WEBVTT - US GDP, Intel Earnings, AI Investment Probe

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<v Speaker 1>Good morning. I'm Brian Curtiz.

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

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<v Speaker 1>Breaking news here on the Bloomberg terminal. Let's get right

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<v Speaker 1>to Ed Baxter in San Francisco.

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<v Speaker 3>Ed, all right, Brian, Yeah, this is the US Supreme

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<v Speaker 3>Court ruling that Alabama can go forward with the country's

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<v Speaker 3>first execution by nitrogen gas. It will be the first

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<v Speaker 3>time using this method and the first execution by a

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<v Speaker 3>new method since nineteen eighty two. The execution is scheduled

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<v Speaker 3>for tonight. They plan to put a face mask on

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<v Speaker 3>fifty eight year old Kenneth Eugene Smith and replace the

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<v Speaker 3>air he is breathing with nitrogen to cause oxygen deprivation.

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<v Speaker 3>Smith's attorneys have argued that the state is trying to

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<v Speaker 3>make him a test subject for an untried execution method.

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<v Speaker 3>He is one of two men convicted in nineteen eighty

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<v Speaker 3>eight murder for hire slaying of a preacher's wife. The

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<v Speaker 3>other was executed in twenty ten. Center Republican leaders are

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<v Speaker 3>working to try and save and emerging Ukraine and migration deal. Today.

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<v Speaker 3>It looked earlier in the day like they were coming together,

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<v Speaker 3>and then Donald Trump entered the fray telling senators and

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<v Speaker 3>House members not to vote for any compromise. Does this

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<v Speaker 3>blow the deal for Ukraine and the border, Well, Bloomberg's

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<v Speaker 3>Jonathan Tamary says, not yet.

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<v Speaker 4>I think what we've heard from Republican senators today is

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<v Speaker 4>say that, yes, McConnell was acknowledging the political reality that

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<v Speaker 4>there's a real challenge to any deal here, but he

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<v Speaker 4>wasn't saying this deal is off. This deal is dead.

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<v Speaker 4>And there are a number of Republicans who came out

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<v Speaker 4>today and said they want to get something done. They

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<v Speaker 4>see this as a once in a generation chance to

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<v Speaker 4>actually get some of their tougher border policies enacted.

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<v Speaker 3>Now, mcconnoll had reportedly gone so far as to suggest

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<v Speaker 3>that possibly Ukraine aid could be separated from the border policy.

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<v Speaker 3>So we'll see where that goes. But how does this

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<v Speaker 3>play going forward? With Trump inserting himself here? While Senator

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<v Speaker 3>Mitt Romney is not a fan.

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<v Speaker 5>Former President Trump is indicated to senators that he does

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<v Speaker 5>not want us to sell the pumbit the border. He

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<v Speaker 5>wants to lay the blame of the border at Biden

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<v Speaker 5>and the idea that someone running for president would say

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<v Speaker 5>please hurt the country so I can blame my opponent

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<v Speaker 5>and help my politics is a shocking development.

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<v Speaker 3>So will Trump be jumping in on every bill going forward?

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<v Speaker 3>Then he is being played by many in Congress now

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<v Speaker 3>as the GOP nominee. Nicky Haley does not think so.

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<v Speaker 6>We have raised a million dollars since I gave that

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<v Speaker 6>speech last night online in small dollars.

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<v Speaker 3>And her super pack has raised fifty point one million

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<v Speaker 3>in the last six months, which is more than Trump has.

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<v Speaker 3>She says New Hampshire was actually invigorating, that it was

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<v Speaker 3>closer than my many thought it would be. South Carolina

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<v Speaker 3>is how shall we say, extraordinarily important. February twenty fourth,

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<v Speaker 3>Donald Trump was a witness today in the civil suit

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<v Speaker 3>involving Egene Carroll's defamation and rape. He was on the

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<v Speaker 3>stand for less than five minutes, a reflection of strict

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<v Speaker 3>limits imposed by the judge about what he could say.

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<v Speaker 3>He said he stands by his deposition that he did

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<v Speaker 3>not rape her and left the courtroom with a scowl.

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<v Speaker 3>Reporter say, he said, this is not America. And Vladimir

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<v Speaker 3>Putin is testing the waters on whether the US is

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

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<v Speaker 3>Bloomberg reporting he has gone through indirect channels global news

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<v Speaker 3>twenty four hours a day and whenever you want it

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<v Speaker 3>with Bloomberg News Now in San Francisco. I'm at Baxter

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<v Speaker 3>and this is Bloomberg. All right, guys, Yeah, thanks very much.

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<v Speaker 3>Six minutes past the hour.

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<v Speaker 1>Now it's time to take a look at some of

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<v Speaker 1>the top stories of the day. Well, we mentioned that

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<v Speaker 1>Intel disappointed with its earnings and the stunt got slam.

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<v Speaker 1>But then GDP did exactly the opposite, encouraging investors. But Doug,

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<v Speaker 1>you know, for a lot of people, taxes is probably

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<v Speaker 1>number one. And we had US Treasury Secretary Jenny Yellen

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

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<v Speaker 1>the White House is keen on making sure that the

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<v Speaker 1>middle class gets a break keeps that break. They'll do

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<v Speaker 1>that by retaining some of the tax reductions that were

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<v Speaker 1>enacted by former President Donald Trump. Here's Yellen.

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<v Speaker 7>President Biden made an ironclad commitment to not raise taxes

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<v Speaker 7>on those making less than four hundred thousand dollars a year.

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<v Speaker 7>There are some proposals to including you know, there was

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<v Speaker 7>a corporate Alternative minimum tax that was passed to ask

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<v Speaker 7>corporations and the wealthy to pay their fair share.

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<v Speaker 1>Jennie Yellen has said that new revenue sources will have

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<v Speaker 1>to be found in order to pay for tax cuts

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<v Speaker 1>that are being extended.

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<v Speaker 2>It's very interesting, Brian, because just yesterday we heard from

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<v Speaker 2>former US treasure Secretary Bob Rubin, and he was saying, Hey,

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<v Speaker 2>the US is in a terrible place with regard to

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<v Speaker 2>that federal deficit, and the way to solve it would

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<v Speaker 2>be higher taxes. Well, keeping a close eye on that

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<v Speaker 2>story to be sure, as we get more deeply into

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

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<v Speaker 2>three companies subpoena today by the Federal Trade Commission. The

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<v Speaker 2>FTC is gathering information on the company's investments in partnerships

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<v Speaker 2>with AI startups and Thropic and Open AI. Here is

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<v Speaker 2>Bloomberg's Jenniferree on where this investigation may have originated.

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<v Speaker 6>Investigation is open when the FTC may have some concern

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<v Speaker 6>or some suspicion that laws have been broken. A study

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<v Speaker 6>is just meant to learn about a business, to learn

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<v Speaker 6>about an industry, to understand these investments. You know, they

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<v Speaker 6>have concern about the dominance of these big tech companies.

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<v Speaker 6>They have concern about AI, which is rapidly becoming a

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<v Speaker 6>part of our economy, and I think they just want

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<v Speaker 6>to make sure they're ahead of this and understand what's

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<v Speaker 6>going on.

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<v Speaker 2>Bloombergs Jenniferree. There now the probe is focusing on investments

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<v Speaker 2>by Microsoft, Amazon, and Alphabet worth a combined nineteen billion dollars.

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<v Speaker 2>It was on Thursday the FTC warned the AI companies

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<v Speaker 2>cannot use claims of innovation as cover for breaking the law.

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<v Speaker 1>Brian, So we talked about stocks getting up to all

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<v Speaker 1>time highs again, and part of that story was the

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

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

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<v Speaker 1>rate is still up around eighty percent or so, and

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<v Speaker 1>so that might justify some of these gains in stocks.

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<v Speaker 1>But we're hearing from more and more companies, Tesla being

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<v Speaker 1>won and Intel another where they have actually given pretty

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<v Speaker 1>weak forecasts. Listen to these numbers. Intel said that sales

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<v Speaker 1>in the first quarter will be twelve point two to

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<v Speaker 1>thirteen point two billion dollars. Analysts were estimating fourteen and

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<v Speaker 1>a quarter billion. Now, the outlook suggests that CEO Pat

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<v Speaker 1>Gelsinger still has a long way to go in restoring

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<v Speaker 1>Intel's former prowess. Here's Dan Morgan at Sinova's Trust.

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<v Speaker 8>I was really looking for a little bit of a

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<v Speaker 8>rebound here in regards to PC chips. We know that

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<v Speaker 8>Intel is behind both AMD and in regards to AI.

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<v Speaker 8>They had a pretty strong quarter last quarter in terms

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<v Speaker 8>of that client computing group, So I was expecting that

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<v Speaker 8>momentum to kind of carry over and maybe you get

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<v Speaker 8>a beat. But they came in line, which was fine,

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<v Speaker 8>but obviously the guidance for the first quarter was very disappointing.

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<v Speaker 8>We're hopeful a little bit better than that.

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<v Speaker 1>So that guidance had the stock down nine percent in

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<v Speaker 1>after hours. And by the way, that was Dan Morgan

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<v Speaker 1>there at Snov's Trust commenting, it's worth noting that the

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<v Speaker 1>chip maker's PC business is recovering, but the company has

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<v Speaker 1>been losing ground in the lucrative market for data center chips.

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<v Speaker 1>All right, let's get to really our top story I

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<v Speaker 1>suppose today is the GDP report, because it did spruce

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<v Speaker 1>up the markets. By the way, I'm Brian Curtis, along

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<v Speaker 1>with Doug Christner, and we're joined on the line now

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<v Speaker 1>by Estelle Oh who's US economist for Bloomberg Economics. To

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<v Speaker 1>take it close to look here. What's interesting is that

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<v Speaker 1>people took a lot of heart in this is stell

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<v Speaker 1>because that number three point three percent was sharply higher

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<v Speaker 1>than expected in the firth quarter, in the fourth quarter.

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<v Speaker 1>But I note that Bloomberg Economics still sees a recession coming,

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<v Speaker 1>and the team says there's a possibility that these GDP

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<v Speaker 1>numbers will be revised lower. Spell that out for us.

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

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<v Speaker 9>got earlier this morning, and it on the surface of it,

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<v Speaker 9>it does look like it's a very strong print that

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<v Speaker 9>is just screaming soft landing, and that's definitely a little

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<v Speaker 9>not to say a little, but contrasts with our current

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<v Speaker 9>view that we still expect US economic growth to slow

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<v Speaker 9>down in twenty twenty four. And the reason for that

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<v Speaker 9>is because if you look under the hood of today's

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<v Speaker 9>four Q GDP print, you'll see that most of the

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<v Speaker 9>bulk of the growth was actually driven by consumer spending,

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<v Speaker 9>but also upside surprises from more volatile categories within the GDP,

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<v Speaker 9>such as trade and government spending, and it's purely because

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<v Speaker 9>of the fact that more volatile categories drove the upside.

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<v Speaker 9>Figured this morning that we don't think this strength will continue.

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<v Speaker 9>And that's why, even though today's TV print was a

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<v Speaker 9>good indicator of how the US economy is faring, we

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<v Speaker 9>are not convinced that strength will continue going forward.

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<v Speaker 2>Okay, so still I'm going to push back. I'm going

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<v Speaker 2>to push back a little bit because that the PCE,

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<v Speaker 2>the core PCE was only up two percent for a

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<v Speaker 2>second straight quarter, So clearly underlying inflation is coming down.

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<v Speaker 2>And I think it gives the FED a lot of

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<v Speaker 2>wiggle room here, particularly if they would be concerned at all.

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<v Speaker 2>And when I say they am referring to policymakers about

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<v Speaker 2>some of the the potential stress in the credit market

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<v Speaker 2>as we see some of these older loans roll off

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<v Speaker 2>and the pressure for companies banks are included in this

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<v Speaker 2>to rea to roll over some loans at a rate that,

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<v Speaker 2>if the FED is not aggressive in lowering rates, would

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<v Speaker 2>be at a rate that's higher than those original loans

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<v Speaker 2>were priced at. Is that a fair statement?

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<v Speaker 9>Uh that the risks you know are completely uh legitimate concerns,

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

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<v Speaker 9>We think the FED will take uh or view this

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<v Speaker 9>gdprint along the lines of how we're viewing it, and

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<v Speaker 9>that it shows that we make good progress on inflation.

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<v Speaker 9>The US economy is still strong, but we don't think

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<v Speaker 9>the FED will take this as to mean that strength

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<v Speaker 9>will continue forward. In that sense, there strength, the FED

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<v Speaker 9>still has incentives or has justifications to lower rates before

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<v Speaker 9>these companies need to refinance their loans in the next

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<v Speaker 9>couple of months or years. Does that make sense, Doug, Yeah.

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<v Speaker 1>Yeah, Well, we mentioned that GDP was three point three

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<v Speaker 1>percent and personal spending rose at a two point eight

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

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<v Speaker 1>it suggests that, you know, there was a little bit

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<v Speaker 1>of the slack made up by business investment and housing

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<v Speaker 1>help there. But I don't see anything in that spending

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<v Speaker 1>by individuals of two point eight percent that suggests that

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<v Speaker 1>it's going to fall apart, And even two point eight

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<v Speaker 1>percent would have been a pretty solid number for GDP.

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<v Speaker 9>Yeah, definitely. So if you look underneath the hood of

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<v Speaker 9>the consumer spending category, you get a really broad mix

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<v Speaker 9>of strength and spending in different categories, but with the

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<v Speaker 9>one category we're really paying attention to is to slow

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<v Speaker 9>down and spending in food services and restaurants. Now, Brian,

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<v Speaker 9>if you recall all throughout the whole pandemic reopening phase,

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<v Speaker 9>one of the pillars of UH, the US strength and

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<v Speaker 9>the US economy was consumer spending on you know, restaurants,

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

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<v Speaker 9>that category pull back, and that to us is an

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<v Speaker 9>indication that you know, consumer spending on discretionary services, you know,

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<v Speaker 9>food services and accommodation is one of the among the

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<v Speaker 9>most discretionary services UH spending consumers can choose to spend on.

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<v Speaker 9>That pullback is UH an indication to us that consumer

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<v Speaker 9>spending will unlikely be continue to be a strength going forward.

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<v Speaker 2>Estelle, do you have a sense as to when the

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<v Speaker 2>labor market is going to begin to to crack or

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<v Speaker 2>to show signs of cracking.

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<v Speaker 9>So yeah, we definitely started seeing signs that the labor

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<v Speaker 9>market is continuing to is showing signs of cracking. In

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<v Speaker 9>the December known Firm DRABS report particular, we're seeing a

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<v Speaker 9>rise in the duration of people staying in unemployment and

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<v Speaker 9>that too. That to us is a good sign that

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<v Speaker 9>we're at a tipping point where either the labor market

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<v Speaker 9>could completely accelerate and it's the curiation trend, or if

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<v Speaker 9>that figure comes back down, then it may mean that

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<v Speaker 9>we only saw a blip, a small downturn in the

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<v Speaker 9>labor market and we may be seeing it recovery already.

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<v Speaker 9>So we're really looking at the non farm paeris print

0:13:31.520 --> 0:13:35.160
<v Speaker 9>next week closely for more signs of further deterioration in

0:13:35.200 --> 0:13:36.640
<v Speaker 9>the unemployment duration rate.

0:13:36.760 --> 0:13:40.520
<v Speaker 1>To answer your question, yeah, we had initial joblest claims

0:13:41.120 --> 0:13:43.360
<v Speaker 1>going up, so that's a little bit to worry some.

0:13:43.520 --> 0:13:46.280
<v Speaker 1>They did rise twenty five thousand to two hundred and

0:13:46.360 --> 0:13:49.599
<v Speaker 1>fourteen thousand. What would a number be that would be,

0:13:50.040 --> 0:13:52.959
<v Speaker 1>you know, would further emphasize your point and would be

0:13:53.240 --> 0:13:56.560
<v Speaker 1>let's say, scary for those people worried about jobs.

0:13:57.960 --> 0:14:03.080
<v Speaker 9>So usually right now unemployment rates are definitely lower than

0:14:04.440 --> 0:14:07.600
<v Speaker 9>prior to previous downturns, and we would need to see

0:14:08.800 --> 0:14:13.679
<v Speaker 9>a fast acceleration in the rate of change. So we're

0:14:13.720 --> 0:14:17.439
<v Speaker 9>not really that concerned with the level we're considered concerned

0:14:17.440 --> 0:14:19.480
<v Speaker 9>about the rate of change. I'll just know that we

0:14:19.560 --> 0:14:23.120
<v Speaker 9>don't really take as much signal in the unemployment claims

0:14:23.160 --> 0:14:27.640
<v Speaker 9>figures right now. But because we've noticed that the series

0:14:27.760 --> 0:14:33.400
<v Speaker 9>is actually artificially it maybe are artificially lower than it

0:14:33.440 --> 0:14:35.400
<v Speaker 9>should be because of the amount of people who are

0:14:35.560 --> 0:14:41.440
<v Speaker 9>uneligible for unemployment place and don't even apply for unemployment

0:14:41.480 --> 0:14:47.480
<v Speaker 9>claims because they already used up their eligibility throughout the

0:14:47.600 --> 0:14:49.000
<v Speaker 9>past few months.

0:14:49.360 --> 0:14:51.880
<v Speaker 2>Estill very quickly before we let you go. In about

0:14:51.880 --> 0:14:54.880
<v Speaker 2>twenty seconds. Right now, the swaps market is indicating the

0:14:54.960 --> 0:14:58.200
<v Speaker 2>Fed will cut in May. Let's assume twenty five basis

0:14:58.240 --> 0:15:00.680
<v Speaker 2>points total rate cuts this year round one hundred and

0:15:00.800 --> 0:15:03.960
<v Speaker 2>forty basis points. Are you okay with that or or

0:15:04.040 --> 0:15:05.760
<v Speaker 2>do you push back on it? Very quickly?

0:15:06.160 --> 0:15:08.560
<v Speaker 9>So we actually think there's a chance for March Raycouk

0:15:08.600 --> 0:15:12.120
<v Speaker 9>because we believe that CORPC inforation is on a fast

0:15:12.200 --> 0:15:15.760
<v Speaker 9>track and likely to undershoot the FEDS target, giving the

0:15:15.840 --> 0:15:18.040
<v Speaker 9>FED justification to cut raise earlier.

0:15:20.280 --> 0:15:23.120
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