And yet in late February, you told us in March we could see the VIX go up to 31 and it went exactly to 31. And I believe that you were using historical standards there. So is the VIX broken or not? Thanks, Abigail Doolittle. It is not broken. But you know, what is happening is because of the zero DTC options which had become so popular and the volume increasing in these, you know, one day to expiration and zero data expiration options. What's happening is the volatility in the market is getting a little bit more condensed. So the VIX measures volatility going up 30 days. The new zero DTC options, they expire, you know, in literally a matter of hours. So we're seeing, you know, 40, 45 percent of total volume now in the aspects in these 0 and in one data expiration option. So the VIX is not broken. It is still a great measurement for looking out 30 days forward. But we've got to look at some of these other measurements now because of the rise of the popularity of these options that are trading. OK, so let's talk about this new one day vixen. I should mention there's so many different VIX products out there. They're getting VIX. There's a three month next. There's this new index. So the fact that we have this new VIX index. Yes, it's very exciting, but it has a lot of company. What does it measure exactly? Because the one day VIX today is down. The S & P 500 is up slightly. So I guess that that matches that. We already know that we're within the day. So how do traders use this tool? So so the regular VIX takes option expiration 23 to 37 days forward in aggregate S & P option prices, the one day uses zero and one day option. So on a day like today where you're seeing the one day volatility index down at just under 10. What that's telling you is today specific. There's not much going on in the marketplace. There is a ton of complacency. I expect DAX change tomorrow because we get Microsoft earnings, we get alphabet earnings. There's more of an impetus for some volatility tomorrow. So I would expect a rise in that. But again, this is measuring one date and the way the person, you know, retail traders are using this is they look to this when there is a big economic report or a big earnings report and they're looking for a quick move in the market. Right. Well, it's interesting because I feel as though there are so many people who want volatility. They don't want to see this complacency anymore. We have this one day VIX now and it's still showing it's backing up the VIX in terms of complacency. In fact, the VIX is actually growing very quickly. Only two options. Are they here to stay or to go? Now they're here to stay. And I wouldn't doubt if sometime in the near future we start to see them on some of the very highly traded equities like an Apple and Microsoft. I bet that's not too far out in the future. They're here to stay. Thanks to Scott Bauer, Prosper Training Academy for joining Options Insight today. And stay with Bloomberg Markets. We will have a conversation with CMO CEO until tomorrow at 250 New York Times. This is Bloomberg. Apparently, there is still a shortage of workers. J.P. Morgan reportedly wants employees in its E-Trade division to give six months notice before they leave the firm instead of the typical two week heads up that most employers impose. Six months? That is half a year. They're just Scarlet Fu just half a year. Well, I guess my question when I first saw this, your first thought is can they actually require that if it's in the contract? Yeah. Was that in this contract? Apparently it was. So this is a baker who is complaining about it. Some website. Yeah. Was complain about it on a public forum. My first thought was, well if if this was in the contract and you signed that contract. Yeah. Well I wasn't paying attention when he signed it. So yes, it's it's on him but it is unusual. Six months notice. It is unusual. And I mean, look, I don't I don't mean to make light of it, but it seems ridiculous that you want to keep anybody around for six. I know it can't be good for the little guy, good morale and everybody else. But but then it also gets into the issue, too, that if they do give you a heads up on this, when you're signing onto an employment and you sign this, then, yeah, that's what lawyers are for. You know what it sounds like to me, because a lot of bankers have to take garden leave once they give you. Yes. Right. And they can't go work somewhere else for, let's say, two or three months. It sounds like a garden leaf, but you have to work the whole time. You do get paid, but you have to work. And then I don't know what happens after that. Do they then have a garden leaver? They have to take X number of months off before they can join the new firm. It sounds a little odd, particularly if you're talking about, you know, middle managers and lower level staffers. I mean, look, I could see if they said to Jamie Diamond, you know, if he'd leave, you know, we don't want you jumping at Bank of America and six maybe Jamie Diamond leaving Guy Johnson. I mean, that's just a rumor. And I want to start anything. But, you know, I feel like there's standards for, you know, top executives and then everyone else. Right. Right. Well, again, this isn't one division where I think it's they're finding it hard to find replacement workers. And we should be part of what we wrote about. We haven't actually verified this is one guy who basically went out there on blind and put this out there and everybody's picking it up here, some anonymous Web site where he was complaining about it. And I'm sure there are plenty of people were like, you signed it. It's all your fault. Yeah, that's me. Scarlet Fu. All right. Stick with you are pulling the slides to the closing bell here now. I got some sympathy. Not a lot, but some NASDAQ 100 up about down season, about three tenths of a percent. Stick with us. Counting down to the clothes. This is Bloomberg. This is the countdown to the close, about 30 minutes left to go here on this Monday afternoon, and it's another day, a barely there are little change moves in the broad indexes. So we got to look at the sectors because there's a little bit more going on. There are clear winners and losers here in this case. Energy is up by one point nine percent. The group had lost two and a half percent last week. One of the worst performers in the S & P 500 right now. All twenty three members are higher as oil prices recover as well. Materials also doing better health care. Also on the upside, up by four tenths of 1 percent on the downside. Real estate investment trusts have taken the lead, as are leading decliners. Tech also lower by half of 1 percent. As we get ready for big tech to report earnings and financials down by a quarter of one percent before First Republic announces results after the close. I was looking for a few bright spots here on this day. I'll keep an eye on some of the medical device companies. Medtronic shares up about four and a half percent. Remember, we have seen a pretty decent rally out of some of those names, including Abbott and a few others last week. That appears to be spilling over into this week. A lot of the fears here that we would actually see a drop in, particularly some of those elective surgical procedures, hasn't materialized yet. Now, a lot of investors starting to re rate higher at the bottom of your screen. Keep an eye on Bed, Bath and Beyond. Unfortunately, a lot of folks piled into that stock last week in the hope that a turnaround was afoot here. But, of course, getting the word here of a bankruptcy filing, more importantly, a swift liquidation just over the next couple of months here. And a tale of two cities right now when it comes to automakers. Ford shares moving higher here on the David Tesla on the back foot once again. Remember, Tesla has started off the year with something like a 70 percent plus rally just through basically mid February. About half of those gains have already been erased. A lot of concerns here about the company's pricing power or lack thereof and whether they can make it back up when it comes to volume. Of course, that was one of the big tech companies that we heard from last week. We're going to hear from all of the big tech companies a little bit later this week. And that's really raised a question here about valuations. You take a look at the S & P 500 tech index right now, the forward PE on that sitting right around twenty four. You look at the S & P as a whole, it's a little all of right above 18 here. So the differential between the two, while it has certainly widened a little bit and this caused some concerns here, Scarlet, about whether the tech valuations can be supported. We should point out it hasn't peeled that far away from the rest of the market. Which one is telling the truth remains to be seen? Yeah, absolutely remain. And of course, the big tech companies have been driving the rally so far this year. So let's continue to push ahead to those tech earnings with Daniel Morgan. He is a senior portfolio manager at Snowmass Trust, which has about twenty one point nine billion dollars in assets under management. Daniel is great to speak with you. Thanks for joining us. Is big tech earnings a make it or break it moment for the stock market at large, given how much big tech has contributed and driven the rally that we've seen this year? Know Scarlet Fu me, if we come into this first quarter report, we're basically looking for profits in the tech sector to actually drop about 14 percent, the S & P for the first quarter earnings are expected to drop about 6 percent. If we go within tech, the biggest drop is semiconductors, about 42 percent. And as you remain in scarlet, both know if we look at the fang stocks, which are reporting all this week, they represent excess of 25 percent total market cap. I think Apple and Microsoft around 15 to 16 percent of market cap on the S & P. So they're really hard to ignore. But I will say this, guys, the expectations are really low. The bar is low. So there might be some upside here in regards to beating these lower expectations. And that's what I'm hopeful for. Is the bar lower for a tech value stocks or tech growth stocks? Well, Carl, it's interesting because we go back in kind of the last six to 12 months, the value stocks, the Oracles, the IBM, ADP, these stocks with low multiples, low betas, low growth expectations. They've been outperforming. And then at the beginning of the year, all of a sudden, the old thing, stocks. Right. Like even met up 76 percent for the year. And we saw a huge migration into stocks like in video that were higher, multiple higher beta stocks. So it's interesting that it's kind of switched over from being a value play in tech to more of a growth play. And again, Scullin remain. This is all in anticipation that the Fed is going to stop raising rates, that we're going to see recovery. And that I.T. budgets are going to expand. And it's this question of where is that inflection point? Well, well, absolutely, Dan. And but when we talk about the valuations there, I mean, I was looking at some of the research that Bloomberg intelligence put out, and they're actually saying that based on current valuations, you would actually need to see a bit of a draw down in the Fed funds rate. I think they put it as high as 300 basis points to justify valuations on an aggregate basis. I know on an individual basis that may vary. Yeah, I mean, but remain to me the multiple doesn't seem that high. I mean, I've been in tech for over 30 years at twenty four times earnings on the S & P 500 information technology benchmark is not excessive on historical basis, but you bring up a good point remain, which is the market does seem ahead of itself. Right. The expectations are that the Fed is going to cut, that all these things are going to happen and it's all going to be rosy for tech. And it may not happen as quick as people think, especially based on the comments we're getting out of power. But when we look at the rally that we saw in tech and you were rattling off some of those big bang names and you know, you talk about Neda, which I think is OUTFRONT, I mean, something like an 80 percent rally, just start the year here. That does beg the question of how much is really in the tank there. Even if they do, you know, surprise to the upside. And it's inching remain. Because if you're not growing top line growth and a lot of the things stocks coming into this first quarter do not have a lot of growth. Microsoft's only three and half percent revenue growth. What do you do? You cut costs, right? You drive the bottom line through, you know, purchase of shares and coming out with reductions of CapEx and headcount and all these different things. And that is the poster child and the fake stock group right now and how to drive their stock price up. It'll be interesting to see if Alphabet into these other follows suit. Microsoft, they're going to be coming in tomorrow if they're going to be announcing more cutbacks. But that seems like the recipe right now to really have a good stock price in terms of appreciation in the tech sector. If you're not getting the growth. Yeah, we know that that's a knee jerk reaction to those job cut announcements. Is the pop in the stock price. Clearly, tech, big tech in particular has been out front when it comes to job cuts. How much more scope do you think there is for those job reductions or at what point will the company start cutting into muscle? But Justice Scalia, because, you know, the job cuts get a lot of press and everybody's concerned about it. But if you looked at these companies just in the last 10 years and their balance sheets in terms of their number of employees, they have grown exponentially. And then they're reverting back a slight amount of cut. But you bring up a good point, Scarlet Fu. When do you get to the point where you start to take away from the growth in the future? Right. That's what you're kind of concerned about in terms of these catalysts for these different things, stocks. And I still don't think we're there yet. They added a tremendous amount of people at Amazon, Google, all these companies, and they went a little bit too far. So they're ratcheting it back. But again, if you look at how much these companies are grown in terms of headcount just in the last 10 years, it's just exponential. So these cuts are pretty minor. I am curious, Dan, about the leadership in the market going forward. I mean, all those names that we have on the screen there. I mean, they sort of. Most of them, at least, I should say. What kind of birth before the last big market cycle coming out of that dot.com bubble? And we're looking at basically the survivors, the one who really sort of showed and prove and I'm wondering if there's a new crop of tech companies that you have your eye on that maybe could end up somewhere down the road being the next Amazon, Apple. If not. Good question. I'll tell you remain. I wish I did. I wish you would tell me which ones those are. I don't have any names. ISE. That's what got me here. Yeah. I'll tell you off there and then we'll keep it a secret. You and I, a load are our retirement fund on it. But you know, I don't really have any other names that are kind of under the radar. I mean, we mentioned and Vidya is obviously a name that, you know, a lot of people know and so forth. But I think a lot of the names are kind of out there. You know, what's that next thing or next? Four horsemen. Everybody always wants to have fun with those type of questions. And, you know, there are a lot of companies out there that to look at. But I unfortunately don't have the secret three or four. They're going to be the next 25 percent market cap. I wish I did. Only about 30 seconds here. But I am curious, are you buying into the buy all the hype around A.I. right now? You know, it's tough for me because this A.I. hype doesn't really trickled down to any huge profit growth. Right. It's just a lot of what can happen in the future. And, you know, we do own stocks that do benefit from the group. But in terms of getting overly loaded up right now, I think it's still a little bit early to get clarity on who the leaders are going to be. There's just a lot of hype about it. But is it really going to drive down to earnings or. We're just not quite there yet? Yeah, it sounds like it's a talking point more than anything for these good TVs, right? Yeah, exactly. All right. Dan, always great to talk to you. Daniel Morgan, he's the senior portfolio manager over. It's an overnight trust. Nice little preview. Here are some of the big tech earnings that we get this week, including Intel, Microsoft, Alphabet, Metta and Amazon. Coming up here after the break, our Stock of the Hour. A focus on Fox Corp. shares have been oscillating all day after one of its highly rated anchors parting ways. That's coming up after the break. This is Bloomberg. Turned out for a stock of the hour. Keep an eye on Fox Corp. It's a class shares down more than 3 percent on the day, down for a fourth straight day. This after learning that its top rated primetime anchor Tucker Carlson has agreed to part ways with the media company. Bloomberg's Chris Ball. Mary joining us for a little bit more on this. And Chris. We normally don't focus on individual talent like this, but this was an outsized talent whose show I think you can, we all agree, brought in a tremendous amount of revenue. He was unquestionably the most popular host in primetime cable TV. Four of the top 10 programs in his second last week were Tucker Carlson tonight for the most popular programs on the air. So a huge profit engine for Fox Corp. of about 70 percent of their profits come from cable TV. He was also bringing in new viewers to their subscribers to their Fox Nation streaming service. So huge. Yeah. And of course, we saw it with the move in the share price, which at one point I'd shaved off five hundred ninety million dollars in market cap from foxes stock. I got to ask, and I'm sure this is something that's out there. Is there a connection between his departure and the settlement that Fox had with Dominion voting system, the seven hundred eighty seven million dollar settlement? Yes, but it's really a convergence of things, certainly that, you know, what came out in that lawsuit was all kinds of comments made internally by Carlson and others who were critical of his colleagues, critical of management. But there were so many other things boiling over, a lawsuit from a former producer accusing a company of harassment and sexual discrimination, just some of the controversial programs. Carlson was pushing on the air. It's just a convergence of things. People like to think the Murdochs have kind of these masterminds trying to dominate the world. And one thing that depositions and the evidence revealed is that they're kind of winging it like other people. And it seems they just got fed up at this point. Chris. We were remiss in not asking you about one of the other big departures in the cable news space. And that's the departure of Don Lemon from CNN. And I know what's going on over there. Completely different than what we're seeing with Fox here. But we talk about folks who, you know, more or less are kind of the faces of these networks here. Well, I mean, what does that mean? Are we sort of headed for sort of a big transition, a big inflection point with some of these brands? Coincidental that they came out on the same day, I think, but emblematic of the way that people are reassessing everything. Is this dramatic change in the way we view media is occurring. Cable TV is is just really suffering along with traditional TV viewing as everybody watches streaming. And so people are executives are more focused on, you know, what are we willing to put up with in terms of grief as we as we try to keep our viewers watching? Maybe they'll replace on Tucker Carlson and Don Lemon went to live sports that it just cost more. But at least it brings in the people for sure. Chris Palmeri, really appreciate you're joining us. Chris in L.A. with us, covering the media companies as we look at Fox and Warner Brothers, Discovery both down and trading. Still ahead, we are counting down to the closing bell. Schlein, CIO, BMO Family Office joins us. This is the countdown to the close on Romaine Bostick ISE Scarlet Fu. It's about 10 minutes until we get to these closing bells. A quick check on the market, a little bit of status when it comes to the S & P 500 and some of the other major indices will basically just call it onshore on the day across the board. Yields on the two year treasury as well as on the longer end of the curve, drifting slightly lower here on the day we talk a look at bank stocks. They remain on the back foot, but you are seeing a little bit of activity when it comes to the oil stocks, OSX up about two and a half percent on the day. Couple of key earnings after the bell, including First Republic. First Republic shares up 12 percent on the day. Yeah, but for the year there, they've been decimated. Right. So it's a little bit of a dead cat bounce here. All right. Let's bring in Carol Ashleigh for more market analysis. Carol Massar CIO, BMO Family Office, which has twenty two billion dollars in assets under administration and consultation. Carol, always great to see you. Thank you for speaking with us. Thanks for having me. So it feels like Romain called it a day of status, but this comes after a week of Stacey's as well, in which the market really went nowhere and remains stuck in a tight range. We've got earnings season and I thought that that was was the catalyst that got things moving and unlocked this paralysis. What is it about earnings season that's not doing it for investors in terms of providing some clarity? I think a piece of it is as to understand, too, that we're still really early in the process. People were waiting with bated breath to see how the banks would come in, both the big banks and the regional banks. And we got past that checkmark. It's a little hard to want to get too wound up about doing anything dramatic today or when you've got big tech earnings starting tomorrow. You've got a big data week. You've got Fed meeting next week. So it really is the the headwinds and the tailwinds are pretty evenly balanced in a really short term basis. And I think, you know, earnings this season are are their earnings expectations are much more muted than they have been in prior years. They're early companies that have come in have beat those for the most part, are beating those revised downward expectations. But there's still a lot of a lot of close listening to the commentary coming out in terms of what's happening with supply chains, what's happening with cost. You've seen some of the consumer goods manufacturers still able to push those price increases through, warning that they won't be able to for very much longer. Right. Clearly, investors are laser focused on margins right now. A company like Tesla can sacrifice some margin in the interest of gaining more market share. We've seen that with the price cuts. Is it an outlier or I wonder what other kinds of companies are in that same boat? I think a lot of companies are making that decision. You've seen a lot of the consumer goods companies opt to push the the name brand and pricing power. But you that's always a risky strategy because it only goes so far. You've seen other consumer goods manufacturers and retailers really focusing on then on the house brands and focusing on that, watching where consumers are going. You're seeing a bifurcating consumer, too, because we've seen globally some really top notch earnings come out of those ultra high end retailers where they're still not as much pain and zero as throughout the rest of the system. Is there an argument to be made right now, Carol, for when it comes to positioning and allocation to sort of stick by this idea of looking at the aggregate? Looking at the broader indices, looking at the other asset classes out there in the same way? Or do you have to be much more selective in this environment? I think you really have to be selective because there's there's all kinds of nuances going on. You can't just say banking. There's large cap banks. There's me medium sized banks are small banks. You can't just say industrial companies because there's certain aspects of industrials that are doing really well and others that are are struggling. There are every single industry has got the winners and the losers. And it's really tough on corporate managements to trying to decide how they're going to adapt and adopt both new technology changes in the work force, changes in our people, in the office, out of the office. What do they do with commercial real estate? There's lots of different decisions on managements management's table. And for them to decide how they're going to take it forward is really a company by company within sub industry decision when you're talking to folks here, because I am curious. I mean, everything you just said, this is what management is dealing with, but they're dealing with it in an environment that could potentially be recessionary, an environment where at least right now the Fed doesn't seem like they're willing to provide any real relief based on their fight against inflation. Where does that leave you then? Do you then still gravitate to fixed income, the cash like instruments? I think it leaves us continuing to promulgate a balanced portfolio. It also leads us evenness within the equity and the fixed income portions to look at companies that have good, solid, secure balance sheets, ideally some excess cash on the balance sheet and not in a lot of need to go seek additional credit. And those are the kinds of companies through downturn after downturn after a downturn, have had the ability to go be very strategic in other companies that they decide to merge with, other decisions they decide to make. When the rest of the industry is struggling, they may decide we're going to grab market share. We can afford to cut prices. We have sufficient cash on our balance sheet. So we're going to move in and establish ourselves more firmly. We're going to build out our marketing campaign to to really firmly establish. So it really is a sector by sector. But for an investor staying balanced and diversified within the portfolio is always a wise decision. Balanced and diversified. It sounds like you believe the 60 40 portfolio still has legs. What are the people who are saying that 60 40 portfolio is dead getting wrong? Well, I think a lot of them are getting wrong. We all got wrong how badly both markets would perform. It had been a hundred years since you saw double digit declines in both stocks and bonds. But assuming that that double digit decline in bonds is going to continue to go on and that we're going to see rates continue to escalate, which is what you'd have to do to get double digit negative returns was the wrong part. Just because it came apart in one year doesn't mean that that's a lasting trend. We actually have seen a lot of interesting things go to a lot of reasonable and then reassuring return in some of the most staid investments. It's one of the reasons why you're seeing a lot of people gravitate towards building short term treasury portfolios, because when you can get four and a half or five percent, put the cover of your Bloomberg this week with the muscular 4 percent return on a on a bond portfolio. Yeah, absolutely. Carol, always wonderful to catch up with you, Kalisch, like their CIO over at the BMO Family Office, helping us count down to these closing bell Scarlett just about three minutes ago. Here are the price action. Once again, a somewhat tepid here. But I do think it sort of underlines the fact that what a lot of people have been saying, that this is kind of an individual market, individual stock market, even individual sectors to be short gear. And what you're seeing at the aggregate probably isn't a reflection of true reflection of investor sentiment. The passive funds may not be the way to go, even if you're looking at specific sectors, because it all depends on doing your homework and looking at each individual company and what idiosyncrasies you can exploit. I'm looking at volume and no surprise given the lack of action in the S & P 500 NASDAQ. Volume is below the average, the 10 day average by about four point six percent right now. Interesting to see the holding pattern in yields here. A two year yield still camped out about 4 percent. Of course, a big Fed meeting just a little less than two weeks away here. We'll get that decision. And then, of course, there was a lot of talk about the VIX. They remain subdued. And of course, there's all this talk about the new kid on the block. So no one did next. Right at the VIX is looking out, you know, 20 something, 30 something days here. I guess what 0 8 options are like what? Like the one night stand that the VIX something you said it, not me for market coverage right here on Bloomberg. Going to take you to the bell and beyond. Beyond the Bell Bloomberg's comprehensive cross platform coverage of the U.S. market closed starts right now. And right now, we are two minutes away from the end of the trading day. Romaine Bostick alongside Scarlet Fu counting down to the closing bell here. Don't take us beyond the bell. It's a global symbol cast. We're joined right now by Christie Gupta, as well as Madison Mills, filling in today for the missing in action Carol Massar. Welcome to our audiences, though, across Bloomberg Television Radio originals. Are those folks pretty still streaming on you? Yeah. I guess they're missing a very actionable day in the markets underneath the hood. Look at the majors, though. Nothing too exciting but remain. Everything's going to change in 24 hours. Really? What do you know? I guess economic data. Earnings. What can't change? Come on. It's this is kind of the spring before the coil, I think. Well, everything could be changing within the next hour, even when we get those first republic earnings. If we do end up getting some type of surprise there, I think that's going to obviously cause a lot of reaction. And we've got Herman Chan coming up on our program to give us some insights from Bloomberg Intelligence on what to expect from that. But those earnings after the bell are going to be critical to watch. Yes, absolutely. And in particular ones, look at the deposit levels. The consensus is they fell about 40 billion dollars from the end of last year. How much of that money stayed away? Did some of it come back? Because the regional bank results we did get seemed to be fairly encouraging that the the withdraw demand was kind of over. Yeah, we talked a lot about this last week when we saw some of those numbers out of those regional banks. And the idea here that while deposit growth was actually no growth, it certainly wasn't as bad as some people had expected. And a lot of the commentary that we heard in the call was how there has been actually a pretty significant reversal basically since the tail end of that quarter there. So maybe by the time we get to the next round of results, we could see a much different story here. For some reason, the Dallas Cowboy cheerleaders are ringing the closing bell. There are. But, you know, will allow it. I mean, I'm not a big Cowboys fan, but sure, I won't let my personal feelings about the worst team in sports did go. The Dow Jones Industrial Average ended the day higher by about sixty nine, thought by about sixty nine points. That's up here by roughly about two tenths of a percent. The S & P 500 higher by less than a tenth of a percent, up about four points higher on the day. Then you have the Nasdaq composite, which looks like it's going to finish the day in the red. Down thirty five points or three tenths of a percent. And the Russell 2000 slightly lower on the day by one tenth of one percent. Yeah. I mean, I got to say, first off, as a fellow Texan, I'd like to see the Dallas Cowboy cheerleaders. I know this. I work very hard to get rid of the ax. And I got to say, but I'm very happy to see the Dallas Cowboys cheerleader. Are you a Texans fan? That is a very different conversation. I can't I can't reveal my loyalties on the air. What I will tell you, though, is that underperform, as you're seeing in the Russell in the NASDAQ to me screams a lack of momentum. I think all that, again, is going to change tomorrow when we get a little bit more direction from your tech heavyweights. All right, let's take a look at the sector performances because there is some momentum on the upside. You've got energy up by one point six percent, all twenty three members in that index or higher. Remember, this group had lost two and a half percent last week for one of the worst performances in the S & P 500 as a group. Consumer durables and health care also doing fairly well, up by at least 1 percent on the downside credit. You've got software and services offered by a 1 percent before. Of course, Microsoft in some of the other big tech companies report earnings. Telecom services as well, down by one point six percent. And automakers losing ground, too. Yeah. You know, it's interesting. We talk a lot about those tech names for me. I think biotech is really front and center. One of the names kept to my eye today on the upside. Medtronic Scarlet MDT is your ticker shares higher by about 5 percent. This is coming off some news from Friday. Look, they got the FDA clearance from their insulin pump receiving a medical device. This is really important. Analysts are very positive about it. They got some upgrades in today's session, Barclays and Wells Fargo. Wells Fargo specifically calling it a major milestone for the company. So those shares higher by about 5 percent. Google as well in the limelight. Gee, oh, gee. Those earnings coming out tomorrow. Alphabet investors, of course, awaiting those details on the push. But a little bit of optimism around that baked into today's trading day. But to me, the Wal-Mart story, I got to say, I've got a comment on a WMT. Is your ticker there shares higher by about seven tenths of one percent in today's session coming out of that bed, Bath and Beyond bankruptcy analysts saying this is going to be a major tailwind for the likes of Target and for Wal-Mart. But I don't know. Can you get your colored towels from Target and Wal-Mart? Maddie, what do you think? Wait. Why is this so? Why is this a net positive for them? Because, come on, you no longer have to go to Bed, Bath and Beyond for these home goods. We know Wal-Mart has been trying to expand into the home kind of business. Target already very established, but their price point a bit higher. So it could be a tailwind. I could be. I mean, they sell bath products, they go to Costco, had products. Do they sell to be on? Probably go to Costco for your towels. Much better deal. Fascinated scar. We got to talk about that. We're going to talk about that. But first, I'm going to bring us our decliners guys, obviously starting off with the Fox News. I know that we've been talking about this throughout the day. The number one cable network parting ways with him on their popular hosts in the U.S.. Sorry, Roman. And we know that this led to a 700 million dollar loss to its market cap. And I should mention that advertisers can pull out as soon as they want. So it will be interesting to see whether that starts to happen on this news. We don't know the details of the party, but we do know that Tucker Carlson was not given a final show. This was announced after his last show on Friday. And this was again a week after Fox agreed to settle to a suit with Dominion Voting Systems for seven hundred and eighty seven million dollars as well. So now I'm going to move over to AT & T, down about three point eight percent. They're on the close, fell the most in more than two decades after they missed analysts estimates for free cash flow in the first quarter. I wonder if this move today is potentially related to the fact that we are getting Verizon's earnings tomorrow. And analysts do say that they are concerned about rising subscriber growth as well. And then I want to draw our attention to as MCI. Those shares down as much as nine point seven percent on Monday after the computer hardware and storage company reported a prelim third quarter net sales that were weaker than expected. And this is similar to the Seagate story I brought up last week. The hard drive companies seen that big pullback in demand. And I wonder to what extent that is a broader impact, broader macro economic indicator to what we might be seeing, let's say, on the macro here. They took a quick look at the Treasury markets here. The drop in yields that we saw in the day might not seem significant, but actually the rate of change that we saw a little bit earlier on the day was quite dramatic here. And that came after we got the Dallas manufacturing data here, which came in ended a contraction of about negative twenty three. And that's about double the contraction that folks were expecting. Looking at about negative 11 here. So you saw yields come down just a little bit, but that to your yield, the most sensitive, of course, to Fed swap policy still remain elevated, still above that 4 percent level. A two day Fed meeting set to kick off a week from this Tuesday. And of course, we have no fed speak to speak of for the moment because of the blackout period. We do have earnings crossing the wire right now. First Republic just reporting. And of course, this is the bank that was under a lot of scrutiny, a lot of pressure in the wake of Silicon Valley. Banks collapse. Net interest margin for the first quarter, one point seventy seven percent. Analysts were looking for one point eight percent. So less than expected. And a key measure of profitability for the business of lending money. First quarter revenue top line was one point two billion dollars. Consensus estimate was from one point one, two billion dollars. Deposits at the end of the first quarter was one of four point four seven billion dollars. That is a big miss from what analysts were anticipating, which was one thirty six point six, seven billion dollars. That was already projected to be a 40 billion dollar drop from the end of last year. So, again, deposits missing the mark by quite a bit. First Republic. So saying it's taking SAT steps and action to strengthen its balance sheet. We already know that several banks have banded together to lend money essentially to First Republic to kind of get it through this period. There was a lot of talk about maybe another bank coming in, partnering up or buying some of its assets or maybe taking over the bank. But none of that really came out because there are a lot of unrealized losses in the balance sheet that prevented an actual sale of the company. Be interesting to see sort of what the mix ends up being as they work through this year, talking about a reduction in expenses that they need to continue with and a reduction in workforce. Now the headline Crossing the Wire, if we want to put a number on it, cutting its workforce by about 20 to 25 percent in the second quarter here. So a bank are still struggling just a little bit here. Not only, of course, with this deposit base, but more importantly, its cost base as well. Yeah. I got to say, take out some look, this wording here, they're working to reduce expenses, are working to restructure their balance sheet. It's fascinating because when you look at some of the layoff announcements we've heard in the last two months or so, Maddie, you do actually see the market rewarding layoffs simply because this idea of cost efficiency. That is absolutely not the case with First Republic certainly seeing quite a bit of distress here. Yeah, I'm see. I mean, it's bobbing around a little bit, but now down at least 7 percent, they're hitting 8 percent, 9 percent, bobbing around a little bit in the closed here. First Republic, again, cutting the workforce by about 20 to 25 percent in the second quarter scarp and cash and cash equivalents. That's another thing that's really important here when it comes to liquidity and questions about liquidity at First Republic, thirteen point sixteen billion dollars. The estimate here was for three point six two billion. So overwhelmingly more cash and cash equivalents than had been and dissipated. But one thing remained that really catches my eye here is the net charge offs. Oh, point two million dollars. The consensus was three point thirty three million as well. Also, the provisioning was not as bad as expected, too. So that just indicates that in terms of the loan quality, it's still holding up. That's not the issue here. Provisions. Let me just put it up for credit losses, 16 million analysts were looking for twenty two point two million, but the deposits falling more than expected is what's dragging the stock lower. Yeah, absolutely. Here in the big question is what becomes the growth story for a company like this? We should note that some other earnings are crossing the wire here. We did see cadence design come out and they had a big miss. There you saw Cleveland cliff earnings come out and they had a big beat there. And Whirlpool, which I thought was interesting. I was keeping an eye on that on the read on consumer spending. It looks like most of their major numbers here are coming in either in-line or slightly above estimates. But meanwhile, you go back to first Republican weakness that we're seeing in those shares continuing here in after hours trading. Yeah. And already you're getting a headline here saying that it's pursuing strategic options as well. Another red head crossing the terminal, folks, that does it for our cross platform coverage of the market close on Bloomberg Television, Radio and YouTube. Reminder that Bloomberg Businessweek is also now on Bloomberg Originals will be back tomorrow, same time, same place. Stay tuned. Welcome back to Bloomberg Television. Extending our coverage here, a look at First Republic, the headline now Crossing the Wire. First Republic is pursuing strategic options. Not quite a surprise here, but, of course, words that you don't necessarily want to hear if you are looking for an immediate turnaround story. This looks like Scarlet Fu. This could potentially be a much longer turnaround story here. We'll talk about what we see in the deposit base, the cash base and the cost base. The need, of course, to cut costs, a reduction of the workforce of 20 to 25 percent for the second quarter. And now the main headline, crossing the terminal, the first republic says it's pursuing strategic options. Yeah, it's because it's pursuing strategic options ever since. Silicon Valley bank collapse. So it's been ongoing for a couple of weeks here. And clearly there are no media buyers out there. All right. Let's bring in Sally Bakewell, who leads our finance coverage for Bloomberg News. She joins us by phone right now to give us her take in Sally. I know the number that jumps out at you here is the deposits. What is significant about this miss on deposits for First Republic? Hi there. Yeah, I mean, it is quite a substantial miss. So that's obviously very bad news for the bank. But I don't think it would come as a huge surprise because analysts had been predicting that they have seen, you know, tremendous deposit outflows over the course of this regional banking crisis that started just at the beginning of March. And Central Bank has really been the one to watch. We've sort of been watching as it's kind of limped along waiting and wondering what kind of rescue deal the bank would be able to secure because it was looking to get some sort of government backstop, but also needed probably the involvement of a larger lender. But there were many things hampering a potential deal. The bank has a lot of sort of runway bets on mortgages and other securities that other banks didn't want to have to absorb. So that was obviously becoming a bit bit of a hurdle. And the bank is now taking measures that would perhaps make it more palatable by reducing its balance sheet to a potential acquirer or the provider of liquidity. So becoming a smaller bank, in essence, after expanding very aggressively over the last couple of years. Another headline that just popped up. Sally, is that First Republic has retained nearly 90 percent of total wealth professionals. I want to ask you about First Republic, because on the one hand, it's a traditional small regional bank, but also had this wealth management business that really tried to extract more value from its high net worth individual customer base. Yes, that's right. It really went up, went after the wealthy customer in San Francisco, in New York and in L.A. And we had that fantastic story about how it targeted interest only mortgages for a lot of these customers, which really came back to bite it. Because, of course, they weren't they weren't paying the principal on that debt for, you know, some 10 years or another longer period of time under those in under those agreements. And so it really catered to the wealthier classes, which, you know, became a little bit of a problem when things all went south. Give us a sense here, though, as to what the options really are here, Sally. I mean, we talk about just the absolute destruction in value here. I mean, this was a, you know, a 30 billion dollar bank, at least in terms of its market cap. Just, you know, a month, month and a half ago here and now we're talking about a two or three billion dollar bank here. You would think that would actually invite some degree of interest among some of the other players in here. But if you haven't seen it now, when would you see it? Well, yes, I think could be these assets sitting on its balance sheet like a Damocles sword. Those were what we're really holding up. Some could have some form of a sale or a deal. This giant capital hole in its balance sheet. So really, I think it's all about reducing that to smooth a path for a deal. And that might make it more palatable for much bigger banks or a much bigger investor to come along and potentially take all of them. All for a group of banks to perhaps clubs. Yes, we will have the conference call beginning at about 430. And we hope that the executives will at least get asked these questions to offer a little bit more clarity as to what strategic options mean, based based on the reporting that you and your team have done over the last few weeks here. Has there been any meaningful and legitimate chatter about the government getting involved? We knew that the government had extended some of its backstops in a way almost entirely, so that first republic would have a bit more of a lifeline, a bit more time to continue operating, because, of course, it didn't want this bank to close, because that would show that the 30 billion if if you remember that the 11 banks clubbed together and injected this 30 billion into the bank and its own public government backstops, it would show that those had failed. And that was the last thing government wants. So it has. Extended lifelines to to the bank so that it could keep on operating so that they could find a solution. So I think things are pointing to some form of a deal and some of the measures that the bank is taking seem very much targeted toward the outcome. All right, Sally, we'll let you get back to it. Sally Bakewell helps lead our our coverage here at Bloomberg. Want to continue here with a look at First Republic Bank, which saw deposits plummet by about seventy two billion dollars in the first quarter here, down to about one hundred and four point five billion. David Arena joining us right now over at Wedbush Securities, who covers this sector for us. And I guess the first question, David, is were you surprised at all by some of the numbers that we're seeing right now? No, they were mostly in line with what we were expecting, although I think we were a little bit below what consensus was at. For instance, we were modeling for one hundred and one and a half billion of deposits. They came in at 1 0, 4.5 billion and as of April 21st, they were at 1 0 two point seven. So essentially in line with what we were expecting. But again, we were a bit more cautious on the name. Heading into the print then and some others. And they had put out an 8-K back on March 16th, which really indicated how much borrowings had essentially skyrocketed to it. It was really a reflection of how much in terms of deposit outflows they were seeing and now we're seeing it in the actual results. And it's interesting to see the oscillations in the stock right now, which had been down deep in the red and then actually poked into the green here. A lot of people really trying to figure out David's sort of what the future of this bank is going to be. Is it going to be first republic standalone as we knew it prior to this crisis, or does this somehow end up being chopped up and sold off to another bank? Yeah, my my base case is that they continue to go forward, stand alone. They included in this release that they're going to reduce the workforce 20 to 25 percent. That makes sense given the pressures that they're seeing and then the reason why they can't sell it off piece by piece. Barring a sort of receivership situation is because of how deep of a hole they're in on a fair value basis with their tangible book value. So I'm expecting them to pretty much chug along and review their strategic options over coming months. But the first step is this workforce reduction of 20 to 25 percent. And I say it's kind of a first round. I think that we could see additional kind of right sizing of their expense base in coming months. So talk to me a little bit more about this reduction of its workforce, 20 to 25 percent, because First Republic prides itself on being a high touch bank, right? You call it. You can actually get a person. You don't talk to an answering machine and continued press 0 constantly. What does that do to the services that it does offer its clients? You know, it's a great question, and that is the hallmark of first Republican. My instinct is to say that most of the reductions initially are not going to be a client facing. But then again, we are in very unprecedented situation for First Republic. So perhaps they do shift some clients to new or new to the client that is relationship managers. But it is very much unprecedented and it really just changes that dynamic. You're absolutely right. Looking forward, they've been adding relationship managers and now this will be the first time that they've had cuts to some of these relationship managers. Been with bank for 30 plus years. Yeah, they really pride themselves on that personal touch. The other question I want to ask you about is management. Give us a sense of the stability of management, because after Jim Herber moved on to become just chairman as opposed to CEO, he named two co CEO is one of whom left Guy Gaia Hurricane. And Mike Rother was the CEO. He was not named permanent CEO until March 14th, right after the Silicon Valley bank issues emerged. How stable is this management? I do view them as as stable, Mike Wroclaw has been with the bank for a long time. So he is, I would say or, you know, 15 years is what I think he's been at the bank for. I'd have to check that number, but he's been there for as long as I've been covering the bank and she knows the financials through and through. So he is actually natural sort of succession for Jim Harper. And in fact, I would have going back prior to a hurricane being chosen to as part of the succession. I would have guessed it would have been Mike Ralph Lauren and it's earned. And ultimately, we ended up coming back to Mike Roesler, but I view him as a stable. There's been a lot of discussion, David. I mean, coming out of this mini crisis that we're in about the concentration of certain client bases for some of these regional banks and these community banks are some people are arguing that that concentration is a big threat. And other people saying that that concentration, partly to Scarlett's question, is exactly what some of these banks are sort of there to do to sort of third, these certain niches that, you know, maybe the big banks aren't willing to serve here. Do you anticipate that we would see any sort of meaningful change in that strategy overall, not just for First Republic? Yeah, I think we could see a bit more diversification in business models. But what is first and foremost, I think is the interest rate risk and managing that interest rate risk a bit better. I don't think we're going to see first rate public doing, you know, long term low rate mortgages funded by, you know, uninsured deposits. So we could see a bit more diversification on both sides of the balance sheet. But I would actually start with the interest rate risk management going forward. You know, clearly they're going to have to put on some swaps and derivatives to hedge out that interest rate risk. If they do decide to stick to their knitting of providing long term residential mortgage loans to borrowers. All right, Dave, I really appreciate you jumping on for us. On a busy day like today. David Severino is the managing director of equity research over at Wedbush Securities. A look at First Republic and the share of the shares right now still in the red, oscillating back and forth here on the back of those results. We have a lot more coverage coming up. Stay with us. This is Bloomberg. Take a look at the Treasury market. Hedge funds betting on higher Treasury yields and a market that's divided over whether the U.S. economy can avoid a recession. Well, if the Fed cuts rates recent positioning data suggesting leverage investors losing their shorts on 10 year Treasury futures for a record would point to my 9 million contracts as of April 18th. Lewis Kaplan McCormick joining us right now. She's Bloomberg's chief correspondent for global macro markets. And take a look at that chart, Liz, because this was really all the talk coming out of the Friday release. So that CFTC data, how everyone right now and I mean, we're just talking about the speculators for the most part, but everyone right now seems to be short treasuries. Yeah. And it's kind of amazing. I guess that's their business to be bold, right? Because they got pretty burned. Right. Well, we had I just heard you talk about First Republic, but the banking issues happened and yields fell. They were short. Kind of covered a bit. And here they go, double down again. So, yeah, I think it's pretty compelling that hedge funds are saying it is kind of a mix of your time. Is it a recession or not? Also, is inflation going to be sticky or not? You know, we've come down a decent amount, but what about from here? Right. Yeah. And there is a big question, too. We were having I mean, is when we look at a chart like that in the positioning here. Is that really a reflection of recession concerns, economic concerns that concerns what? Well, of course, we don't know. It's a mix of everything. Right. Because one investor can say, I think it's all inflation. The other one can say, I think the Fed and many do that the Fed's not going to cut, like you mentioned, the market's pricing in two cuts. The Fed's not going to be able to do that because we might have a recession, but they may let the economy have that amount of pain, you know, because, you know, I think Chairman Powell doesn't want to kind of have his legacy, have sticky inflation on it. So he may kind of lean in further. And even if they just kind of. Marcus price for one more quarter point cut and possibly a second one in June. But remain even if they just sit there and don't move for a year, the market's not set up for that. Hedge funds are on higher rates. Right. You know, the money market traders are pricing in cut. So there's a little bit of the rub, right? I think it's interesting to listen the story on the Bloomberg terminal. There seem to be some people are saying that, well, some of this is kind of positioning that has nothing to do with economic conditions per say that a lot of this is either hedging or folks really doing sort of carry trades and pair trades and that's resulting into this large batch of shorts. Yeah, that's the thing with futures. They could be doing the basis trades you're looking at and many of them are. And you know, Garfield, who wrote that story was also talking about, which is true. And a lot of times this happens, the asset managers kind of like call it the plain vanilla macro hedge fund, not hedge fund and macro managers. They're long treasuries. So you have these kind of two sides of the market, the kind of hot money against that kind of longer term money. They're both going different sides. One is short, one is long. And I think there's some basis trade. Not that we don't love to highlight this in our normal. We do. You know how we do. You do. And it matters. I mean, we I mean, we always have to have that caveat that this is one sort of subset of the financial world right now that is betting on this. But it does get to the idea of who who actually ends up being right. And I mean, I know you can't necessarily answer that, but maybe you could give us a little guidance as to maybe what may prove either side, right? Well, I think the key thing is if we get a sense, like from forward guidance from the Fed saying we're not going to move rates and inflation stays high, then you have to feel like the entire curve, whatever shape the curve is, that rates have to go a little higher. So I think those are the hawkish people who are saying, you know, maybe we could go. Somebody said to me today, maybe a 10 year, you could go back above 4 percent, which doesn't seem too far, is about three and a half now. But I think that's going to be the key, is if inflation stays around higher than the Fed wants. They have to cause some pain. But you've been going. I mean, we're well, something like, what is it, 3 5 right now? That's not the big sort of rate of change that we saw over the last year, which I think is what spooked a lot of people. If you go half a basis, half a point up from 3, 5 to 4. Is that really gonna freak people out? No, I don't think so. Yeah. And it's been like a mind bending volatility in rates. So like you said today, we were saying it feels like summer day today. It was kind of quiet today relative to the norm. So I think. But I don't think many people think volatility in rates has gone away. It's kind of taken a little bit of a hiatus. But I mean, we have the Fed meeting and like I said, it's a blackout period. So we're not hearing a lot of Fed chatter. And we've heard this from a lot of the big strategists, Mark. A lot of it. Mike Wallace and a few others who basically said that the volatility, the subdued volatility that we're looking at is is that an anomaly? And a lot of people get bitten by it. Yeah. And we were talking earlier or the online folks have that. What's the pain trade today? And people were saying stocks keep continuing to go higher because everyone's saying they should go lower. That's a pain trade. And I think for the bond market, you get a lot of pain on both sides for hedge funds. If rates start tumbling again, they're in trouble for the asset. Managers are trying to just clip these coupons and make some money. They're in trouble if rates go up. So there's a lot of pain to be had all around. All right. Lazar, always great to talk to you. Liz McCormick, she's Bloomberg's chief correspondent for Global Macro Markets. A look back at that CFTC data. Among a certain cohort, big shorts there, sit with us here. They push ahead to a big week of earnings, big tech on deck. Microsoft Alphabet. Among the others, Jefferies analyst Brent Fill going to be stopping by to give us his take. This is Bloomberg. Romaine Bostick here with a look at how financial markets did on this Monday afternoon, the S & P stock, the NASDAQ stuff, the Russell 2000 stuff market still looking for direction. The volatility, well, is not really there. The volume not really there. Neither is a breath and quite frankly, neither is a conviction, a market setting up for what is going to be the busiest week of the earnings season. About one hundred and eighty companies in the S & P 500 teed up to report this week. And, of course, that's the big lead in to the following week where you get a big Fed decision here, big two day meeting that concludes a week from this Wednesday. Will make it a little bit better sense, not just so much if the Fed hikes, but more importantly, where there's going to continue to do so deeper into the year. As we talk about the broader market here on this day, a look at some of the individual names. We did get those results out of First Republic Bank just a little while ago here, a 40 percent drop in deposits in the first quarter from the fourth quarter and more importantly, billions of dollars in unrealized losses that that companies recording on its balance sheet. We're going to dive a little bit deeper into that just in just a little bit as we keep an eye on those shares. But I do want to go back to earnings season and, well, the big earnings season ahead. And it's going to be all the big heavyweights, the ones that really drive this market. Abigail Doolittle standing by right now with a bit of a preview and what to expect. Well, 16 trillion dollars worth of market cap is on reporting duty this week remain. And a lot of it is big CAC, as you know. And tomorrow, of course, we have Alphabet and Microsoft and then Wednesday met an eBay, Intel, Amazon. So lots of companies reporting this week. As for Microsoft, an alphabet that doesn't even include Apple, which is kind of amazing. They could have so much market cap reporting and not have the world's largest company. Microsoft up seventeen point five percent this year. Alphabet up even more, up 20 percent. What makes us so interesting is a lot of folks are talking about where's the growth? Because the growth is really starting to come in for these companies. I remember just a couple of years ago, double digit, even above 20, 30 percent for both top and bottom line. Now we're looking at single digits for both of these companies, in fact, specific to Google itself. Take a look at this alphabet. The top line growth. So they're expected to report nearly 70 billion dollars in revenues, but really a muted growth. I think one point four percent. The aggregate paid clicks may be high to mid single digits. And then the ad revenue, the growth, they're expected to be the pricing. Not a lot of red leverage because of chat, jeep duty and also the banking crisis. So stay tuned. The question is, does the company, does the stock does a warrant that 30 percent or excuse me, 20 percent year to date move if this is the quarterly report? As for Microsoft, they are looking at a little bit better growth. I think it's about 7 percent or so revenue growth. But relative to the cloud, a year ago, twenty three point four million this upcoming quarter, the quarter that just was twenty eight point one million, that's 31 percent growth. But take a look at the DSL aeration quarter over quarter remains. And this is going to be the big theme for these big tech companies up big time this year. But where's the growth? Yeah, absolutely. That's a big question here. And maybe somebody who can answer that is our next guest. Let's get right to Brent Build, equity research analyst over at Jefferies, who covers most of the companies that Abigail just wonderfully took us through here. Brent, let's start off here. I do want to start off with Microsoft, because we were having a conversation with with some other folks last quarter about kind of of the sort of big tech cohort, you know, which ones sort of have the ability to sort of really sort of stand up and thrive in the environment they're in. And everybody seemed to raise their hand and say, well, maybe Microsoft, that company, I don't know. Is it? I think it is relative to the names you flashed on the board. We think overall tech has some headwinds. Given the magnitude of the moves of these stocks in. So I think the concern is can the fundamentals hold up with the type of returns we've seen year to date with, you know, a matter of close to 77 percent and others up close to 20 percent? So I think Microsoft holds up and I honestly don't even think anyone really cares about this quarter's numbers because they see the tidal wave come in behind the numbers. So remember, all the revenue that they're going to have from openly either partnership on the potential share gains from being won't all hit this quarter. They'll start to hit in the next few quarters. So every institutional investor I talked to you is long and strong. Microsoft, no one shorted. No one is questioning the next six to nine months. Everyone's question in the near term. But I think ultimately the EAI tailwind has got everyone so excited. They just don't want to leave the story because they believe better things are to come from the monetization of a I don't want again. It'll happen several quarters out. It'll happen because he looks the most exciting from just a durability perspective. You can tell that the EAI story in the next cell phone, once it starts, we'll talk a little bit more about the ISE story, because a lot of the other names that are reporting this week have also. Either entered into the ISE field or at least made it clear that they don't intend to be left behind. I mean, whether you're talking about an alphabet, a matter Amazon, if you will, and of course you have the companies like an NBA, a lot of companies here that basically want investors understand that they're going to benefit from this, too. Do you think they will? Yeah, I think, you know, this isn't going to be a zero sum game, obviously. Obviously, Microsoft is benefiting from opening. They are. They have stole the show. And right now, every company I cover in tech is embedding open A.I., which all those workloads are gonna go to Microsoft. So that investment combined with the partnership and Azure, which is their backing cloud, which will receive those transactions, they're gonna benefit over time. I think everyone is writing Google off too soon. I think Google is going to benefit. I think they are more technology behind the scenes than investors are giving them credit. But I think to your to your previous overview, there's gonna be some big investments they're going to need to Aaron's brace for perhaps lower margins this year because the investments they need to make. But I think Google is actually further ahead than than everyone is giving them credit for. So that one's going to be fascinating and trades at a big discount to Microsoft on valuation. Definitely. So talk a little bit about Metta, because, of course, they made that big pivot into the metaphors with certainly a lot of criticism and we haven't necessarily seen them walk it back. But of course, on the last earnings cycle, they made it clear that they were going to be a little bit more mindful of that cost of that spend. Yeah. And then again, the biggest move of the year in tax, 77 percent, at least in our coverage. And you look at that. That's driven off of expense savings. That's not driven off of revenues. So ACT 2 now has to come from accelerating revenue growth. Again, not a lot of growth expected, but the comps get easier every quarter. They should start to show at least mid to high single digit growth. And then with all these cost savings, they're going to have tremendous leverage on the bottom line. So the stock's had a huge move and it's largely driven off the pullback of the metaverse, though, the actual lean in on advertising and and cost cuts. But now we have to see what is active, what is going to drive that revenue growth for it. We've heard great things from advertisers around Instagram. We've heard the privacy changes lapse now from Apple. We've heard tick has faded a bit. It's still exciting for advertisers, but the excitement faded perhaps a little bit. And snap in Twitter seemed to be losing share. So at this point, it seems in social media, all the checks have been really good fundamentally. And again, it's not an expensive name on earnings basis considering the cuts that they're putting. And we need to see that revenue acceleration for the stock to continue to work from here. On Thursday, we are going to get Amazon earnings. I think of the batch. This is probably one of the more diversified of the companies, but certainly not necessarily a stock that everyone has embraced, at least not over the last few months. Yeah, I mean, this has actually been a surprise. Yeah. I mean, it's up 26 percent year to date. It's outpaced Google and Microsoft. And I think it goes back to the cost savings again. Same thing that Matt and went through. Amazon is going through. The real key for Amazon's going to be the growth of the EAW, US, the buy sides looking for a high single digit growth. All sides looking for a little bit ISE low teens and that's their cash cow. So each of us is the number one watch for me. The number two is on the online business to see if they've cut that back on expenses. Everywhere you turn, they're pulling back that pullback back in the headquarters, they're pulling back on capacity build out. So, again, similar to Matt. Not necessarily a revenue growth story, but more of a cost savings. And if they get those costs savings in and the U.S. doesn't fall apart, I think Amazon is kind of been the sleeper hit. Everyone's been talking about the duel between Microsoft and Google. And Amazon quietly has been grinding higher on the sidelines. So, again, I think Jesse's a software guy. He knows high margin businesses. He loves high margin businesses. So hopefully they get those cost savings in. Got one thing that's scaring everyone. I an Amazon is that a return or bigger splash into food? What are they going to do? They said last call. They want to be in food in a bigger way. Everyone cringes when they say food because it's a very low margin business. Yeah. But again, I think Amazon is probably the one that I'm most concerned about just from a from a cost perspective. And E.W. as well, the checks are good, but not necessarily phenomenal. So I think there's a there's a lot of concern there as Thursday comes on that one. All right. Upfront. Really great stuff. Really glad you can join us. Brent Till, Jefferies analyst there with a look at some of the big tech names report and of course, Microsoft Alphabet tomorrow after the Bell Meadow on Wednesday. And we get Amazon on Thursday after the bell. Full coverage right here on Bloomberg Markets the close. Would you want to go back to some earnings that just crossed the wire a little while ago with this one first republic, which, of course, has been in focus really for the past month, month and a half now, considering strategic options amid a first quarter report, the SAP below the Street's estimates earnings call underway right now as we speak. Executives withdrawing all of the bank's previous financial guidance. Herman Chan covers this bank as well as others for us at Bloomberg Intelligence. Herman, let's start off here first with that deposit base. It was down. We expect it to be down, but it was down more than what people were looking for. Yeah, it was down 40 percent quarter over quarter. If you exclude the 30 billion dollars collectively from the largest U.S. banks. It's down 57 percent. They mentioned in the earnings release that deposits that stabilized a bit in April was only down 2 percent as of mid-April. So. Oh, no, it's been a challenging quarter for deposits. And unfortunately, fortunately, things still are now the woods quite yet. Is there any sense as to why? Because we heard from some other regional banks last week that seemed to hold up a little bit better. They still saw a contraction in deposits, but nowhere near the 40 percent that we hear. Right. Really, the issue is that First Republic has a lot of uninsured deposits that are below that 250000 dollar FDIC limit. So as those depositors high net worth wealthier depositors look for safer banks. Unfortunately, the first republic is the one that does face a bit more outflow versus the other regionals. They have less of these chunkier high net worth deposits. You know, normally whenever we have an old song, we always say ask. I'd like to ask them sort of what they expect, what they want to hear on the conference call, what they would ask. We should point out the first republic said it's not going to take questions or rights conference call. They did put out a statement saying that they are considering strategic options and they're also saying that they have retained over 97 percent of their client relationships. What a strategic options look like for First Republic, right? Yeah. That's the key question. Why is there a bank that's willing to step in right now? I think it's going to be a challenge for them to find a buyer, if that's what they're referring to, given the fact that there is a big hole in the balance sheets and the the loans are underwater. Given where rates are today. So the hands are a bit tired. I think the main issue going forward for the management team is really bringing back some of those deposits somehow and storing some stability and confidence within the bank. And I think it's interesting we're looking at some of the data. This is sort of the end of last year. Twenty seven billion of markdowns on loans, even additional like 13 billion or so are related to some of the Treasury investments and stuff. And now you have the CEO saying on the the executives say in the conference call that they're seeing moderating loan volume. So is there even a growth story here? Right now, it's gonna be a challenge. It's going to be a shrinking balance sheet. Given the fact that they've mentioned reducing the FHA, I'll be borrowings. They mentioned potentially loan sales and asset sales. So the growth story is not going to be there for. The foreseeable future until they really shore up the liquidity and the deposit issue. Do you think there will be a white knight here? It's going to be something that the odds are not in their favor at this point, given where the balance sheet sits and a lot of uncertainty within the asset side. So unfortunately, it's going to be something that has to be a self-help story that that management team has to deal with themselves. All right. Herman, great stuff and always appreciate you coming on on a busy day. Herman Chan, senior U.S. regional banks analyst for Bloomberg Intelligence. Stick with us. A lot more to discuss, including some interesting deal activity out there. Yes, deals are still getting done. This is Bloomberg. We used to pay so much attention to the VIX, you know, people sort of making bets on where volatility is going to be about a month from now. Well, not anymore. The CBOE launching a one day version of that flagship VIX index aimed at the trading boom and short lifespan options, zero day options, as they're called. Bloomberg's Abigail Doolittle joining us here as we wrap up the first day of the zero day option VIX contracts out there. And I was looking at the price action on it and there wasn't a whole lot of price action on it. In fact, it goes down pretty significantly. It did. Yeah, the volatility. Yes, everybody wants volatility. The VIX isn't doing much there. Folks wanted this one day, zero day option VIX. And yet to your point, it's below 10. But it's interesting. And if I can control room can pull this up because I had actually not seen this before sitting in this seat, which is a one year chart of VIX, one day it's a back tested index. So if we go back into time when the VIX, the traditional VIX, was staying below 40. This thing was spiking above 40 a little bit. But it really is based on this whole DTV options ban. So interesting. So you'd think, though, it could potentially be more of an accurate barometer down the road. You know, I don't know. I'm looking at this chart right now and it's suggesting the same thing is the traditional VIX. There's not a lot of volatility. But what really strikes me about this is so if the VIX measures volatility over the next 27 to 30 days, so a useful parameter, if it's correct, this is basically today into tomorrow. But I can just look at the S & P 500 and see what's happening. Well, that's well, that was the question, too, because when we talk about sort of why the VIX has maybe become a little less reliable, there's some people say, well, that's because a lot of the speculators really aren't using anymore. But people are still using it as a hedge or at least as a reflection of their longer term views here on the shorter term view side. We kind of know that. I mean, it's not just equities, but you can look at the option markets in and of themselves, independent of those VIX contracts and see where the money is going. It's true. I think to some degree, CBO, they've had a real cash cow and those are Steve Sosnik of interactive brokers where it's not mine in terms of all these different products people face. It's not just the VIX. It's not just a one day VIX or a nine day VIX. There's a skew in DAX. There is the VIX, the three month IBEX. So they have a whole plethora of these sorts of VIX tools. This is just one more tool in the tool belt that will encourage people to perhaps trade. You know, it's interesting. I was just speaking not too long ago to Chris Murphy over Susquehanna. He was saying that one very useful piece of this could be because of zero day or one day. So zero day, it seems not very useful. But say there was a jobs report saying we were looking at this on Thursday, more Friday. Maybe it will give some cue on what the markets expect on jobs. But I don't know. This seems to say it's a marketing tool, but it seems like there's more sizzle to it than actually the steak itself. Benson, obviously, this is just the first day, maybe up a little traction of Vick's one D on your terminal or Bloomberg terminal if you want to check it out. Abigail Doolittle course knows this better than anyone. We'll check in with her tomorrow for options inside. Meanwhile, there actually was some deals will come. Tiny deals. Trillium Capital making a non-binding offer to buy Getty Images for about 10 bucks a share. That would be about a four billion dollar deal. Shares at Getty just saw it here on the day and we had a couple other names out there also bouncing around. Joining us right now to talk about this is our Bloomberg's U.S. Deals managing editor Liana Baker. For more on this. All right. Let's start off with Getty. I mean, this is a small deal if it actually ends up coming to fruition for a billion bucks. What's it about? So that's the big question. Well, this happened. Trillium is actually an investor in Getty and they've been agitating the company to make changes. To me, it seems like they're trying to put the company in play by making a bid. It's unclear where they're getting the money from. Who else is backing them? Getty has the Getty family behind it and other sort of controlled investors because remember, it went public through a spec deal. It hasn't performed well. That's why I think Trillium is in here trying to get that stock price up. It was interesting because we were talking the other day last week about this idea of the dearth of deals and what sort of brings people back into the market. Is this because the financing isn't there or is this more just people just aren't really seeing the opportunities for something good? I'd say it's all of the above. There's certainly a lot of deal talks happening. We reported last week Boston Scientific making an offer for a company called Shockwave Medical. That could be a 10 billion plus deal. There's also a big vote that we're all watching this week, tech resources, which had a hostile offer from Glencore. So certainly things kicking around. But are we seeing huge deals get to the finish line? It was a quiet merger Monday today. And it was. And then there was also that report about carrier. And then there again, which people familiar with the situation that Bloomberg reporter spoken to, potentially making a bid for a German company here. And that would be of roughly a 10 billion dollar deal. But then the shares sold off hard on that, because I think this gets to the point here is do investors really want to see this kind of stuff right now? CEO confidence you would say that deals beget more deals if we see stock prices going up on big deals. We'll see more. Right now we aren't seeing that, but mergers that make sense. I think we're still seeing some buyer stock price appreciate. And we're not really seeing a whole lot come to market either into the IPO process as well. I mean, I know we've had this big IPO just launched a carve out called Can View from Johnson. And Johnson is going to raise five billion. They just posted the initial range. So we're going to see a pretty that's a real one, not a spec deal. It's a real it's a carve out deal that's we're actually going to see more IPO is and also and a big corporates are carving out big businesses. So that is kind of a steady part of the market where you see something in that division. They had an Investor Day with that today. So the S-1 filing has hit. They're going to be hitting the road show starting tomorrow, meeting with investors trying to drum up interest. Do you think that's a harbinger of maybe additional deal activity or is this all going to just be concentrated with a few health care companies? So I would say that companies like arm and insta car that are supposed to be in that 2023 IPO class, they'll be watching to see how this one does. Even though it's, you know, the owner of Tylenol and sort of like more consumer facing business. All right. Lot great stuff. Eliana Baker leads our deal's coverage here at Bloomberg. A look at a couple of deals that might potentially make their way through the pipeline. Stick with us here. Show's not over yet. We're going to set you up for what to watch tomorrow. This is. All right. As we wrap up our coverage here on this Monday afternoon to look ahead to what to watch on Tuesday, we start overseas earnings out of UBS. Of course, a lot of folks are paying attention to that, not only for the deposit inflows and outflows, but more importantly, the integration of that Credit Suisse deal. Meanwhile, back here in the U.S., we're gonna get some earnings before the bell, including from General Motors, General Electric, McDonald's Horizon, as well as U.P.S.. Keep in mind, UBS, remember a lot of concerns here about package volume being down over whether it will be interesting to see whether the company has managed to adjust their costs in line with that potential drop. And then after the bell, we get some big tech earnings, including from Texas Instruments, Microsoft, Visa and Alphabet. We were just having a good discussion here about Microsoft. Remember, sales growth there expected to come in below 5 percent for the second straight quarter. Also, we're gonna get some economic data. A slew of economic data, including new home sales, expected to be slightly lower than where we were the previous month. Consumer confidence expected to hold up. And we got Dallas Fed manufacturing data earlier today. We're gonna get the Dallas Fed services data tomorrow vision to see if we see a similar sized contraction there. Thank you for watching Bloomberg Markets close. I'll be back tomorrow. In the meantime, balance of power coming up right after this. Stick around. This is Bloomberg.

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