WEBVTT - Bloomberg Daybreak: January 27, 2023

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<v Speaker 1>Live from the Bloomberg Interacted Burger Studios. This is Bloombergy

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<v Speaker 1>Daybreak for Friday, January. Coming up this hour, Intel shares

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<v Speaker 1>plunge after one of the gloomiest forecasts in its history.

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<v Speaker 1>Hasbro is the latest company to slash jobs. Republicans may

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<v Speaker 1>be willing to raise the dead select temporarily, and Japan

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<v Speaker 1>and the Netherlands moved closer to joining the US on

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<v Speaker 1>China ship restrictions. A guilty verdict for the man who

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<v Speaker 1>killed eight people along the New York Punk Path, plus

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<v Speaker 1>cities brace for the video release of Memphis officers in

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<v Speaker 1>a deadly beating. I'm Michael bar More Ahead, I'm John

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<v Speaker 1>Stash Aaron sports thrilling overtime win for the Knicks in Boston,

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<v Speaker 1>the Nets lost to Detroit, the Devil's lost in Nashville.

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<v Speaker 1>That's all s traded ahead on Bloomberg day Break on

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<v Speaker 1>Bloomberg eleven three on New York, Bloomberg one, Washington d C,

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<v Speaker 1>Bloomberg one oh six one, Boston, Bloomberg nine sixties and

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<v Speaker 1>Francisco Sirius x M one nine team and around the

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<v Speaker 1>world on Bloomberg Radio dot Com and via the Bloomberg

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<v Speaker 1>Business Good morning. I'm Nathan Hagar and I'm Karin Moscow.

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<v Speaker 1>Here are the stories we're following today. Let's begin with

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<v Speaker 1>an earnings disappointment from Intel. The shares are down more

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<v Speaker 1>than nine percent after the downbeat results. Let's get the

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<v Speaker 1>latest live from Bloomberg's Steve Rappaport. Good morning, Steve, Good morning, Nathan,

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<v Speaker 1>and Karen. Intel's out with a forecast that's one of

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<v Speaker 1>the worst in the chip maker's history, predicting a gross

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<v Speaker 1>margin of thirty seven for this quarter. Despite that outlook,

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<v Speaker 1>CEO Pat Gelsinger says the company remains focused on the

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<v Speaker 1>big picture. I want to remind everyone that we are

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<v Speaker 1>on a multi year journey. We remain focused on the

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<v Speaker 1>things that are within our control as we navigate short

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<v Speaker 1>term headwinds while let's secut into our long term strategy.

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<v Speaker 1>Gelsinger adding he thinks momentum will stabilize this year. Live

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<v Speaker 1>from New York, I'm Steve Rappaport, Bloomberg Daybreak. All right, Steve,

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<v Speaker 1>thank you all. Disappointing earnings are also taking a toll

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<v Speaker 1>on Hasbro this morning. Shares at the Toy are down

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<v Speaker 1>more than five percent, and Bloomberg's Charlie Pellett reports Hasbro

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<v Speaker 1>is cutting fiferent of its workforce. That's eleven thousand jobs,

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<v Speaker 1>and it comes after a disappointing holiday shopping season. The

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<v Speaker 1>company also projected it will fall short of fourth quarter

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<v Speaker 1>adjusted profit estimates. The company said while it's digital gaming business,

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<v Speaker 1>including Dungeons and Dragons and Magic the Gathering, perform well,

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<v Speaker 1>it's traditional toy business faltered. Changes to its business plan

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<v Speaker 1>are expected to result in charges of about three hundred

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<v Speaker 1>million dollars. As part of the changes, president Eric Niman

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<v Speaker 1>is leaving the company in New York. Charlie Pellett Bloomberg

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<v Speaker 1>day Break. All right, Charlie, thank you. Another corporate story

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<v Speaker 1>this morning centers on bed Bath and Beyond. The struggling

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<v Speaker 1>retailer is moving closer to bankruptcy. We get more from

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<v Speaker 1>Bloomberg's Doug Prisner. In a filing on Thursday, the retailer

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<v Speaker 1>said it received a default notice from JP Morgan Chase

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<v Speaker 1>after breaching the terms of its credit line, but Bedad

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<v Speaker 1>and Beyond warned it didn't have enough funds. The company

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<v Speaker 1>listed around two point one billion dollars of obligations it

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<v Speaker 1>owed as of November. One analyst said the likelihood of

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<v Speaker 1>a bankruptcy filing within the next thirty days is relatively high. Earlier,

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<v Speaker 1>Bloomberg reported the company has begun speaking with potential lenders

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<v Speaker 1>on funding the firm during bankruptcy proceedings in New York.

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<v Speaker 1>I'm Doug Prisner, Bloomberg daybreak. All right, thank you, While

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<v Speaker 1>turning to the markets. Now, US futures are lower as

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<v Speaker 1>we close out the trading week. At the same time,

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<v Speaker 1>the SNP five hundred is coming off its highest close

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<v Speaker 1>since early December. Patrick Calfrey is senior equity strategistic Credit Sweez.

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<v Speaker 1>I think the equity picture right here actually looks pretty good.

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<v Speaker 1>I mean, we've seen the market rally almost eleven since

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<v Speaker 1>the end of September, or up four and a half

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<v Speaker 1>percent year to date, and really that's in response to

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<v Speaker 1>the fact that we are having interest rates come in.

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<v Speaker 1>Credit spreads are narrowing in, the vix is falling. That

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<v Speaker 1>is a good backdrop for risk. Credit Sue Senior equity

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<v Speaker 1>strategist Patrick Paul Frey is also watching the Fed. He

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<v Speaker 1>sees two more rate hikes coming from the Central Bank

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<v Speaker 1>followed by a pause. Like he inflation report for the

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<v Speaker 1>FED comes out this morning. Karen. December's personal consumption expenditure

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<v Speaker 1>prices are forecast to be unchanged while the core rate

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<v Speaker 1>rises three tenths. We get more on the upcoming inflation

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<v Speaker 1>report from Bloomberg Economics correspondent Michael McKee The data should

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<v Speaker 1>continue a string of good news on inflation. Falling energy

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<v Speaker 1>prices and holiday discounts to clear merchandise will put downward

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<v Speaker 1>pressure on the Fed's favorite price index, and the year

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<v Speaker 1>over year change in both headline PC and core are

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<v Speaker 1>likely to come in softer than Fed officials had forecast.

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<v Speaker 1>The income and spending numbers may not be as cheerful,

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<v Speaker 1>with incomes barely rising and spending set to drop. Retail

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<v Speaker 1>sales were down in December. The report will tell us

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<v Speaker 1>whether that meant more was spent on services or whether

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<v Speaker 1>consumers simply pulled back. Michael mckeey, Bloomberg Daybreak. All right, Mike,

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<v Speaker 1>thank you all. Turning to Washington now, there may be

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<v Speaker 1>some movement in the fight over the debts sailing. Bloomberg

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<v Speaker 1>News has learned House Republicans are considering a short term

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<v Speaker 1>increase until September thirty that would allow more time to

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<v Speaker 1>negotiate with Democrats, though it's not clear whether they're open

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<v Speaker 1>to it. Republican Congressman Dusty Johnson of South Dakota says,

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<v Speaker 1>this issue will get resolved. What we're getting is a

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<v Speaker 1>credit card bill, and it is a whop, and I

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<v Speaker 1>get it. We have to pay the credit card bill.

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<v Speaker 1>We absolutely should not default on our death. But when

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<v Speaker 1>a company gets that credit card bill show up in

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<v Speaker 1>the mail, it is exactly the right time for them

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<v Speaker 1>to sit down and have a family conversation about how

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<v Speaker 1>do they get the spending under control. Congressman Dusty Johnson

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<v Speaker 1>spoke with Our Washington corresponded Joe Matthew on Bloomberg sound On.

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<v Speaker 1>Catch the show weekdays at five pm Eastern on Bloomberg

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<v Speaker 1>Radio or subscribe to the Bloomberg sound On podcast. Turning

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<v Speaker 1>to geopolitics, Karen, the US is limiting China's access to

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<v Speaker 1>advanced semiconductor equipment, and now Japan and the Netherlands are

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<v Speaker 1>poised to do the same. Bloomberg Daybreak Asia anchor Brian

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<v Speaker 1>Curtis has more from Hong Kong. Sources say the three

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<v Speaker 1>countries are on the verge of forging a powerful alliance.

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<v Speaker 1>It will undercut China's ambitions to build its own ship capabilities,

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<v Speaker 1>Bloomberg saidwin Chan says it would be a black eye

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<v Speaker 1>for China. It's with the significant victory for the Biden administration,

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<v Speaker 1>It's something that the US could not have done alone

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<v Speaker 1>contained China's chip ambitions. If key allies, such as an

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<v Speaker 1>evalence in Japan refused to participate, the talks could conclude

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<v Speaker 1>as soon as today. In Hong Kong, Bran Curtis Bloomberg,

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<v Speaker 1>Day bright, It's thirty six degrees in Central Park. It's

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<v Speaker 1>gonna be partly sunny and cool today with highs in

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<v Speaker 1>the low forties. Will get back down to the low

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<v Speaker 1>thirties tonight under Apartment Cloudy sky Time. How to look

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<v Speaker 1>at some of the other stories making news in New

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<v Speaker 1>York and around the world. Good morning, Michael Vare, Good

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<v Speaker 1>morning Nathan. New York City and Long with other major

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<v Speaker 1>cities across the nation, are bracing for tonight's video release

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<v Speaker 1>of a confrontation with Memphis police officers accused in the

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<v Speaker 1>beating death of a twenty nine year old black motorists

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<v Speaker 1>earlier this month. The five Fiard officers have been charged

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<v Speaker 1>with murder and other crimes in the killing of Tyree Nichols.

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<v Speaker 1>All of the officers are black. Last night, a vigil

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<v Speaker 1>was held for Nichols. His mother, rove On Wells, told

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<v Speaker 1>the crowd to be peaceful when the video is released.

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<v Speaker 1>I don't want us burning up our cities, turning up

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<v Speaker 1>the streets, because that's not what my son stood for.

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<v Speaker 1>This officials say the video will show the entire faithful encounter,

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<v Speaker 1>from beginning to end. A New York lawyer has been

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<v Speaker 1>sentenced from the George Floyd protests. In a judge ordered

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<v Speaker 1>Collinford Maddis to spend a year and a day in

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<v Speaker 1>prison and pay just over thirty thou dollars to the

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<v Speaker 1>NYPD for the fire bombing of a police car. Maddis

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<v Speaker 1>and Rouge Raman were arrested as demonstrations and protests rage

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<v Speaker 1>over the killing of Floyd at the hands of police

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<v Speaker 1>in Minneapolis. Rahman was sentenced in November to fifteen months

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<v Speaker 1>in prison. And Islamic extremists who killed eight people a

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<v Speaker 1>speeding truck in the seen rampage on the West Side

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<v Speaker 1>Highway bike path has been convicted of federal charges and

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<v Speaker 1>could face the death penalty. Jurors in the Manhattan courtroom

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<v Speaker 1>found Cipolo Psipop guilty. The jury will return to court

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<v Speaker 1>no earlier than February six to decide whether Psipop should

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<v Speaker 1>be executed. New York Mayor Eric Adams vowed in his

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<v Speaker 1>State of the City addressed to increase the number of

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<v Speaker 1>police and hold drivers accountable. Adams also says he wants

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<v Speaker 1>to get repeat offenders off the streets. He reflected on

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<v Speaker 1>his first year in office, we hit the ground running

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<v Speaker 1>and we got stuff done. One year later, our cities

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<v Speaker 1>on the pathway to being safer. Our economy is recovering,

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<v Speaker 1>and our stores, subways in hotels a full. Mayor Adams

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<v Speaker 1>says the state of the city is strong. Global news

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<v Speaker 1>twenty four hours a day on air and on Bloomberg Quicktake,

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<v Speaker 1>powered by more than journal list and analyist more than

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<v Speaker 1>a hundred twenty countries. I'm Michael Barr and this is Bloomberg.

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<v Speaker 1>Thanks Michael, timing out for the Bloomberg Sports update, brought

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<v Speaker 1>to you by Tri State Auty. For that, we bring

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<v Speaker 1>in John Session. Thanks Nathan. The Knicks best win of

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<v Speaker 1>the season in Boston, Celtics at the NBA's best record

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<v Speaker 1>and they jumped in front by fifteen. Nicks blew a

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<v Speaker 1>fourth quarterly that's happened a lot, but they rallied in overtime,

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<v Speaker 1>big three point by r J. Barrett. Julius Randall's two

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<v Speaker 1>free throws put him a head Nicks one one one seventeen.

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<v Speaker 1>Randalls scored thirty seven. Jalen Brunson at twenty nine. Nicks

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<v Speaker 1>continue to be better on the road than at home.

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<v Speaker 1>It's their fifteenth road win. Only the Celtics have more.

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<v Speaker 1>The Nets began a stretch of home games, losing to

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<v Speaker 1>Detroit one thirty one twenty two. They clearly missed Kevin Durant.

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<v Speaker 1>Nets have lost six of their last eight. Devils lost

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<v Speaker 1>at Nashville six four, in the third time this season

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<v Speaker 1>they've allowed that many goals. Novak Djokovic playing his Australian

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<v Speaker 1>Open semifinal match right now, and he leads American Tommy

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<v Speaker 1>Paul seven five three love earlier a semifinal win in

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<v Speaker 1>four sets, force stefinal sits pass. Two NFL head coaches

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<v Speaker 1>fired during the season, he got new jobs. Frank Reich

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<v Speaker 1>lost his job in Indianapolis but hired by Carolina, and

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<v Speaker 1>Nathaniel Hackett fired in Denver, and he's now the offensive

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<v Speaker 1>coordinator of the Jets Conference Championship. Sunday begins in the

0:10:17.520 --> 0:10:20.040
<v Speaker 1>NFC in Philadelphia. Eagles forty nine is the a f

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<v Speaker 1>C game, a rematch from last year when Joe Burrow

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<v Speaker 1>led Cincinnati to a comeback overtime win at Kansas City.

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<v Speaker 1>Can Burrow and the Bengals do it again. We've been

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<v Speaker 1>in these spots, um, they have the experience. We know

0:10:31.960 --> 0:10:34.640
<v Speaker 1>a team we're playing team has been in this this

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<v Speaker 1>game the last five seasons and there they've all been

0:10:38.200 --> 0:10:41.160
<v Speaker 1>in that stadium. So to me, they're still a team

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<v Speaker 1>to beat, and then we're coming for him, but we

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<v Speaker 1>know it's gonna be tough. Burrow in the last two

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<v Speaker 1>years has won three playoff road games. Longtime college basketball

0:10:49.880 --> 0:10:52.960
<v Speaker 1>analyst Billy Packer has died. He was eighty two. John

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<v Speaker 1>stash Award Bloomberg Sports Live from coast to coast from

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<v Speaker 1>New York to Send Francisco, Boston to Washington, d C.

0:11:02.640 --> 0:11:06.520
<v Speaker 1>Nationwide on Sirius Examp, the Bloomberg Business app, and Bloomberg

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<v Speaker 1>dot Com. This is Bloomberg Daybreak. Good morning, I'm Nathan Hagar.

0:11:11.440 --> 0:11:13.600
<v Speaker 1>At the end of a big week for big tech earnings.

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<v Speaker 1>The focus this morning is on Intel and the disappointment

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<v Speaker 1>from the chip maker. The shares are down nine percent

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<v Speaker 1>after one of the gloomiest quarterly forecasts in Intel's history.

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<v Speaker 1>Bloomberg Quick Take correspondent Alex Webb is back with us

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<v Speaker 1>this morning for more on the earnings and the overall

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<v Speaker 1>chips story. Alex, good morning. How big a surprise was

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<v Speaker 1>it that Intel came out with this forecast? It was

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<v Speaker 1>something like at least two and a half billion dollars

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<v Speaker 1>lower than the average estament. It certainly was a bit

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<v Speaker 1>of a sideswipe. The market was not anticipating good news,

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<v Speaker 1>but the scope of the miss was quite considerable. The

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<v Speaker 1>consensus had been for first quarter sales of fourteen billion dollars.

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<v Speaker 1>Intel's projecting it's going to be between ten and a

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<v Speaker 1>half and eleven and a half. That would make it,

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<v Speaker 1>you know, the lowest in some twenty years. Also me

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<v Speaker 1>ten years or so, so it's um a bit a

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<v Speaker 1>sizeable blow. Hope, is then that some analyst commentary this

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<v Speaker 1>morning that they're frontloading a lot of the bad news

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<v Speaker 1>and just saying we're going to take a painful quarter

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<v Speaker 1>and with the hope that they rebound a bit in

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<v Speaker 1>the second half. Is this just an Intel story or

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<v Speaker 1>does this say something more about the overall outlook for

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<v Speaker 1>the tech sector. I mean, we've been talking for quite

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<v Speaker 1>some time about a lot of these magacap names are

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<v Speaker 1>in retrenchment mode after the pandemic and trying to cut cast. Uh,

0:12:31.040 --> 0:12:33.240
<v Speaker 1>there's clearly our broader issues in the tech sector. Of course,

0:12:33.360 --> 0:12:35.439
<v Speaker 1>you know, there is a lot of the tech sector

0:12:35.760 --> 0:12:38.200
<v Speaker 1>encompasses a lot of very different businesses. You know, of

0:12:38.280 --> 0:12:41.400
<v Speaker 1>an online advertising is not the same as chipmaking, but

0:12:42.080 --> 0:12:45.280
<v Speaker 1>we have seen that the personal computing business, and that's

0:12:45.320 --> 0:12:48.560
<v Speaker 1>what's really hurting Intel right now that it is clearly

0:12:48.600 --> 0:12:50.440
<v Speaker 1>not going to e really well. So that obviously has

0:12:50.440 --> 0:12:54.840
<v Speaker 1>implications for Dell, for parts of Apple's business in others besides,

0:12:55.280 --> 0:12:57.679
<v Speaker 1>but also some of the chipmaking peers like A m

0:12:57.760 --> 0:13:01.360
<v Speaker 1>D and Nvidia, who don't how quite the problems that

0:13:01.440 --> 0:13:04.160
<v Speaker 1>Intel might do, but that they're likely to see some

0:13:04.160 --> 0:13:07.080
<v Speaker 1>some similar effects in the most recent quarters. Well, what

0:13:07.240 --> 0:13:11.160
<v Speaker 1>is the issue, Alex for Intel that's holding it back?

0:13:11.240 --> 0:13:14.160
<v Speaker 1>Why is it that we're seeing this sort of slow

0:13:14.240 --> 0:13:19.080
<v Speaker 1>down in PC sales in particular that's affecting Intel. A

0:13:19.120 --> 0:13:22.040
<v Speaker 1>lot of spending got front loaded during the pandemic, so

0:13:22.200 --> 0:13:24.040
<v Speaker 1>it's a combination of two factors, you know, as people

0:13:24.080 --> 0:13:26.679
<v Speaker 1>had to work from home or they needed a better

0:13:26.679 --> 0:13:30.040
<v Speaker 1>computing setup, so people bought laptops. Companies bought laptops and

0:13:30.760 --> 0:13:33.400
<v Speaker 1>clearly some desktops as well. But there was also a

0:13:33.400 --> 0:13:36.600
<v Speaker 1>little bit more disposable income floating around. Some people, you know,

0:13:36.679 --> 0:13:38.920
<v Speaker 1>had more money during the pandemic, not everybody by any

0:13:38.920 --> 0:13:41.720
<v Speaker 1>stretch of the imagination, and that meant that they're able

0:13:41.720 --> 0:13:45.400
<v Speaker 1>to buy new gear now as personal finances become a

0:13:45.440 --> 0:13:49.080
<v Speaker 1>little bit more straightened. Uh and frankly, little people already

0:13:49.080 --> 0:13:52.800
<v Speaker 1>have these new laptops. There isn't as much demand, and

0:13:52.840 --> 0:13:54.760
<v Speaker 1>so there's quite a lot of inventory sitting around and

0:13:54.800 --> 0:14:00.439
<v Speaker 1>warehouses from from personal computing companies. So that's really pounding

0:14:00.440 --> 0:14:03.400
<v Speaker 1>what's already not a terribly happy ship at Intel. Who

0:14:03.440 --> 0:14:06.760
<v Speaker 1>that has been has been hemorrhaging market share to t SMC,

0:14:07.000 --> 0:14:11.080
<v Speaker 1>the big contract manufacturer of semi conductors, and is in

0:14:11.120 --> 0:14:13.120
<v Speaker 1>the middle of a huge strategic pivot to try to

0:14:13.160 --> 0:14:16.280
<v Speaker 1>catch up. And even before these earnings came out, Alex

0:14:16.360 --> 0:14:19.800
<v Speaker 1>you know, the CEO of Intel, Pad Gelsinger, has been

0:14:20.320 --> 0:14:24.360
<v Speaker 1>talking for quite some time about a multi year turnaround

0:14:24.400 --> 0:14:27.200
<v Speaker 1>plan that he's trying to implement an Intel. When you

0:14:27.240 --> 0:14:29.400
<v Speaker 1>have an outlook like this, does that raise some doubts

0:14:29.480 --> 0:14:32.840
<v Speaker 1>for investors about whether that multi year plan is working.

0:14:34.360 --> 0:14:36.840
<v Speaker 1>You know, he was reminding people on the call uh

0:14:36.880 --> 0:14:40.800
<v Speaker 1>that it is a multi year plan asking for more patients.

0:14:40.800 --> 0:14:44.080
<v Speaker 1>It clearly is, particularly in a space like semi conductors,

0:14:44.120 --> 0:14:47.200
<v Speaker 1>where the innovation cycles you know, over quite a long

0:14:47.680 --> 0:14:51.200
<v Speaker 1>time frame. You know, between each new generation of chips,

0:14:51.200 --> 0:14:53.320
<v Speaker 1>the time it takes to get new new fabs, that's

0:14:53.360 --> 0:14:56.440
<v Speaker 1>the sort of factories essentially for semi conductors, the time

0:14:56.440 --> 0:14:59.520
<v Speaker 1>it takes to get them online is considerable. What Intel

0:14:59.600 --> 0:15:02.600
<v Speaker 1>is doing is trying to pivot towards contract manufacturing. So

0:15:02.720 --> 0:15:06.360
<v Speaker 1>the contract manufacturing is you know, Apple makes Apple designs

0:15:06.400 --> 0:15:09.080
<v Speaker 1>chips for instance, that go into its iPhones. It does

0:15:09.120 --> 0:15:11.960
<v Speaker 1>not make them. It contracts that out to t SMC

0:15:12.240 --> 0:15:15.280
<v Speaker 1>in Taiwan. Intel is trying to get into that business

0:15:15.520 --> 0:15:19.160
<v Speaker 1>so that it can try and offset the change the

0:15:19.200 --> 0:15:23.560
<v Speaker 1>declines at seeing elsewhere. That is a multi year project

0:15:23.640 --> 0:15:26.920
<v Speaker 1>and a huge significant change that can't happen overnight. In

0:15:26.920 --> 0:15:29.680
<v Speaker 1>our last minute here, Alex, there of course, there was

0:15:29.720 --> 0:15:33.200
<v Speaker 1>a lot of investment expected from the chips and Science

0:15:33.240 --> 0:15:35.880
<v Speaker 1>Act that was passed in Washington last year. Can Intel

0:15:35.880 --> 0:15:39.120
<v Speaker 1>account support from that, Yes, And we're seeing of plans

0:15:39.160 --> 0:15:42.680
<v Speaker 1>to open new facilities, for example in Columbus, Ohio. UM

0:15:42.680 --> 0:15:45.240
<v Speaker 1>it's fifty billion of spending that is coming from the government.

0:15:45.240 --> 0:15:47.400
<v Speaker 1>There is a huge bun fight right now between the

0:15:47.440 --> 0:15:50.240
<v Speaker 1>various chipmakers and not just American chipmakers to get a

0:15:50.240 --> 0:15:53.400
<v Speaker 1>piece of that. It's going to go into UH subsidizing

0:15:53.400 --> 0:15:58.760
<v Speaker 1>new manufacturing facilities, to training UM new engineers, to getting

0:15:58.800 --> 0:16:01.600
<v Speaker 1>into some of the underlying technolog It is partly a

0:16:01.680 --> 0:16:04.680
<v Speaker 1>play to reduce dependence on Taiwan. And when we think

0:16:04.720 --> 0:16:07.320
<v Speaker 1>about reduce dependance on Taiwan, a lot of that's TSMC.

0:16:07.520 --> 0:16:09.760
<v Speaker 1>So it is in the long stone something that could

0:16:09.880 --> 0:16:14.480
<v Speaker 1>and should benefit into. This is Bloomberg Daybreak Today, your

0:16:14.560 --> 0:16:17.400
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