WEBVTT - Bloomberg Daybreak: January 21, 2022 - Hour 1 (Radio) 0:00:02.759 --> 0:00:06.080 Live from the Bloomberg Interactor Burgers Studios. This is Bloomberg 0:00:06.160 --> 0:00:10.719 day Break for Friday, January. Coming up this hour. Tech 0:00:10.760 --> 0:00:14.280 weakness again this morning, following yesterday's late day sell off. 0:00:14.440 --> 0:00:19.119 Netflix shares plunge on subscriber disappointment, Bitcoin drops below thirty 0:00:19.200 --> 0:00:22.760 nine thousand dollars, and JP Morgan Chase boost Jamie Diamonds 0:00:22.760 --> 0:00:26.119 pay Following a record year. New York Mayor Adams calls 0:00:26.160 --> 0:00:29.480 for better coordination between federal and local authorities and fighting crime. 0:00:29.560 --> 0:00:32.879 Plus high stakes meeting between the US and Russia in Geneva. 0:00:33.080 --> 0:00:36.360 I'm Michael Bloger. More ahead, I'm John Stash Aaron Sports. 0:00:36.360 --> 0:00:39.519 Another home loss for the Knicks beaten soundly by the Pelican. 0:00:39.560 --> 0:00:44.280 Is the third round underway at the Australian Opening. That's 0:00:44.280 --> 0:00:48.600 all straight ahead on Bloomberg day Break on Bloomberg eleven, TREEO, 0:00:48.720 --> 0:00:53.120 New York, Bloomberg one, Washington, d C, Bloomberg one oh 0:00:53.159 --> 0:00:57.640 six one, Boston, Bloomberg nine sixties, San Francisco, Sirius x 0:00:57.840 --> 0:01:01.200 M one nineteen and around the world on Bloomberg Radio 0:01:01.280 --> 0:01:08.400 dot com and via the Bloomberg Business Set. And good Morning. 0:01:08.440 --> 0:01:11.480 I'm Karen Moscow. I'm Nathan Hagar Bloomberg Daybreak brought to 0:01:11.520 --> 0:01:15.200 you by SEI Crises emphasized character and partnership, one mission, 0:01:15.200 --> 0:01:18.080 one community, Sei go to se I C dot Com 0:01:18.120 --> 0:01:21.279 slash I M s N SMP Future is little changed 0:01:21.280 --> 0:01:23.200 on this Friday morning at is five oh one on 0:01:23.240 --> 0:01:25.880 Wall Street. We checked the markets every fifteen minutes throughout 0:01:25.920 --> 0:01:29.360 the trading day. On Bloomberg SMP futures again little change down, 0:01:29.360 --> 0:01:33.000 Future is up thirty six and nasday futures down. Sixties 0:01:33.080 --> 0:01:35.959 seven ten year Treasury up four thirty seconds. YELD one 0:01:36.000 --> 0:01:38.520 point seven eight percent yield on the two year one 0:01:39.000 --> 0:01:41.479 one percent, Nathan Well Karen. The late day sell off 0:01:41.520 --> 0:01:44.720 we saw on Wall Street yesterday spilled over to Asia overnight. 0:01:44.840 --> 0:01:47.840 Let's get the recap from Bloomberg's Juliette Sally in Singapore. 0:01:47.880 --> 0:01:50.400 Good morning, Juliette, Good morning, Nathan and carn. The m 0:01:50.440 --> 0:01:52.520 s c I Asia Pacific Index fell close to two 0:01:52.520 --> 0:01:54.800 percent over the course of the week, notching up its 0:01:54.840 --> 0:01:58.320 worst week since November. During Friday session, the tech sel 0:01:58.360 --> 0:02:01.240 off from Wall Street flowed through into Asia, with Japan's 0:02:01.280 --> 0:02:05.760 Topics index flirting with correction. TSMC and Samsung shares were dumped, 0:02:05.800 --> 0:02:08.320 weighing on the taie X in Cosby, along with Ali 0:02:08.360 --> 0:02:11.320 Baba in Hong Kong. Alibaba shares also hurt by a 0:02:11.320 --> 0:02:15.560 Financial Times report saying China State broadcaster has implicated Jack 0:02:15.600 --> 0:02:19.600 Mars and Group in a corruption scandal. Australian Stokes plunged 0:02:19.639 --> 0:02:22.000 to the lowest in seven months, while yields on the 0:02:22.040 --> 0:02:24.840 tenure fell as much as nine basis points in Singapore. 0:02:24.880 --> 0:02:28.240 Juliette Sally Bloomberg Daybreak, Juliette, thank you. We are seeing 0:02:28.240 --> 0:02:31.720 weakness in NASDAK futures once again this morning, after yesterday's 0:02:31.720 --> 0:02:34.520 plunge sent the Tech Heavy index into a correction. We 0:02:34.560 --> 0:02:37.079 get the latest live with the Bloomberg's John Tucker, John 0:02:37.080 --> 0:02:39.680 gole Boarding and Karen After yesterday is one point three 0:02:39.680 --> 0:02:42.640 percent slide for the nastac TO Tech Heavy index is 0:02:42.680 --> 0:02:46.000 now down close to twelve percent since it's November high. 0:02:46.320 --> 0:02:49.480 Adding to the correction that's started this week, investors have 0:02:49.520 --> 0:02:52.440 been fretting over higher interest rates from the Fed, and 0:02:52.480 --> 0:02:56.519 now add another concern, company earnings have been shaky. Sarah 0:02:56.600 --> 0:02:59.440 Hunt of Alpine Woods Capital Investors says this is a 0:02:59.480 --> 0:03:03.600 time when stocks need to stand on fundamentals. Valuations are finally, 0:03:03.639 --> 0:03:05.720 after quite a long period of time, going to start 0:03:05.720 --> 0:03:08.120 to matter, and cash generation and balance sheets are going 0:03:08.160 --> 0:03:10.480 to be very important as we navigate what is no 0:03:10.639 --> 0:03:13.640 longer a very easy FED policy going forward. The earnings 0:03:13.680 --> 0:03:16.880 reporting season so far has been uneven, highlighting the risk 0:03:16.960 --> 0:03:19.600 that it may fail to enliven animal spirits in the 0:03:19.639 --> 0:03:22.400 stock markets, and the Master's face a one two punch 0:03:22.480 --> 0:03:25.399 of FED rate hikes and the possible reduction of its 0:03:25.600 --> 0:03:28.720 eight point eight trillion dollar balance sheet in New York 0:03:28.720 --> 0:03:31.919 on John Tucker, Bluebirk Radio and John One market veteran 0:03:31.960 --> 0:03:34.960 says this selling is not over. Jeremy Grantham has been 0:03:34.960 --> 0:03:37.720 calling market bubbles for decades now. The co founder of 0:03:37.760 --> 0:03:41.000 Boston based GMO says the historic stock collapse he predicted 0:03:41.040 --> 0:03:44.560 a year ago is underway. Grantham says even intervention by 0:03:44.600 --> 0:03:47.840 the FED can't prevent an eventual plunge of almost fifty 0:03:48.760 --> 0:03:53.680 this time. Trend is at most and I would expect 0:03:54.160 --> 0:03:56.920 even if the Federal Reserve tries to do the same, 0:03:57.600 --> 0:04:01.320 it will be hard to prevent the market from declining 0:04:01.360 --> 0:04:03.920 to that level. Jeremy Grantham made those comments at a 0:04:03.920 --> 0:04:07.400 Bloomberg Front Row interview Well Nathan, the prospect of higher 0:04:07.440 --> 0:04:10.120 interest rates has been putting stocks under pressure, and now 0:04:10.120 --> 0:04:13.080 the Fed is preparing for its next policy meeting next week. 0:04:13.360 --> 0:04:16.039 Economy is surveyed by Bloomberg say the Central Bank will 0:04:16.160 --> 0:04:18.440 use it to signal a March rate hike than a 0:04:18.440 --> 0:04:21.680 balance sheet unwind soon after. Most of the forty five 0:04:21.680 --> 0:04:24.640 economists polled said the Fed will telegraph at twenty five 0:04:24.680 --> 0:04:27.360 basis point increase, though two of them are looking out 0:04:27.400 --> 0:04:30.840 for a surprise fifty basis point hike. Let's turn to 0:04:30.880 --> 0:04:34.440 corporate news Karen and a big earning surprise from Netflix. 0:04:34.480 --> 0:04:38.520 The stock is down twenty two in early trading after 0:04:38.560 --> 0:04:40.760 the streaming service that it expects to add just two 0:04:40.760 --> 0:04:44.080 and a half million subscribers this quarter. Bloomberg's Charlie Pellet 0:04:44.160 --> 0:04:47.080 reports that is well short of Wall Street estimates. It 0:04:47.240 --> 0:04:50.080 suggests the streaming giant is entering a new phase of 0:04:50.200 --> 0:04:54.440 slow growth. In twenty two, Netflix signed up eight point 0:04:54.480 --> 0:04:58.560 two million customers in the fourth quarter of one, beating 0:04:58.600 --> 0:05:01.679 Wall Street estimates, but lee into the slowest annual growth 0:05:01.720 --> 0:05:04.920 since twenty fifteen. The company says sign ups have not 0:05:05.160 --> 0:05:08.320 re accelerated at the pre COVID levels, blaming a tough 0:05:08.320 --> 0:05:12.279 economy as well as lingering fallout from the pandemic. In addition, 0:05:12.320 --> 0:05:15.160 Netflix says it's biggest shows of the current quarter don't 0:05:15.200 --> 0:05:20.359 come out until March. In New York, Charlie Pellet Bloomberg Daybreak, Charlie, 0:05:20.360 --> 0:05:23.520 thank you. While another stock, Darling during the lockdown era, 0:05:23.720 --> 0:05:26.680 is also taking a hit. Pelloton lost almost a quarter 0:05:26.720 --> 0:05:30.000 of its value yesterday after a CNBC report said that 0:05:30.040 --> 0:05:33.800 the company is temporarily halting production of its bikes and treadmills. 0:05:34.160 --> 0:05:36.320 Stock hit an all time high last January at a 0:05:36.360 --> 0:05:39.359 hundred sixty six dollars a share is trading around twenty 0:05:39.480 --> 0:05:43.240 six dollars in pre market and Karen. Bitcoin's moving lower 0:05:43.279 --> 0:05:45.080 as well this morning. In fact, it's trading at its 0:05:45.080 --> 0:05:47.600 lowest level in more than five months. Bitcoin hit a 0:05:47.680 --> 0:05:50.880 high of almost sixty nine thou dollars in November. This morning, 0:05:50.880 --> 0:05:54.440 it's around thirty nine thousand on Wall Street. Nathan JP 0:05:54.520 --> 0:05:57.360 Morgan Chase is coming off its most profitable year on record. 0:05:57.400 --> 0:06:00.400 As a result, it's rewarding CEO Jamie Amen and we 0:06:00.400 --> 0:06:03.839 get the latest live from Bloomberg's Reneed, A young good Morning, Rena, 0:06:03.880 --> 0:06:07.280 Good Morning Care, and regulatory filings show that Jamie Diamond 0:06:07.320 --> 0:06:10.039 got a ten percent pay raise to thirty four point 0:06:10.080 --> 0:06:13.400 five million dollars for his work last year. JP Morgan 0:06:13.480 --> 0:06:17.159 earned forty eight point three billion in one Now. The 0:06:17.200 --> 0:06:20.600 move is the latest time that, after compensation pressures emerged 0:06:20.680 --> 0:06:23.279 last year from the junior ranks up through the banking 0:06:23.320 --> 0:06:26.799 and trading hierarchy, banks are now paying their most senior 0:06:26.880 --> 0:06:30.080 leaders more as well. Live in New York, I'm rened 0:06:30.120 --> 0:06:33.040 a Young Bloomberg, Daybreak and Reneda. Jamie Diamonds counterpart of 0:06:33.040 --> 0:06:35.520 Bank of America, says his bank expects growth and loan 0:06:35.560 --> 0:06:38.760 balances in the single digits this year. Brian moynihan says 0:06:38.800 --> 0:06:41.120 it depends on the trajectory of the U S economy. 0:06:41.360 --> 0:06:43.560 Well rates go up, yes, four times this year is 0:06:43.600 --> 0:06:46.240 a prediction. The reality is does that help our earnings? Yes? 0:06:46.400 --> 0:06:48.840 But the real reality is is that's to bring the economy, 0:06:49.240 --> 0:06:51.320 you know, to take the inflation out of the system. 0:06:51.440 --> 0:06:54.120 And if they get it right, because the economy is 0:06:54.160 --> 0:06:57.320 growing very fast and inflation is growing very fast, as 0:06:57.360 --> 0:06:59.920 that slows down, we should get back to normal economy. 0:07:00.080 --> 0:07:02.760 Bank of America CEO Brian moynihan made the comments in 0:07:02.760 --> 0:07:05.760 an interview with Bloomberg's David west End. Right now, SMP 0:07:05.920 --> 0:07:09.159 futures are down four points. Staff futures are up thirty three. 0:07:09.560 --> 0:07:12.800 NASAC futures down fifty seven points. The tenure treasury is 0:07:12.880 --> 0:07:16.560 up six thirty seconds, the yield one point seven. Straight ahead, 0:07:16.560 --> 0:07:18.920 your latest local headlines and the check of sports. This 0:07:19.040 --> 0:07:24.760 is Bloomberg. The South five oh seven on Wall Street. 0:07:24.880 --> 0:07:27.760 Very cold this morning, just fifteen degrees in Central Park. 0:07:27.760 --> 0:07:30.680 We've got an accident investigation already southbound Root one by 0:07:30.760 --> 0:07:33.600 Route eighteen and Edison. Details coming up in traffic. First. 0:07:33.880 --> 0:07:35.720 Michael barrs here with more on what's going on in 0:07:35.760 --> 0:07:38.320 New York and around the world. Good morning, Michael, Good 0:07:38.320 --> 0:07:40.960 morning Nathan. New York City Mayor Eric Adams called for 0:07:41.040 --> 0:07:44.960 better coordination between federal and local authorities to fight urban crime. 0:07:45.360 --> 0:07:48.720 Mayor Adams has phase high proth lyle violent crimes in 0:07:48.800 --> 0:07:51.600 New York during his first week's in office. Adam says 0:07:51.680 --> 0:07:55.560 law enforcement agencies should coordinate against gun violence the way 0:07:55.560 --> 0:07:59.200 they did against terrorism after the September eleventh attacks. The 0:07:59.400 --> 0:08:02.320 same quote nation that stopped planes from flying in our 0:08:02.360 --> 0:08:06.000 builders must be used to stop bullets from cobbon highways 0:08:06.040 --> 0:08:09.160 of depth in our country, particularly in black and brown 0:08:09.360 --> 0:08:12.800 and poorer communities there. Adams spoke at the National Conference 0:08:12.800 --> 0:08:17.040 of Mayors in Washington yesterday. Secretary of State Anthony Lincoln 0:08:17.040 --> 0:08:21.440 will meet Russia's foreign minister in Geneva today. On Ukraine, yesterday, 0:08:21.560 --> 0:08:25.000 President Joe Biden said Russia will pay a heavy prize 0:08:25.000 --> 0:08:28.440 of any of its forces move across the border into Ukraine. 0:08:28.600 --> 0:08:33.079 We met with severe and coordinated economic response that I've 0:08:33.120 --> 0:08:36.080 discussed in detail with our allies, as well as laid 0:08:36.080 --> 0:08:40.720 out very clearly for President Putin. President Biden earlier suggested 0:08:40.760 --> 0:08:44.240 Western allies might struggle to react to a small scale attack. 0:08:44.679 --> 0:08:47.199 The largest anti abortion rally in the US will take 0:08:47.200 --> 0:08:50.319 place today in Washington. The March for Life begins as 0:08:50.360 --> 0:08:53.079 the Supreme Court appears lankly in the coming months to 0:08:53.240 --> 0:08:57.760 rule on states imposing tighter restrictions on abortion. The Court 0:08:57.840 --> 0:09:00.920 is considering a Mississippi case and could returned the landmark 0:09:01.240 --> 0:09:04.679 Roe v. Wade ruling. A jury of eighteen people who 0:09:04.679 --> 0:09:07.960 appeared mostly white, was picked for the federal trial of 0:09:08.040 --> 0:09:12.560 three Minneapolis police officers charged in George Floyd's killing. The 0:09:12.679 --> 0:09:17.360 judge told potential jurors twelve and six alternates, the case 0:09:17.440 --> 0:09:20.480 has absolutely nothing to do with race. The court declined 0:09:20.520 --> 0:09:24.800 to provide demographic information. Michael Lee a Day, better known 0:09:24.840 --> 0:09:32.760 as meat Loaf, has died. The singer was known for 0:09:32.800 --> 0:09:35.000 her hits including bat Out of Hell and This One 0:09:35.080 --> 0:09:38.480 Paradise by the Dashboard Light. Meat Loaf was seventy four 0:09:38.840 --> 0:09:41.240 Global news twenty four hours a day on air and 0:09:41.400 --> 0:09:44.640 on Bloomberg Quick Take, powered by more than twenty seven 0:09:44.679 --> 0:09:47.400 hundred journalists and analysts more than a hundred twenty countries. 0:09:47.520 --> 0:09:50.760 I'm Michael bar This is Bloomberg, Nathan, So long meat Loaf. 0:09:50.800 --> 0:09:57.520 Thanks Michael five O nine on Wall Street. Time for 0:09:57.520 --> 0:10:00.480 the Bloomberg Sports Update. Now, Good morning, John stash out morning. 0:10:00.520 --> 0:10:02.720 They're just a nightmare of a week. But the Knicks, 0:10:02.760 --> 0:10:04.800 they had won five straight home games, were at the 0:10:04.880 --> 0:10:08.360 Garden for three games in four days, all against beatable teams. 0:10:08.400 --> 0:10:11.000 They lost all three. New Orleans led all the way, 0:10:11.080 --> 0:10:13.640 pull the way third quarter, outscore the next thirty five 0:10:13.800 --> 0:10:16.360 to fifteen. The final a little more respectable, but a 0:10:16.520 --> 0:10:19.240 one oh two to ninety one lost. The Knicks coach 0:10:19.280 --> 0:10:24.800 is Don Thibodeaux. We played hard, but we didn't play, 0:10:25.080 --> 0:10:27.280 you know, with the toughness that we needed to in 0:10:27.400 --> 0:10:32.760 terms of being able to fight through things. Show they 0:10:33.000 --> 0:10:35.520 always say to being mentally tough when you face it 0:10:35.679 --> 0:10:39.440 VERSI is not going our way. Just keep battling. You know, 0:10:39.880 --> 0:10:41.880 your hustle can get you back into the game and 0:10:41.920 --> 0:10:45.319 oftentimes that's what changes that very currens Wan Mitchell Robinson 0:10:45.400 --> 0:10:47.360 was the next leading score. He and r. J. Barrett 0:10:47.400 --> 0:10:49.439 both in the seventeen points. Clearly a big reason the 0:10:49.480 --> 0:10:51.319 Knicks not where they were last year. The play of 0:10:51.480 --> 0:10:54.400 Julius Randall. Last night, Randall store only four points at 0:10:54.480 --> 0:10:57.720 one for nine. Warriors lost over time to Indiana. Another 0:10:57.720 --> 0:11:00.559 win for league leading Phoenix in Dallas. The Sons are 0:11:00.640 --> 0:11:03.800 thirty five and nine nets. In San Antonio. Tonight, Rangers 0:11:03.840 --> 0:11:07.600 visit Carolina. Top two teams in the Metropolitan Division. Australian 0:11:07.600 --> 0:11:10.440 Open Rafteryelmdal just now starting his third round match. American 0:11:10.559 --> 0:11:13.480 Riley Opelka lost four sets to the Canadian Dennis Shop 0:11:13.480 --> 0:11:16.440 of all of Matteo Barrettini came from two sets down 0:11:16.440 --> 0:11:18.920 to win. Naomi Osaka is right now in the third 0:11:18.960 --> 0:11:21.520 set of her match. Yankees will not be making any 0:11:21.520 --> 0:11:23.800 trips to Montreal. That's the other Bay Rays who always 0:11:23.800 --> 0:11:26.640 struggle with the track. Fans made a proposal to play 0:11:26.679 --> 0:11:29.400 their half their home games north of the border. MLB 0:11:29.520 --> 0:11:33.640 rejected the idea. The raised lease and Tampa runs through seven. 0:11:33.679 --> 0:11:35.920 They could be on the move after that. John Stash 0:11:35.920 --> 0:11:39.000 Atward Bloomberg Sports Nathan Okay, John, thanks right now. S 0:11:39.040 --> 0:11:41.800 and P futures are down five points. Staff futures are 0:11:41.920 --> 0:11:45.280 higher right now modestly, Sell up twenty five points. Nastack 0:11:45.360 --> 0:11:49.439 futures still on the decline after heading into correction. Territory down. 0:11:49.520 --> 0:11:52.360 Nastack futures are lower by almost fifty eight points. The 0:11:52.400 --> 0:11:55.480 tenure treasury is up six thirty seconds. The yield one 0:11:55.520 --> 0:11:59.120 point seven eight percent. Patrick Palfrey of Credit Suite joins 0:11:59.200 --> 0:12:06.920 us next. The outlook for markets this is Bloomberg Bloomberg 0:12:07.000 --> 0:12:09.199 eleven three oh weather sunny but cold today, HIGs only 0:12:09.200 --> 0:12:12.120 in the low twenties, upper twenties. Tomorrow under partly mostly 0:12:12.160 --> 0:12:15.680 Sunday skies, more clouds moving Sunday highs in the low thirties. 0:12:15.800 --> 0:12:24.600 Right now fifteen degrees. Markets headlines and breaking news twenty 0:12:24.600 --> 0:12:27.439 four hours a day at Bloomberg dot com. The Bloomberg 0:12:27.480 --> 0:12:37.760 Business Atland at Bloomberg Quick tape is a Bloomberg business flash, 0:12:38.240 --> 0:12:40.959 and I'm fair at Moscow. US Dock Index futures are 0:12:41.080 --> 0:12:44.280 mixed this morning. European shares are falling and we checked 0:12:44.320 --> 0:12:46.800 the markets every fifteen minutes throughout the trading day on 0:12:46.840 --> 0:12:49.560 Bloomberg U S and P future is it'll change this morning. 0:12:49.559 --> 0:12:53.559 Down futures up fifty one, nasdack features down thirty eight. 0:12:53.800 --> 0:12:56.560 The decks in Germanys down one point four percent, the 0:12:56.559 --> 0:12:58.560 ten year treasury up four thirty seconds. You had one 0:12:59.120 --> 0:13:02.080 eight percent yield on the two year one point two percent. 0:13:02.440 --> 0:13:05.080 Nimex scrude oil is down one percent on a dollar 0:13:05.120 --> 0:13:07.839 fifty five at eighty four dollars a barrel. Comex school 0:13:07.960 --> 0:13:09.760 is down four tenth per cent or eight dollars at 0:13:09.760 --> 0:13:12.640 eighteen thirty six ninety an ounce. The Euro one point 0:13:12.640 --> 0:13:14.800 one three four one against the dollar, British bound one 0:13:14.800 --> 0:13:17.160 point three five six nine. The yuns at one thirteen 0:13:17.200 --> 0:13:20.840 point nine three Bitcoin this morning also lower at thirty 0:13:20.880 --> 0:13:23.600 eight thousand, nine hundred dollars. That's a Bloomberg business flash. 0:13:23.679 --> 0:13:25.800 Now here's muchel Barr with Moore on what's going on 0:13:25.840 --> 0:13:29.240 around the world. Muckle, good morning, Good morning, Karen Rock. 0:13:29.320 --> 0:13:33.520 Superstar meat Loaf has died. He's been known for such 0:13:33.600 --> 0:13:36.720 hits as Bad Out of l and Paradise by the 0:13:36.800 --> 0:13:40.960 Dashboard Light. Family. Statement provided by his longtime agent says 0:13:41.000 --> 0:13:44.120 the singer born Marvin Lee a Day died last night. 0:13:44.600 --> 0:13:47.120 Meat Loaf was seventy four. The US plans of the 0:13:47.160 --> 0:13:50.520 raise the federal employee minimum wage to fifteen dollars an hour. 0:13:50.840 --> 0:13:53.680 That's according to a report from Axios. In the NBA, 0:13:53.800 --> 0:13:56.920 the Nixon Warriors lost in the NHL. The Bruins beat 0:13:56.960 --> 0:13:59.920 the Capital's for three Global News twenty four hours of 0:14:00.200 --> 0:14:02.360 on a or end on Bloomberg Quick Today Power by 0:14:02.360 --> 0:14:04.960 more than twenty seven hundred journalists and analysts more than 0:14:04.960 --> 0:14:08.640 a d twenty countries. Michael Barr and this is Bloomberg. 0:14:08.679 --> 0:14:11.559 Nathan alright, Michael, Thanks, It's five nineteen on Wall Street 0:14:11.600 --> 0:14:15.160 line from the Bloomberg Interactive Broker Studios. This is Bloomberg Daybreak. 0:14:15.200 --> 0:14:18.160 Want to turn right back to this market action this morning. 0:14:18.200 --> 0:14:20.840 Patrick Palfrey is with US senior equity strategist and co 0:14:20.960 --> 0:14:24.800 head of Quantitative Research over at Credit Sweez Patrick. It's 0:14:24.880 --> 0:14:27.120 great to have you back with us on Bloomberg Daybreak 0:14:27.120 --> 0:14:31.200 because we're watching sort of a stabilization now in futures contracts, 0:14:31.200 --> 0:14:34.720 though the NASDAC is still moving lower after the UH 0:14:34.840 --> 0:14:38.280 move into a correction. Now for the Tech Heavy index, 0:14:38.760 --> 0:14:41.120 where is this going from here? Does this sell off 0:14:41.160 --> 0:14:44.640 have further to go? Well, thank you for having me. 0:14:45.160 --> 0:14:47.920 And in terms of what we're seeing for the NAZAC, 0:14:48.000 --> 0:14:49.760 I think we're going to continue to see a little 0:14:49.760 --> 0:14:53.440 bit of pressure for technology stocks and for high pe stocks, 0:14:53.440 --> 0:14:56.520 and those stocks are primarily found in the NASTACK. But 0:14:56.600 --> 0:14:58.960 I think there's plenty areas of the market where the 0:14:58.960 --> 0:15:05.440 backdrop remains quite healthy, and there I'm talking about cyclical groups, energy, materials, 0:15:05.480 --> 0:15:09.320 industrials and financials areas where you have valuation support in 0:15:09.320 --> 0:15:12.320 the growth prospects still remain quite strong. So I think 0:15:12.320 --> 0:15:14.960 it's going to be a bifurcation and performance for the 0:15:15.200 --> 0:15:18.240 for the next several months given that backdrop. Of course, 0:15:18.240 --> 0:15:20.800 you've probably heard the comments by now from Jeremy Grantham 0:15:20.800 --> 0:15:23.720 over a GMO saying that we're in a super bubble 0:15:23.840 --> 0:15:26.200 and not even the FED can stop what he sees 0:15:26.240 --> 0:15:30.240 as a near fifty percent plunge for the SNP. What's 0:15:30.280 --> 0:15:34.200 your reaction to that, Well, we we don't really see 0:15:34.320 --> 0:15:36.560 the data the same way, And I think what it 0:15:36.600 --> 0:15:39.600 comes down to is how you look at valuations for 0:15:39.640 --> 0:15:41.440 the benchmark, and I think a lot of investors are 0:15:41.440 --> 0:15:46.640 really focused on valuations. Evaluations look expensive when you put 0:15:46.680 --> 0:15:50.040 into consideration, you have a lot of very expensive companies 0:15:50.080 --> 0:15:52.000 in certain portions of the market, and that's where a 0:15:52.000 --> 0:15:54.280 lot of the concern is. When you take a step 0:15:54.320 --> 0:15:56.800 back and you look with a more broad brush, the 0:15:56.840 --> 0:15:59.480 fundamentals remain quite strong. We have a GDP that's going 0:15:59.520 --> 0:16:03.280 to grow with long term average, with a backshop with inflation, 0:16:03.320 --> 0:16:06.800 which is pricing power to companies that to benefit. And 0:16:06.840 --> 0:16:09.080 we have an inflation and we have an interest rate 0:16:09.120 --> 0:16:12.680 backstop that remains very low, which is providing little alternative 0:16:12.720 --> 0:16:15.960 for investors to move into equities. So I don't necessarily 0:16:16.000 --> 0:16:19.000 see it broadly as problematic, but there are certain portions 0:16:19.040 --> 0:16:21.400 that that it will be an issue though. There is 0:16:21.440 --> 0:16:23.360 a lot of concern I think in the market about 0:16:23.400 --> 0:16:24.960 what the FED is going to do, what it could 0:16:25.040 --> 0:16:28.000 signal at its meeting coming up next week, a lot 0:16:28.080 --> 0:16:31.400 of speculation that we could see a first rate hike 0:16:31.480 --> 0:16:33.600 as soon as March. What's your view on what the 0:16:33.640 --> 0:16:38.200 FED could come out with at its January meeting. Well, 0:16:38.240 --> 0:16:40.720 I think ultimately what we're looking for is the pace 0:16:40.800 --> 0:16:42.880 of which they're going to begin to raise rates and 0:16:43.040 --> 0:16:45.400 putting that in the context of the current geel curve. 0:16:45.760 --> 0:16:47.360 I think at the end of the day, that's our 0:16:47.360 --> 0:16:49.840 main focus because we want to make sure that the 0:16:49.960 --> 0:16:54.120 FED has the ability to move into ultimately stem inflation, 0:16:54.760 --> 0:16:57.600 but we don't want to see them actually push rates 0:16:57.640 --> 0:17:01.000 too high ward, curtails financial conditions and pushes into recessions, 0:17:01.040 --> 0:17:03.480 so they have a delicate balancing act ahead of us. 0:17:03.840 --> 0:17:06.040 Putting it in the conscious, the yield curve is really 0:17:06.040 --> 0:17:08.240 what we're focused on and kind of judging their commentary 0:17:08.280 --> 0:17:10.639 and how fast that they're willing to move. What's your 0:17:10.720 --> 0:17:14.240 view on where the yield curve could go from here, Well, 0:17:14.320 --> 0:17:16.760 ultimately I expect the yel curb to continue to flatten, 0:17:17.080 --> 0:17:18.960 and it's really just a function of the fact that 0:17:19.000 --> 0:17:21.240 if that is going to be in raising rights, it's 0:17:21.280 --> 0:17:25.240 not problematic, although many often view it as a recessionary signal. 0:17:25.720 --> 0:17:28.439 Um I think Ultimately, what it just depends on is 0:17:28.520 --> 0:17:32.840 how they can you know, really balance um. You know, 0:17:33.640 --> 0:17:37.040 the calming inflation, but yet at the same time allowing 0:17:37.119 --> 0:17:38.920 the economy to continue to run. And a lot of 0:17:38.960 --> 0:17:40.679 the factors which are driving in place room right now, 0:17:40.720 --> 0:17:43.280 such as labor we would an incredibly tie labor market 0:17:43.600 --> 0:17:45.640 and the fact that an interest rates are really low, 0:17:45.680 --> 0:17:47.600 which is driving housing, some of those are gonna be 0:17:47.640 --> 0:17:51.000 difficult for them to contain credit. Suez is one of 0:17:51.000 --> 0:17:54.680 the most bullish firms on Wall Street. Patrick, what would 0:17:54.680 --> 0:17:56.919 it take for you and your team to change your 0:17:56.920 --> 0:18:02.520 mind on the bullish outlook for stocks? Well, ultimately, what 0:18:02.680 --> 0:18:04.640 is leading us to be as bullish as we are 0:18:04.920 --> 0:18:08.680 is how positive the underlying backgroup is. That includes real 0:18:08.760 --> 0:18:11.560 economic growth, like I said earlier, growing double the long 0:18:11.680 --> 0:18:15.119 term average, and the fact that inflation um is a 0:18:15.119 --> 0:18:17.840 benefit to a lot of companies. You know, should inflation 0:18:17.920 --> 0:18:21.000 remain high and that begins to erode demand, so we 0:18:21.040 --> 0:18:25.280 see real economic estimates begin to slide, that would cause 0:18:25.400 --> 0:18:27.720 us a level of concern and I think it would 0:18:27.720 --> 0:18:30.240 be problematic. And then I think the second area where 0:18:30.240 --> 0:18:32.960 we would see an issue is if is if interesting 0:18:33.000 --> 0:18:36.399 to actually um you know materially fall from here and 0:18:36.400 --> 0:18:37.919 and it's not an issue that we see this on 0:18:37.920 --> 0:18:39.920 the table at the moment, but it would signal an 0:18:40.000 --> 0:18:42.879 unhealthy backdrop, and I think that would be somewhat problematic 0:18:42.920 --> 0:18:45.960 for stocks. In our last minute here, Patrick, I think 0:18:45.960 --> 0:18:50.760 you mentioned UH move toward more cyclical stocks as as 0:18:50.800 --> 0:18:54.760 a strategy. What are some surprise moves that you're that 0:18:54.840 --> 0:19:00.440 investors could make to whether the outlook going forward? Well, 0:19:00.480 --> 0:19:04.040 I think right now we have a um some of 0:19:04.119 --> 0:19:07.280 a commodity boom that's taking place in light of just 0:19:07.320 --> 0:19:09.480 the robust demand that we've seen in the bathroup. So 0:19:09.520 --> 0:19:12.720 I think UH, energy prices, I think a lot of 0:19:12.760 --> 0:19:15.000 materials prices. I think we have a lot of upside 0:19:15.040 --> 0:19:17.440 left in those areas, and I think that is underpinning 0:19:17.440 --> 0:19:20.480 the success that we're seeing those companies driving pricing power 0:19:20.560 --> 0:19:24.080 and really helping gain operational leverage for a lot of 0:19:24.080 --> 0:19:27.400 these companies, something that wasn't there three and five years ago, 0:19:27.440 --> 0:19:30.920 and I think oftentimes left those sectors for dead. Really 0:19:30.920 --> 0:19:33.560 appreciate this, Patrick, thanks again for coming on with us early. 0:19:33.600 --> 0:19:37.120 That's Patrick Palfrey's senior equity strategist CO had of Quantitative 0:19:37.119 --> 0:19:41.520 Research over at Credit Suez and right now SMP futures 0:19:41.560 --> 0:19:44.760 are little changed to the upside. Doubt futures up fifty 0:19:44.760 --> 0:19:47.880 five points. Danstack future is still lower. They're down by 0:19:47.920 --> 0:19:50.560 almost thirty five points. The tenure Treasury is up four 0:19:50.640 --> 0:19:53.560 thirty seconds, the yield one point seven percent, and the 0:19:53.640 --> 0:19:56.280 yield on the two year right now one point zero 0:19:56.400 --> 0:20:01.680 two percent. Stay with us. You're listening to Boomberg Daybreak 0:20:07.560 --> 0:20:10.639 Bloomberg eleven three oh cold weather partly Sunday Today. Hi 0:20:10.760 --> 0:20:12.000 is only in the low twenties, will be in the 0:20:12.080 --> 0:20:15.320 upper twenties by tomorrow. Sunday war clouds than sun. High 0:20:15.320 --> 0:20:18.960 in the low thirties. Right now fifteen degrees in Central Park. 0:20:22.240 --> 0:20:26.800 Broadcasting live from the Bloomberg Interactive Broker Studio in New York. 0:20:26.920 --> 0:20:31.560 Bloomberg E Living Freedom to Washington, d C, Bloomberg to Boston, 0:20:31.680 --> 0:20:35.080 Bloomberg one O six one to San Francisco, Bloomberg NAM 0:20:35.160 --> 0:20:38.439 sixteen to the country, Sirius XM CHADO one nineteen and 0:20:38.480 --> 0:20:41.879 around the globe, the Bloomberg Business at and Bloomberg Radio 0:20:41.960 --> 0:20:51.320 dot Com. This is Bloomberg Daybreak. It's five thirty on 0:20:51.320 --> 0:20:54.440 Wall Street. Good morning. I'm Nathan Hagert and I'm Karen Moscow, 0:20:54.560 --> 0:20:56.920 and we're just about four hours away from the open 0:20:56.920 --> 0:20:58.639 of US trading. Let's get you up to date in 0:20:58.680 --> 0:21:00.479 the news you need to know. At this hour. We're 0:21:00.520 --> 0:21:04.160 seeing more tech weakness following yesterday's a late day sell off. 0:21:04.200 --> 0:21:07.080 We get the very latest live, but the Bloomberg's John Tucker, 0:21:07.200 --> 0:21:09.600 John Karen that has that correction let's started this week 0:21:09.680 --> 0:21:12.560 has gotten worse after yesterday slide. The Tech heavy index 0:21:12.600 --> 0:21:15.760 now down close to twelve percent since it's November high, 0:21:16.160 --> 0:21:19.280 and the list of investor concerns is growing markets face 0:21:19.359 --> 0:21:21.639 of one two punch of FED rate hikes and the 0:21:21.680 --> 0:21:25.400 possible reduction of its eight point eight trillion dollar balance sheet, 0:21:25.720 --> 0:21:29.080 and earning season so far has been uneven, highlighting the 0:21:29.160 --> 0:21:31.320 risk that may fail to do the heavy lifting for 0:21:31.400 --> 0:21:35.240 stocks when the Federal Reserve ends it's stimulus You New York. 0:21:35.280 --> 0:21:38.639 I'm John Tucker, Boonberg Radio and John. Adding weakness to 0:21:38.640 --> 0:21:40.959 the tech sector this morning is Netflix. The shares are 0:21:41.000 --> 0:21:44.520 down twenty one percent this morning on disappointing subscriber growth. 0:21:44.600 --> 0:21:47.359 We get more from Bloomberg Intelligence, Tech and media analysty 0:21:47.440 --> 0:21:49.600 to run and nothing. The sheet was kind of looking 0:21:49.640 --> 0:21:52.760 more at a first quarter editions of about six point 0:21:52.760 --> 0:21:55.000 to six point three million, which would kind of then 0:21:55.040 --> 0:21:57.840