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Speaker 1: Good morning. I'm Brian Curtiz.

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Speaker 2: And I'm Doug Prisner. Here are the stories we're following today.

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Speaker 1: Breaking news here on the Bloomberg terminal. Let's get right

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Speaker 1: to Ed Baxter in San Francisco.

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Speaker 3: Ed, all right, Brian, Yeah, this is the US Supreme

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Speaker 3: Court ruling that Alabama can go forward with the country's

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Speaker 3: first execution by nitrogen gas. It will be the first

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Speaker 3: time using this method and the first execution by a

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Speaker 3: new method since nineteen eighty two. The execution is scheduled

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Speaker 3: for tonight. They plan to put a face mask on

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Speaker 3: fifty eight year old Kenneth Eugene Smith and replace the

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Speaker 3: air he is breathing with nitrogen to cause oxygen deprivation.

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Speaker 3: Smith's attorneys have argued that the state is trying to

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Speaker 3: make him a test subject for an untried execution method.

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Speaker 3: He is one of two men convicted in nineteen eighty

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Speaker 3: eight murder for hire slaying of a preacher's wife. The

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Speaker 3: other was executed in twenty ten. Center Republican leaders are

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Speaker 3: working to try and save and emerging Ukraine and migration deal. Today.

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Speaker 3: It looked earlier in the day like they were coming together,

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Speaker 3: and then Donald Trump entered the fray telling senators and

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Speaker 3: House members not to vote for any compromise. Does this

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Speaker 3: blow the deal for Ukraine and the border, Well, Bloomberg's

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Speaker 3: Jonathan Tamary says, not yet.

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Speaker 4: I think what we've heard from Republican senators today is

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Speaker 4: say that, yes, McConnell was acknowledging the political reality that

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Speaker 4: there's a real challenge to any deal here, but he

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Speaker 4: wasn't saying this deal is off. This deal is dead.

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Speaker 4: And there are a number of Republicans who came out

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Speaker 4: today and said they want to get something done. They

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Speaker 4: see this as a once in a generation chance to

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Speaker 4: actually get some of their tougher border policies enacted.

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Speaker 3: Now, mcconnoll had reportedly gone so far as to suggest

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Speaker 3: that possibly Ukraine aid could be separated from the border policy.

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Speaker 3: So we'll see where that goes. But how does this

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Speaker 3: play going forward? With Trump inserting himself here? While Senator

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Speaker 3: Mitt Romney is not a fan.

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Speaker 5: Former President Trump is indicated to senators that he does

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Speaker 5: not want us to sell the pumbit the border. He

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Speaker 5: wants to lay the blame of the border at Biden

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Speaker 5: and the idea that someone running for president would say

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Speaker 5: please hurt the country so I can blame my opponent

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Speaker 5: and help my politics is a shocking development.

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Speaker 3: So will Trump be jumping in on every bill going forward?

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Speaker 3: Then he is being played by many in Congress now

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Speaker 3: as the GOP nominee. Nicky Haley does not think so.

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Speaker 6: We have raised a million dollars since I gave that

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Speaker 6: speech last night online in small dollars.

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Speaker 3: And her super pack has raised fifty point one million

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Speaker 3: in the last six months, which is more than Trump has.

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Speaker 3: She says New Hampshire was actually invigorating, that it was

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Speaker 3: closer than my many thought it would be. South Carolina

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Speaker 3: is how shall we say, extraordinarily important. February twenty fourth,

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Speaker 3: Donald Trump was a witness today in the civil suit

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Speaker 3: involving Egene Carroll's defamation and rape. He was on the

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Speaker 3: stand for less than five minutes, a reflection of strict

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Speaker 3: limits imposed by the judge about what he could say.

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Speaker 3: He said he stands by his deposition that he did

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Speaker 3: not rape her and left the courtroom with a scowl.

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Speaker 3: Reporter say, he said, this is not America. And Vladimir

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Speaker 3: Putin is testing the waters on whether the US is

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Speaker 3: ready to engage in talks for ending Russia's invasion of Ukraine.

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Speaker 3: Bloomberg reporting he has gone through indirect channels global news

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Speaker 3: twenty four hours a day and whenever you want it

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Speaker 3: with Bloomberg News Now in San Francisco. I'm at Baxter

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Speaker 3: and this is Bloomberg. All right, guys, Yeah, thanks very much.

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Speaker 3: Six minutes past the hour.

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Speaker 1: Now it's time to take a look at some of

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Speaker 1: the top stories of the day. Well, we mentioned that

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Speaker 1: Intel disappointed with its earnings and the stunt got slam.

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Speaker 1: But then GDP did exactly the opposite, encouraging investors. But Doug,

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Speaker 1: you know, for a lot of people, taxes is probably

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Speaker 1: number one. And we had US Treasury Secretary Jenny Yellen

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Speaker 1: weighing in on the Biden administration's tax policies today. She said,

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Speaker 1: the White House is keen on making sure that the

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Speaker 1: middle class gets a break keeps that break. They'll do

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Speaker 1: that by retaining some of the tax reductions that were

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Speaker 1: enacted by former President Donald Trump. Here's Yellen.

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Speaker 7: President Biden made an ironclad commitment to not raise taxes

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Speaker 7: on those making less than four hundred thousand dollars a year.

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Speaker 7: There are some proposals to including you know, there was

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Speaker 7: a corporate Alternative minimum tax that was passed to ask

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Speaker 7: corporations and the wealthy to pay their fair share.

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Speaker 1: Jennie Yellen has said that new revenue sources will have

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Speaker 1: to be found in order to pay for tax cuts

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Speaker 1: that are being extended.

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Speaker 2: It's very interesting, Brian, because just yesterday we heard from

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Speaker 2: former US treasure Secretary Bob Rubin, and he was saying, Hey,

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Speaker 2: the US is in a terrible place with regard to

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Speaker 2: that federal deficit, and the way to solve it would

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Speaker 2: be higher taxes. Well, keeping a close eye on that

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Speaker 2: story to be sure, as we get more deeply into

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Speaker 2: this presidential election year. Let's get to Amazon, Alphabet and Microsoft,

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Speaker 2: three companies subpoena today by the Federal Trade Commission. The

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Speaker 2: FTC is gathering information on the company's investments in partnerships

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Speaker 2: with AI startups and Thropic and Open AI. Here is

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Speaker 2: Bloomberg's Jenniferree on where this investigation may have originated.

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Speaker 6: Investigation is open when the FTC may have some concern

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Speaker 6: or some suspicion that laws have been broken. A study

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Speaker 6: is just meant to learn about a business, to learn

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Speaker 6: about an industry, to understand these investments. You know, they

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Speaker 6: have concern about the dominance of these big tech companies.

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Speaker 6: They have concern about AI, which is rapidly becoming a

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Speaker 6: part of our economy, and I think they just want

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Speaker 6: to make sure they're ahead of this and understand what's

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Speaker 6: going on.

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Speaker 2: Bloombergs Jenniferree. There now the probe is focusing on investments

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Speaker 2: by Microsoft, Amazon, and Alphabet worth a combined nineteen billion dollars.

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Speaker 2: It was on Thursday the FTC warned the AI companies

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Speaker 2: cannot use claims of innovation as cover for breaking the law.

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Speaker 1: Brian, So we talked about stocks getting up to all

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Speaker 1: time highs again, and part of that story was the

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Speaker 1: strong GDP report, but also the earnings have been pretty good. However,

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Speaker 1: we've seen quite a few weak forecasts, Doug. The beat

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Speaker 1: rate is still up around eighty percent or so, and

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Speaker 1: so that might justify some of these gains in stocks.

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Speaker 1: But we're hearing from more and more companies, Tesla being

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Speaker 1: won and Intel another where they have actually given pretty

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Speaker 1: weak forecasts. Listen to these numbers. Intel said that sales

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Speaker 1: in the first quarter will be twelve point two to

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Speaker 1: thirteen point two billion dollars. Analysts were estimating fourteen and

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Speaker 1: a quarter billion. Now, the outlook suggests that CEO Pat

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Speaker 1: Gelsinger still has a long way to go in restoring

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Speaker 1: Intel's former prowess. Here's Dan Morgan at Sinova's Trust.

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Speaker 8: I was really looking for a little bit of a

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Speaker 8: rebound here in regards to PC chips. We know that

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Speaker 8: Intel is behind both AMD and in regards to AI.

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Speaker 8: They had a pretty strong quarter last quarter in terms

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Speaker 8: of that client computing group, So I was expecting that

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Speaker 8: momentum to kind of carry over and maybe you get

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Speaker 8: a beat. But they came in line, which was fine,

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Speaker 8: but obviously the guidance for the first quarter was very disappointing.

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Speaker 8: We're hopeful a little bit better than that.

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Speaker 1: So that guidance had the stock down nine percent in

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Speaker 1: after hours. And by the way, that was Dan Morgan

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Speaker 1: there at Snov's Trust commenting, it's worth noting that the

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Speaker 1: chip maker's PC business is recovering, but the company has

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Speaker 1: been losing ground in the lucrative market for data center chips.

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Speaker 1: All right, let's get to really our top story I

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Speaker 1: suppose today is the GDP report, because it did spruce

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Speaker 1: up the markets. By the way, I'm Brian Curtis, along

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Speaker 1: with Doug Christner, and we're joined on the line now

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Speaker 1: by Estelle Oh who's US economist for Bloomberg Economics. To

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Speaker 1: take it close to look here. What's interesting is that

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Speaker 1: people took a lot of heart in this is stell

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Speaker 1: because that number three point three percent was sharply higher

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Speaker 1: than expected in the firth quarter, in the fourth quarter.

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Speaker 1: But I note that Bloomberg Economics still sees a recession coming,

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Speaker 1: and the team says there's a possibility that these GDP

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Speaker 1: numbers will be revised lower. Spell that out for us.

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Speaker 9: That's right, Brian. It is a surprising print that we

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Speaker 9: got earlier this morning, and it on the surface of it,

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Speaker 9: it does look like it's a very strong print that

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Speaker 9: is just screaming soft landing, and that's definitely a little

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Speaker 9: not to say a little, but contrasts with our current

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Speaker 9: view that we still expect US economic growth to slow

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Speaker 9: down in twenty twenty four. And the reason for that

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Speaker 9: is because if you look under the hood of today's

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Speaker 9: four Q GDP print, you'll see that most of the

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Speaker 9: bulk of the growth was actually driven by consumer spending,

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Speaker 9: but also upside surprises from more volatile categories within the GDP,

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Speaker 9: such as trade and government spending, and it's purely because

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Speaker 9: of the fact that more volatile categories drove the upside.

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Speaker 9: Figured this morning that we don't think this strength will continue.

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Speaker 9: And that's why, even though today's TV print was a

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Speaker 9: good indicator of how the US economy is faring, we

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Speaker 9: are not convinced that strength will continue going forward.

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Speaker 2: Okay, so still I'm going to push back. I'm going

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Speaker 2: to push back a little bit because that the PCE,

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Speaker 2: the core PCE was only up two percent for a

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Speaker 2: second straight quarter, So clearly underlying inflation is coming down.

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Speaker 2: And I think it gives the FED a lot of

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Speaker 2: wiggle room here, particularly if they would be concerned at all.

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Speaker 2: And when I say they am referring to policymakers about

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Speaker 2: some of the the potential stress in the credit market

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Speaker 2: as we see some of these older loans roll off

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Speaker 2: and the pressure for companies banks are included in this

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Speaker 2: to rea to roll over some loans at a rate that,

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Speaker 2: if the FED is not aggressive in lowering rates, would

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Speaker 2: be at a rate that's higher than those original loans

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Speaker 2: were priced at. Is that a fair statement?

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Speaker 9: Uh that the risks you know are completely uh legitimate concerns,

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Speaker 9: But I'll just say that we don't think the FED.

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Speaker 9: We think the FED will take uh or view this

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Speaker 9: gdprint along the lines of how we're viewing it, and

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Speaker 9: that it shows that we make good progress on inflation.

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Speaker 9: The US economy is still strong, but we don't think

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Speaker 9: the FED will take this as to mean that strength

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Speaker 9: will continue forward. In that sense, there strength, the FED

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Speaker 9: still has incentives or has justifications to lower rates before

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Speaker 9: these companies need to refinance their loans in the next

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Speaker 9: couple of months or years. Does that make sense, Doug, Yeah.

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Speaker 1: Yeah, Well, we mentioned that GDP was three point three

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Speaker 1: percent and personal spending rose at a two point eight

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Speaker 1: percent rate, so that's almost in sync. But as you say,

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Speaker 1: it suggests that, you know, there was a little bit

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Speaker 1: of the slack made up by business investment and housing

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Speaker 1: help there. But I don't see anything in that spending

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Speaker 1: by individuals of two point eight percent that suggests that

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Speaker 1: it's going to fall apart, And even two point eight

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Speaker 1: percent would have been a pretty solid number for GDP.

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Speaker 9: Yeah, definitely. So if you look underneath the hood of

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Speaker 9: the consumer spending category, you get a really broad mix

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Speaker 9: of strength and spending in different categories, but with the

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Speaker 9: one category we're really paying attention to is to slow

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Speaker 9: down and spending in food services and restaurants. Now, Brian,

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Speaker 9: if you recall all throughout the whole pandemic reopening phase,

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Speaker 9: one of the pillars of UH, the US strength and

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Speaker 9: the US economy was consumer spending on you know, restaurants,

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Speaker 9: dining out, travel, accommodations. And we're finally seeing spending in

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Speaker 9: that category pull back, and that to us is an

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Speaker 9: indication that you know, consumer spending on discretionary services, you know,

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Speaker 9: food services and accommodation is one of the among the

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Speaker 9: most discretionary services UH spending consumers can choose to spend on.

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Speaker 9: That pullback is UH an indication to us that consumer

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Speaker 9: spending will unlikely be continue to be a strength going forward.

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Speaker 2: Estelle, do you have a sense as to when the

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Speaker 2: labor market is going to begin to to crack or

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Speaker 2: to show signs of cracking.

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Speaker 9: So yeah, we definitely started seeing signs that the labor

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Speaker 9: market is continuing to is showing signs of cracking. In

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Speaker 9: the December known Firm DRABS report particular, we're seeing a

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Speaker 9: rise in the duration of people staying in unemployment and

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Speaker 9: that too. That to us is a good sign that

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Speaker 9: we're at a tipping point where either the labor market

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Speaker 9: could completely accelerate and it's the curiation trend, or if

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Speaker 9: that figure comes back down, then it may mean that

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Speaker 9: we only saw a blip, a small downturn in the

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Speaker 9: labor market and we may be seeing it recovery already.

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Speaker 9: So we're really looking at the non farm paeris print

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Speaker 9: next week closely for more signs of further deterioration in

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Speaker 9: the unemployment duration rate.

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Speaker 1: To answer your question, yeah, we had initial joblest claims

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Speaker 1: going up, so that's a little bit to worry some.

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Speaker 1: They did rise twenty five thousand to two hundred and

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Speaker 1: fourteen thousand. What would a number be that would be,

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Speaker 1: you know, would further emphasize your point and would be

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Speaker 1: let's say, scary for those people worried about jobs.

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Speaker 9: So usually right now unemployment rates are definitely lower than

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Speaker 9: prior to previous downturns, and we would need to see

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Speaker 9: a fast acceleration in the rate of change. So we're

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Speaker 9: not really that concerned with the level we're considered concerned

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Speaker 9: about the rate of change. I'll just know that we

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Speaker 9: don't really take as much signal in the unemployment claims

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Speaker 9: figures right now. But because we've noticed that the series

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Speaker 9: is actually artificially it maybe are artificially lower than it

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Speaker 9: should be because of the amount of people who are

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Speaker 9: uneligible for unemployment place and don't even apply for unemployment

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Speaker 9: claims because they already used up their eligibility throughout the

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Speaker 9: past few months.

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Speaker 2: Estill very quickly before we let you go. In about

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Speaker 2: twenty seconds. Right now, the swaps market is indicating the

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Speaker 2: Fed will cut in May. Let's assume twenty five basis

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Speaker 2: points total rate cuts this year round one hundred and

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Speaker 2: forty basis points. Are you okay with that or or

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Speaker 2: do you push back on it? Very quickly?

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Speaker 9: So we actually think there's a chance for March Raycouk

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Speaker 9: because we believe that CORPC inforation is on a fast

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Speaker 9: track and likely to undershoot the FEDS target, giving the

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Speaker 9: FED justification to cut raise earlier.

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