Bloomberg Markets: The Close 01/18/2024

Bloomberg Markets: The Close 01/18/2024

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Clinging to optimism. Live from Studio two here at Bloomberg headquarters in New York, I'm Romaine Bostick and I'm Scarlet Fu. We're kicking off to the closing bell here in the u.s. remain talks about clinging to optimism. The s&p 500 clinging on to gains. This would mark the first advance this week, this holiday shortened week. And you are seeing big tech lead the way with the nasdaq 100 up 9/10 of 1%.

The chip sector getting a boost in particular thanks to tsmc's outlook. We're looking at the two year yield moving down slightly by two basis points. This is, of course, the tenor that is most sensitive to Fed policy. The yields spiked after the jobless claims report this morning after yesterday surging 14 basis points on hotter than expected retail sales. It's gone from 5.2% in mid-October to as low as 4.1% last week. So all over the place. And finally, we're taking a look at WTI nine EX crude up by two and a half percent climbing on rising Middle East tensions with the U.S.

striking more than a dozen Houthi muscles, missiles, while Pakistan, of course, is carrying out a retaliatory strikes in Iran. So a lot to keep track of remain. All right. But let's go back, of course, to what is actually a big move in the market today.

And that is a big day once again for, well, big tech. That is the bright spot today. And after a years long slump and demand for new tech hardware, the latest earnings report that we got out of Taiwan Semiconductor, well, it suggests a recovery for smartphones and computers. CEO telling investors that Tsmc's

businesses have bottomed out and he sees a healthy growth in the year ahead. And it's not just bluster. Just last week, the Semiconductor Industry Association, they estimated that chip sales posted their first monthly increase after more than a year of declines. That is the bright spot, and that's a big reason why you're seeing the Nasdaq 100 outpacing the rest of the market by a factor of at least 4 to 1. And the Philadelphia Semiconductor index is outpacing the Nasdaq itself by 3 to 1. In fact, chip and chip equipment companies are projected right now to post the biggest year over year earnings growth among any other sector subsector in the tech space.

That's according to Bloomberg Intelligence. Of course, a lot will still depend on the economy and, of course, the path of interest rates. But Blackstone CEO Steve Schwarzman, he told Bloomberg earlier he already sees those animal spirits returning to the markets. Now, the case for animal spirits may be bolstered and, well, quite frankly, maybe even tempered just a bit by the unexpected drop an application for U.S. unemployment benefits. We got that data this morning. And while we always have to include that

a little asterisk that the weekly jobless claims report tends to be very volatile, the smoothed out four week moving average still confirms a trend, Scarlett having now dropped to the lowest level in 11 months. All right. So let's take a look at how that all illustrates out. And the subject line really says it all. U.S. labor strength. The number of people filing for unemployment benefits fell last week to 187,000. That was a number that was below all the estimates in a Bloomberg survey of economists and, by the way, also represents the second lowest reading since the 1960s.

So chalk one up, a big one up for those in the soft landing or no landing cap. Now, when you look at the unadjusted figures, it appears companies are less willing to let go of employees than in the past. We've actually we're actually at the seasonally weakest point of the jobless market. So there's always a spike right around

January of every year. But since the pandemic, as you see, it's been a series of lower highs remain. All right. So you asking Joining us right now to help kick things off to the close, she's head of U.S. macro over at CNY Mellon here in studio

to weather. Sonja, great to see you. Thank you. Everyone is focused right now on macro conditions. Everyone is focused on the narrative of the Fed cutting rates or maybe just staying the course of where it is right now. You take a look at that trend line in the job market, not just the weekly jobless claims numbers, but all these labor market data points we've gotten. They still seem to suggest a much

stronger labor market than the market the financial markets are given credit for. Well, yes, I would agree with that characterization. That said, I do think the Fed has done a reasonable job over the last couple of years bringing down demand and, you know, bringing down job openings, for example, without actually unemployment coming up too much, which is consistent with the soft landing story that the markets are pricing right now. So do we not need to be worried about the potential for a recession this year? Well, we would think that, yes, it's just not actually our central scenario. Our central scenario for the US is a

soft landing scenario. What is the likelihood that inflation will start to pick up in a way that people aren't expecting? I mean, we are, of course, very mindful of the move higher in oil prices and in shipping prices because of exhaustion as shocks taking place in the Middle East. But what are you hearing or what are the what are the areas of concern when it comes to other prices moving up? Sure, sure. Those exaggerated shocks, mind you, seem to be never ending in the cycle.

It's consistent. Exactly. But outside of that would think, you know, there's definitely around this central scenario that we just discussed, a soft landing that tails definitely appear to be fatter than usual. And one of those is the upside risk there. Inflation does reaccelerate because the labor market is still strong and because some of.

Those supply side factors that have been weighing on inflation more than we had expected may in fact be weak. What about the rest of the world? Because Europe is, of course, contending with inflation, so is the U.K. and they're looking to cut rates as well at some point as inflation does slow down. But there is that risk again, of all these supply shocks. Yeah, we do think that international divergence is one possibility this year for sure.

The US was more resilient last year and so far it appears that that trajectory is intact for 2024. I am curious, I mean, as we get deeper into earnings season here, there is a lot of optimism about what we're going to see out of those numbers. Certainly on a year over year basis, you're going to see some improvement. But even longer term, when you compare it to longer term trends, it's still a pretty healthy setup, assuming that these numbers do come to fruition here. If that is the case, is there a case to be made of gravitating to a much broader pool of potential stock picks, or do you stay kind of in that big tech large cap space because that's where the growth is and more importantly, that's where the safety might be? I think that's a really, really important question for 2024 and maybe perhaps because I'm an economist to me harks back to what the Fed ends up doing, how much they end up cutting, how soon they start cutting, because for those, as we discussed in here before, for those smaller caps, actually credit is quite a provision is very important and they're suffering more from higher rates. So the more the Fed cuts and the sooner the Fed cuts, the more helpful it would be for smaller cap.

Did you always want to be an economist or was that like a dream of yours when you were a little girl? You know, actually, I was born in Russia, and economics in Russia is a very important topic. I remember inflation and in a very different scale than we experienced in the last couple of years here. So, yes, I got interested in the early hair pulling we've been doing about our brief nine flirtation with 9% CPI. That's nothing compared to what you saw. Well, try 25%. No, no. How about that? I know. So this idea of getting back to 2% is,

you know, just the scale is does not compare. Well, you know what, though, does come back to expectations. You don't want people starting to buy gold and putting gold bars under their pillow because they don't know what to expect from inflation.

Yeah. Now, that's a really good point. I mean, when when it comes to inflation, though, there is this idea and it goes back to expectations that things will as everything normalizes, we'll go back to a pre-COVID normal, even when it comes to price increases. That's wrong, isn't it? I mean, your one of your takes is that people are going to have to adjust that. And it's not necessarily bad for stocks

either. Yes, we would agree with that view, because it does seem that structurally things may have changed on the labour market side and on the supply side in general going forward. You know, this could be coming from geopolitical risks that we discussed being elevated from green energy transition, etc.. That said, we do have potentially AI derived productivity gains coming down the pike as well over time. So I think that uncertainty around

inflation expectations has risen and it does appear that market pricing actually reflects that. All right, Sonia, always great to talk to you, Sonia, and helping us get this off to the close. Head of U.S. Macro over at the NY Mellon. A lot more coming up here on the program, including a closer look at Apple suffering from two downgrades in the last couple of weeks and now getting an upgrade over at Bank of America. The upside from the Vision Pro. We're going to break down all of the recent Apple news with Dan Ives over at Wedbush. Plus, the chief negotiator, negotiator of SAG-AFTRA, Duncan Crabtree, Ireland will be joining us from Davos.

He'll share his views on AI and the labor market. And extreme winter weather right now hitting the Northeast and hitting Amtrak. Dozens of cancellations along the assembly line. We're going to sit down live with the president of Amtrak about the disruptions, the short term disruptions, as well as some of the long term issues when it comes to climate change. All that and more coming up in a bit. This is the close on Bloomberg. And.

This week, Bloomberg is live at the World Economic Forum annual meeting in Davos, Switzerland. As markets anticipated dovish pivot by central banks, policymakers grapple with two wars on the global stage, and A.I. continues to dominate the tech headlines. Trust Bloomberg for the fastest coverage and exclusive analysis from the world's top leaders and experts. Continuing coverage this week only on Bloomberg Television and radio. All right. Taking a look at shares of Smith Douglas

Homes, You may not have heard a whole lot about it, but it's actually one of the biggest IPOs we've had so far this year. Investors welcoming that debut. And maybe it's a sign that the IPO market is finally showing some sort of stability. Having raise $162 million on its first day. SMITH Douglas is dispelling fears that it would mirror recent underperformance, but some of the IPO is out there. Let's get right to Amy or who helps

cover this for us here at Bloomberg News. And we talk about the performance of the secondary IPO market, meaning that once those companies come to market, we saw a lot of big names last year and they had decent debuts. But of course, within the next few days, that sort of luster sort of really sort of waned. I'm curious as to whether there is a different set up now that the appetite not only for the new issue, but more importantly, the secondary market is going to be there to support a healthy IPO market? Well, it's a New Year's, though, is a new page. So asset managers will have like a fresh capital and fresh capital pool to play with. So everyone is eager to actually play with both the primary issuance, but also the second secondary issuance as well.

So hopefully this is going to be the year where things are going to normalize, but we're seeing a very slow start. As you mentioned, Douglas is the first, which is the largest so far. But right now, Bright spring is raising money. So that is going to be around $1,000,000,000 in stocks. But also there is going to be like mandatory convertibles that are also like $400 million. So that's going to be big. And also, Amer sports is coming. So like there is a good pipeline that is

coming. So hopefully it's going to be a steady flow of IPOs to come. And also in the secondary market, there's a good pipeline. But as Romain mentions, the performance

in the secondary market weighs on people's minds. How are investors feeling about that? How is that playing into whether they're going to take a flier on any of these names? I kind of feel like everyone is thinking about 20, 23 kind of class of IPOs almost as an anomaly. And also it's kind of like in the back burner now. So everyone is looking forward. So hopefully this year is going to be better and everyone is like looking at the comparison between the performance of IPOs last year compared to the broad market rally, especially when we see the S&P has rallied so much, the NASDAQ is rally a lot more. So essentially, when you think about

putting money to IPOs, they want to actually have that boost and not not only just a tiny boost, but also outperformance in the market. Yeah, Yeah. So they don't do that. So it's kind of hard. But right now the market is going for

the slow and steady first because at the end of the day the IPO market is very jittery. So everyone wants the sentiment to actually kind of build up to the point that they can actually get riskier tech companies to come. So that's the reason why right now all the homebuilders, like the people or the companies that have like strong cousin, I'm curious about, too I mean, because. Smith Douglas, I mean, no offense to them, it's quite a household name, a good bet. But some of the household names I was just taking a look at Birkenstock, which everyone knew, and that's now trading back below its IPO price.

It gets to the question as to what's the quality, the potential quality of the companies that could potentially come to market. Are we talking about companies that are going to already have profits and have a growth story or is this. Buy it now and wait for four or five years until it becomes actually profitable? I think Birkenstock is also a very interesting case where a lot of people are thinking about as in like whether it's overpriced in a way, because right now, like it's actually doing pretty well.

I think it was up like 8% or so. So even though it like today is kind of come down slightly, but essentially right now is everything is larger size so that all the bigger Etsy managers can participate. Definitely profitable or with a with a site to profitability. Those are the ones that people have confidence to put money to. This is not the time to put anything that is risky to put to the market at the moment and test the market. So just comfortable shoes.

Now you look like I said. I mean, Scarlette bought like 20 pairs of these that didn't even move the share price. So I don't know what we can do. She's holding up buoying.

The share price is not going further down just because of her. To be fair, Birkenstock is now forecasting revenue of 18%. It's just that people expected a lot more than 18% given where the stock was priced. All right Amy or thank you so much, Amy. We're covering IPO's for us and leading that coverage. All right. Coming up here on the close. More conversations from the World economic forum in davos.

We're going to hear from the new CEO of Morgan stanley pick about m&a and the fed's path for interest rates. This is the closed. All right. When it comes to mergers and acquisitions, Morgan Stanley CEO Ted Peck says his firm has enough organic growth without it. He shared his thoughts with the host of Bloomberg Surveillance out at Davos at the World Economic Forum.

Stuff is going to come across the transom. I'm not sure we need to be in a rush because again, we don't have sort of the victory's curse. I think we just sort of do these things. I think there's enough organically. But I'm glad you mentioned Lisa, because I think when you talk about five or ten years and you think about the amount of aggregation and transparency of wealth outside the U.S., particularly in Asia, you know, we're 22% owned by our friends at Mitsubishi who literally saved us during the financial crisis. I've been going a lot to Japan.

I go every quarter, we double down on Japan. Imagine just a sort of like a vision thought. Imagine wealth in Japan 5 to 10 years from now when you come off the zero rate, you know, the zero barrier. Asset allocation, wealth, opportunity, investment banking is one example of a of the kind of place where we could do extraordinary business. We had a bank CEO earlier this week who just said it out loud. Investment bank has been in recession for the last couple years. It's been really, really tough.

Can that end without rate cuts from the Federal Reserve? Can we end that IP recession given what you see in the pipeline? I hear you guys talk about this every morning. And once when I said we don't know, who knows? I think the path is probably that inflation's passed. But, you know, there's a tale. There's a five or 10% probability. They do 50 in March, not 25, 55 to 10%. Right. It's 40 to 60% to 25 March. There's also, if you price an exotic 5

to 10% possibility that we have another hike in us. I kind of did that check thinking of you two guys because it is possible that we either because every time the Fed talks about it right as they did in the reverse in the teens, you know, it would tighten up and they didn't go. Now it's they talk about it loosens up. It's like, okay, we don't want to have the inflation the Arthur Burns bit. We don't want it to get away from us. So we're going to we're going to do it when we're ready. I think the big picture, though, is they're going to start lowering at some point when they're ready, they're going to be prudent, they're going to be thoughtful. And that kind of predictability is very

good for the core investment banking business because you have these financial sponsor portfolios that have been locked up. They need to be liberated. Some can go in continuation funds, some can go to other sponsors, but some have to go public or be sold. And then the corporate dynamic was folks are ready to get going. Then with three years of pandemic, there's always going be election, there's always going to be macro. But I think the core investment banking activity that we have known with real cost of capital, traditional corporate finance like the mid-nineties is going to come back.

That was Morgan Stanley's new CEO, Ted Pink. We want to continue the discussion on banks, broaden it out to the overall banking sector with David Traynor. Now he is CEO of New Constructs. And David, I look at the KBW Bank index and it fell 4.8% last year.

It has a trailing PE of 9.45. And in terms of the members that gained last year, the big banks are there. Jp morgan Chase, Wells Fargo, Citi, each gaining at least 20%. What's priced into bank stocks right now as we think through the various scenarios that could play out this year, it depends on which dang stock you're talking about. If we're talking about Jp morgan, we're showing a stock that implies a permanent decline in profit around 20, 30%. So there's a lot of upside if market

expectations just believe or just get to the place where Jp morgan maintains its existing level of profitability. You can't say that about Citi or Wells Fargo. You can say that about some of the smaller banks. Zions is one of our favorites. It's also priced for permanent profit decline. So I think the answer and fortunately it's not that easy.

It depends on which bank you're talking about. Absolutely. And Jp morgan Chase, by the way, is your favorite stock in the financial sector. What's more likely to happen, do you think, David, Jp morgan, losing some of its shine or the other big banks closing the gap with it improving? I think it's probably more the other banks closing the gap a little bit because they've really been stumbling around for a long time. I mean, how many more scandals can we expect from Wells Fargo? Like, I mean, how just how deep is that rabbit hole goal? A rabbit hole go. And when did they start kind of getting their act together? And we think Citi Citi's actually actually shown some serious improvement already in getting its act together. They've got you know they know what act

to follow. So I think it's only a matter of time for those banks to catch up and the valuations imply that they will. It's really just surprising to us that the valuation of Jp morgan remains so cheap. Yeah, and I'm sure Jamie Dimon has pretty much made that clear as he did on the conference call. He also thinks it's a little cheap as well. It gets to the question, though, when we talk about the competition between these banks, I know we all sort of lumped them in at least the big five all kind of together, but they all seem to be kind of to a certain extent, either deliberately or maybe inadvertently moving in different directions in terms of the strategy, in terms of the type of businesses they're chasing here.

Is there an argument to be made that the traditional financial bank, big money center bank as we know it, that that model may not be long for these days? I think it's much more possible that the regional banks are going to kind of be sort of phased out as they just can't keep up on the scale front at the big money center bank. I just don't see it going away. I mean, you know, there are a lot of new technologies have been sort of threatening the legacy financial system structure for a while. But, you know, not a lot of that has come to fruition. We've been saying for a long time we think it's more likely that the big banks adopt those technologies and incorporate them and use them to their advantage. They've certainly got the war chest to

go and buy those technologies or buy the firms that are creating these technologies and put them to use. We think there's more likely, you know, at the end of the day, remain. I think it comes back to distribution. And these big banks just had that distribution that is effectively almost impossible for the smaller ones to try and replicate. And at the end of the day, it's the distribution that matters.

Okay. Well, then I'll flip that question around then back to the regional side of it here as to basically, do we have too many of those smaller and regional banks? Is there a consolidation, meaning do they get folded into other banks or do they just wither on the vine and eventually disappear? I think you're going to see that the weaker players kind of disappear and fall out. And that may mean some cheap acquisitions for the stronger players. So there'll be some consolidation because, you know, as it is with most companies, even if it's not going to survive, there some good parts, even if the bad parts outweigh the good parts and some will come along and pick up the pieces.

You know, as we've seen some of the bigger banks do over the years as well, I mean J.p. Jp morgan has certainly been the beneficiary of taking some other financial firms out of receivership and getting assets for pennies on the dollar. I think that's good that we're going to see more of that. But ultimately I think it leads to who are the bigger firms at the bigger scale are the ones that are left standing. David we mentioned how JPMorgan Morgan

Chase is your favorite financial stock. What, within the regional space, regional banking space is your favorite name? Zions. That's that's one we've been we like for for a while. We think that they've got among the strongest balance sheets, highest level of profitability, highest margins, not a lot of concentration in commercial real estate, which is great. And then a really cheap valuation. I mean, the valuation for Zions I think implies something like a a part a permanent 40 or 50, maybe 60% decline of profits. So it's really priced effectively to go

out of business almost. And so we think that that's good risk reward. All right, David, always great to talk to you. David Traynor, CEO over at New

Constructs, a breakdown here of some of what we've seen in the bank. And really, I'm really much more fascinated, Scarlet, by this idea of sort of what our banking sector, least here in the U.S., is going to look like, I don't know, ten or 20 years down the road.

Is it going to basically be we're going to have no options other than Chase and Citi Bank and or are we or we're going to have a broader array of regional and smaller banks. And I mean I mean, we're kind of the same generation. I mean, those banks, at least where I grew up, they were huge. I mean, you weren't if you were a small business or medium sized business, you weren't getting the loan from a big money center bank. You had to go to the regionals. Absolutely. They had the presence, you know, in your

neighborhood. They had the connection with you that the big banks weren't interested in doing. And you can make the argument that a bank like Citibank is moving away from that. They're closing down and they're really focusing on some of the more wholesale businesses. Yeah, and they've made that clear. But what happens if you also start to see maybe JPMorgan gravitating away from that and the other shoes that left with a we're just gonna be left with Wells Fargo and make America and maybe some of the super regionals. Yeah yeah that may very well be the

case. All right well that could potentially give us something to talk about for the next few years. Scarlet Fu. But at least for the next couple of hours, I'm going to continue to focus on the markets. Stick with us here. We're going to break down some of the

action in the commodities space when we come back after the break. Romaine Bostick alongside Scarlet Fu. This is the closed on Bloomberg. This is the countdown to the close, just about 230 here in New York.

Green across the screen for the equity space and quite a bit of green going on in commodities as well. Let's get right to Abigail Doolittle, who's standing by with our commodities clothes. Abigail Indeed, Romaine and Scarlet, we do have some green on the screen for commodities near session highs. The Bloomberg Commodity index about half

a percent. New York crude, you can see up 2.1% on continued and heightened tensions in the Middle East. Heating oil futures, not surprisingly higher, up 1.5%. In fact, most of the energy complex is higher. But heating oil futures, I say that because of the cold weather here in the U.S., gold futures up about 8/10 of 1%. Wheat reversing a decline from earlier,

now up about 3/10 of 1%. There are two exceptions. One of them, though, to this green on the screen, one of them is natural gas. We, in fact, have natural gas down four, I believe it is a third day in a row.

Yes, three down days. And you can see it's a pretty significant decline, almost a bear market in three days. Now, of course, natural gas is wildly volatile. Part of this decline has to do with be likely to delay the start up of the Golden Pass LNG terminal. It could mean a drop in gas demand and

increased storage volume. Speaking of that, Ramin, inventories today, they were more than expected. The withdrawal was less than expected. Stockpiles are basically at above the five year average. All right, our thanks to Abigail Doolittle.

A check on what's going on in the commodities space. Let's go back, I guess, to the labor market and all of the issues that are batted around out there in Davos. Our next guest is fresh off a panel entitled Workers in Focus, and he should know. Duncan Crabtree, Ireland is head of the SAG-AFTRA Union. He's the national executive director and he was the chief negotiator in that union's labor negotiations with Hollywood studios. In fact, he was really at the center of what was probably one of the most widespread spate of labor strikes that we've seen in this country in several decades. Duncan, great to have you here on the

program. And coming out of, I guess, the resolution of those strikes, the new deals that were struck, if you will, are your members, those hundred and 60,000 plus members in the film, television news industry, are they in a better place now than where they were before those negotiations started? Thanks for having me. Remain And Scarlett, it's absolutely the answer to that is yes. Our members are in a much better place in a whole number of ways economically, in terms of significant changes to the structure of the industry that we were able to negotiate for and ultimately achieve. And of course, with respect to I and you know, there were no protections with respect to the use of AI in our contract with the studios and streamers prior to this round of bargaining. And now we have 16 pages of detailed

protections that I think put our members in a much better place. It's not the end of the process. It is going to evolve. There will have to be and will be more negotiations in two and a half years. But it is a really important and real starting point that's very protective. Well, that's what I'm that's what I'm curious about, too. I mean, those 16 pages, we know how fast technology moves, particularly when it comes to A.I. and all the iterations of it.

There are a lot of folks on on other stages at Davos are talking just about that here. How relevant are those six pages going to be? I don't know, a year from now, let alone two and a half years? Yeah. No, I think they will be, because we anticipate, you know, we we've anticipated this. We've been working on A.I. for a number of years. And what we knew is we had to embed the core philosophy that underlies fair treatment in this area.

And that core philosophy was informed consent and fair compensation. And so while there are a number of mechanisms that are built into the contract to actually implement and enforce that, those principles will continue on regardless of newly developing technology or changes in industry practices. I also think that while the technology continues to advance very rapidly, implementation in the industry is going to follow at a slightly slower pace. And part of this conference is every six months we meet with each of these studios to find out exactly what they are doing and what they plan to do, especially with generative AI, so that we have that information in hand and ready to go for continued bargaining over future contract terms. That's really interesting. The fact that you'll be meeting with them regularly every six months.

Do you believe that the trust is there on both sides, given the somewhat acrimonious relationship that the two sides had during the strike? You know, it was a difficult time during the strike. There's no doubt about it. I think that things got way more adversarial than it should have been. We should have been able to achieve these provisions without having to go on strike.

But it is true that it took a strike in order to accomplish it. Having said that, I think we are eager to move forward together in good faith based on the agreements that we've reached. Obviously, we'll be using our enforcement powers to ensure that those contract terms are lived up to. But my expectation is that now with those ground rules set that we will see compliance with those rules and that we will be able to work together to move forward in a way that is more human centered and that's of creative talent. And we should mention that the Screen

Actors Guild recent. He signed a deal requiring consents and guaranteed minimum payments. When your members voices are used or replicated digitally in video games and other entertainment. Can you tell us a little bit more about how that might kind of form the template for other future deals? Yeah, no, I appreciate you asked about that, Scarlett. First of all, let me just be clear.

We are in the middle of negotiations with all the major video game studios, and this is not them here. We are eager to reach a deal with them. We haven't got there yet. We have a strike authorization. I'm hopeful we'll be able to make a deal. But this was a deal with a new AI company called Replica Studios that specifically is focused on using AI technology to create digital voice replicas. And the reason why this deal is so

important is, first of all, it builds on the A.I. principles that we embedded in the studio and streamer agreement that we were just talking about. And not only that, this is a company that's focused in this area. It's made up of A.I. professionals and people who have that kind of technical skill, and they have concluded that they can, in fact, approach this with a sense of ethics and a sense of support for creative talent. So there are provisions in this agreement that I think will be the model for future agreements, including things like enhanced transparency, safe storage provisions with respect to the biometric data and data from the digital replication process, as well as time limitations on the use of these replica. So I think there's a lot to like about that agreement, and it is a step forward in the evolution of these protections.

All right. We'll be looking for other agreements similar to this then. Duncan, really appreciate your joining us. Duncan Crabtree, Ireland, the SAG-AFTRA national executive director and chief negotiator. He, of course, played a critical role in helping actors get paid more and remain. You know who else is getting paid more, according to Walmart. Store managers are going to get paid

more. Your base pay is going up. Yeah, I mean, this is a big deal. I remember they raised the base pay last year for store managers to in most in some cases six figures. They're now also saying that there will potentially be performance bonuses that could be as much as 200% of your base pay here.

And we talk about, you know, what a retail worker would make and whether you're a manager or whether you're down the line here, the amount of money that you could potentially make in that space today is significantly greater than what it was, I don't know, a year or two ago, particularly at Walmart, and especially because Wal-Mart does kind of set the tone. Obviously, not every retailer has the same kind of scale that Wal-Mart does. But, you know, because there's such a fight for talent, it's going to be an issue. We should mention that the base pay for store manager wages goes from 117,000 228,000.

Yeah, And it's interesting, too, because this also feeds into the whole notion of inflation and the Fed's fight against them. Remember, they've been so tapped into wage growth here and it's not over. Right? We all kind of without we're past this. But I think there's Wal Mart, so I know it's just one company, but it seems to suggest that a lot of these companies still need to offer a little bit more to their employees to keep them. It's the biggest employer in the U.S. So there you go. Absolutely.

And of course, as they do, a lot of their competitors will do as well. Stick with us. We'll be back in a moment. This is Denver. Let's get a view from the sell side with our top calls. Big movers on the back of analysts recommendations.

And we start off with Hertz, an upgrade today to overweight overnight. Morgan Stanley analyst Adam Jonas impressed with the decisive action the car rental company has been taking to address what he calls self-inflicted challenges from that large EV fleet. Jonas says the current share price is an invitation for investors who can stomach elevated levels of volatility. Those shares getting bought up today by about 8% here on the day.

Next up, let's take a look at Pinterest, nailing it with an upgrade to buy over at Argus Research. Argus saying improvements in content and personalization as well as Pinterest's deal with Amazon will all drive higher engagement, increase ad prices and ultimately supercharge growth, though shares up 2% on the day. And finally, let's take a look at Apple back in Bank of America's good graces, snagging an upgrade today to buy from hold. The iPhone maker set to begin taking orders for the Vision Pro headset this Friday. An analyst over at Bank of America expect the mixed reality device will actually give a boost to both hardware and services revenue and says that the A.I. features baked into that are poised to be expanded into the iPhone, which should drive a stronger upgrade cycle for the handset. Shares of Apple having a phenomenal day

up three and a half percent. And those are some of our top calls. We do want to stick on Apple here and go out to Dan Ives, the senior equity analyst over at Wedbush. He's got an outperform rating on the stock. And let's get his view here on, I guess, what is going to be the next big new thing for Apple, at least if Tim Cook has his way. That mixed reality headset set to start, I guess, taking orders this Friday. Not quite sure exactly when you get your hands on it, but do you expect to see any sort of a material impact once we get the next earnings results in the following quarter from the release? This is laying the groundwork for the next form factor.

And if you look at vision growth two years from now, we think it's going to resemble sunglasses and be us in 1500 hours. And it's all about tapping the install base Developers are the key here. This is something I think the street's missing in terms of what this is ultimately going to lead to. We believe in a app store announcement

over the next year. I am curious, I mean, in addition to the release of this and I've already encountered some people wearing those new metta, you know, Ray-Ban glasses or whatever you call them. Is this kind of we went through this before with SNAP and of course, with Facebook a few years ago, and it really didn't gain any traction. Is this sort of the moment now where these types of wearables on your face are actually going to have a little bit more traction on for the consumer this time around? Well, and of course, when Apple talks, everyone listens. I mean, you're talking about 2 billion iOS devices, 1.2 billion iPhones. It's all about the apps.

And when you look at why they waited so long, it was about getting the sort of content providers, the partnerships and the apps where this is going to now start to be part of the vision. And I think it's going to form into something that's much more mass market over the coming years. And that's what betting against Apple, it's been the wrong move, right spend against Tom Brady in a Super Bowl. All right. Well, Bill Belichick knows a thing or two about that. Let's move on to Apple's dispute with Massimo, the patent dispute, because we, of course, found out this week that a court ruled that Apple has to stop selling the watches with the oxygen measurement feature while an appeal of the ban plays out. And, of course, that could take a while.

We heard from Mossimo CEO on Bloomberg Technology today. Take a listen to what he had to say. Apple knew their product wasn't good enough to be relied on medically, but literally they said, and this is in 2020 and the middle and the chaos of COVID, this is quotation in their document. If we launch pulse oximetry with our watch, we'll gain market share from Fitbit. If true, not a great look for Apple. I'm curious from you. Apple doesn't break out sales or numbers related to Apple Watch. It's just part of the wearables

business, which I believe made up about 10% of revenue in 2023. Ultimately, how important is this dispute on Apple Watch to its bottom line to the financials? Look, I think this is something that's going to head towards some sort of settlement or compromise out of court, because, look, Apple can't keep having these starts and stops. It is important to the broader vision in terms of where the watch is going in the broader ecosystem and these patent issues. You know, obviously, it's not just the first one. I think you're going to see more of them and it's something Apple is going to have to deal with. But as we've seen with Cupertino, I think it's a small bump in the road and ultimately 3 to 6 months now, it's a non-event. All right, Dan, always great to talk to

you. Dan Ives over at Wedbush. A closer look at Apple. Apple having a phenomenal day, up more than 3% here, getting a bit of its mojo back. All right. Coming up here on the program, we're going to have a discussion here with Rodger Harris. He's the president of Amtrak, the big rail system here in the United States.

He's going to discuss some of the train disruptions that we're seeing because of the winter storms now sweeping the northeast. Also going to get his take on some of the longer term challenges here for the train service as well. That conversation coming up next on the close. This is Bloomberg. I'm. Welcome back to the close. It's time now for our Wall Street Week Daily segment. David Westin, the host of Wall Street

Week, joins us as he does every day around this time. The focus today. David, on transportation here in the northeast, actually, and huge parts of the United States right now are under some extreme cold weather. And it's really started to disrupt

travel planes, trains and automobiles. I only know my little part coming in from Westchester and has been a pain in the neck the last two days because it is very, very cold. But you know who else has had a lot of trouble? People are trying to do that.

CASELLA Yes. On the northeast corridor between Washington and Boston, you've had to cancel a lot of those trains because of the cold weather, in fact, which surprised me, actually. Yeah, I'm always amazed at how that gets Amtrak deals like that. I mean, obviously, we know whether it's a big factor of just obviously have those rails on the ground. But like, how do they sort of create sort of a template for dealing with that and dealing with it efficiently in order to get those trains back up and running? And as we all know, they've had their challenges. We haven't invested in this country

enough, probably in rail for some time now. We've got climate change coming in, so it's not going to get better. Romania thing is going to get worse. I was looking at sort of where Amtrak is located. I mean, they're National rail lines and of course, here in the United States, we have a huge swath of that northeast corridor, as well as those southern lines that are going basically right along waterways. The similar thing out in California. And those waterways are the tracks are sometimes are very close to the waterways. So let's turn to somebody who actually

knows this stuff terribly well. He's Roger Harris. He's the Amtrak president. So, Mr. Harris, thank you so much for being with us. We have been talking about this. I know you had really increased use of

your ear of Amtrak last year. Congratulations on that. At the same time, we do have these problems now with weather today. Could you tell us what's going on, the Excel and why we've got a problem with it? Okay. Thanks, David. Pleasure to be here today.

So, yes, we were talking earlier about the problems we have with water and weather. And it's certainly true that some of the tracks are close to our shorelines, which was a problem a few days ago. And also the cold weather that we've been experiencing this week has been a problem, especially with the older cells, which we're hoping to replace with the new ones coming later this year.

But we want to make sure we run a very reliable service. So we have proactively canceled some services so that the ones that do remain are reliable. And I know you have some ambitious plans for Amtrak. Could you tell us what you need to get in order to be able to do this? I know some billions of dollars have actually been committed just this year, both for bullet trains and also for that northeast corridor. Yeah. So really exciting. We from the idea we had essentially

enough money to replace our entire fleet over the next decade and the new cells are going to be part of that coming up this year. And also we have about $20 billion worth of projects between Newark, New Jersey and New Rochelle, New York, that will, in the coming decade mean a replacement or renovation of eight tunnels and four or five bridges along that 25 mile segment. So looking at long term, though, I mean, as you try to sort of grow this business and it is a business, is this an increase in ridership along existing lines or is there somewhere else outside of sort of the more profitable northeast corridor or some of the lines you have out in California where you can see an increase in ridership? There are the great question. It's really both. So our ambition is to double our ridership to 66 million riders a year by 2040. And that really comes in equal measure

between growing the Northeast Corridor Service, which we just spoke about, doubling that itself, and that involves some of this new infrastructure that I just mentioned and also more rolling stock, some of those new trains that were paid for by AIG. But it also is going to mean expanding service to new markets. Some of those were funded in the recent state of awards that the FAA announced, including programs in California, as you mentioned, and also some really exciting ones closer to home in Virginia and North Carolina. But when you say sort of expanding the infrastructure, because when I hear doubling the number of passengers, I think about not just the general infrastructure of Amtrak, but some of those choke points, of course, getting in and out of New York. I mean, you can have smooth sailing in, you know, the 50 miles or so before you get here.

But then when you get to that last mile, you're talking about, you know, having the right away and something that you don't always have, particularly down there in D.C. as well. So how do you address that? Is that an infrastructure problem or is that more of a political problem and dealing with the jurisdictions to get something opened up? Well, certainly it takes a long time to get everybody to agree to all portions of the of the projects, But you're beginning to see real results of the infrastructure bill and the funding that came from that and previous work. So, for instance, as you leave New York, going towards Washington, D.C. today, as soon as you come out of the tunnel underneath the Hudson, you see this enormous bridge going up on your right hand side, which is the new portal, North Bridge that New Jersey Transit is developing together with us. And you'll see that we're well underway. We're about 40% finished with the new

structure, and that's a great example of where additional capacity will be brought to bear and increased reliability so that we can run more trains and bigger trains through that area, which will help the growth cause. RUSH I'm Chris, about what metrics you follow to determine whether your service is improving or not. For example, with airlines, when we fly, there is on time arrivals.

Do you track that sort of thing for Amtrak? Where are you on that and is it improving? Absolutely. I mean, what I track for big numbers, one is revenue, which is always important because we're under a mandate to make the best use of the taxpayers money and also pay for as much of our operation as is feasible. I track ridership, which is a very important part, another important part of our utility and public benefit.

And that's the thing that really has snap back. We grew almost 25% year over year and actually we're back to pre-pandemic levels in a lot of the country and even higher than that on Northeast Regional Services, we look at customer on time performance. So not really sort of when did the train physically arrive at its terminal because it often doesn't have many people on board by the time it arrives at the last station. But we really look at the on time performance of the typical customer on the system. And then we also look very closely at customer satisfaction. So we have a very elaborate customer satisfaction survey process.

We also have a lot of work that we do on analyzing the data we get from those customers to figure out where the pain points are, what we can do about them. And the really interesting thing is that you can have two customers on two different trains with things like on time performance and look very similar, but their satisfaction is very different. So we're really mining that data today to figure out how we can make the experience as good as possible for the customer. Roger, this has been very helpful. Thank you so much for your time. That's Roger Harris. He's the president of Amtrak. And I know both of us use this northeast

corridor. And so we're rooting for him. Oh, absolutely. I mean, I mean. Then a lot of ways it could be more efficient than flying. If everything is working as it's supposed to working.

And I think the bigger issue too, becomes those choke points too, right? Because like I said, I mean, you have smooth sailing for so long and then you get closer to the direction that you think you're going to get there and then all of a sudden it slows down. That's right. Okay. Tomorrow on Wall Street week, we're going to be joined by Larry Summers. He, of course, is the former U.S. Treasury. And also, we'll talk with Blair Effron of Centerview Partners. That's coming up Friday at 6 p.m. Eastern Time. And you can check David out every day

around this time here on our Wall Street retail segment, at least for one more day as we round out into the final hour of trading here on the close. Stocks actually trying to rebound here after a couple of days of losses. We'll have a full breakdown for you of all the market action when we come back after the break. This is a close on Bloomberg and. And.

Just about 3 p.m. here in New York. This is the countdown to the close. Let's get a view from the top. I'm Romaine Bostick and I'm Scarlet Fu and it looks like a picture outside. It looks so deceptive. Right? Like it looks nice and warm. I know it's anything but.

It's literally like two degrees. I was outside at about 10 a.m. and I was dying. Yeah, but you made it in. Okay, But I made it in okay. Risottos. Yes, absolutely. And if you look at the markets right

now, you know, it's recovered from two days of losses. A lot of green on the screen. Yeah. I mean, it's interesting rebound. And we should point out, I mean, look, this is not sort of the the big conviction rally that I think people want to see. But you talk about a big but 1% gain on

the Nasdaq, 101.4%, to be sure. Here gives you some sense here of where investors heads are at here. It's not back into those cyclical names. It's into the big cap tech names. The Philadelphia Semiconductor index, of

course, outpacing everything up by 3%. And that was because TSMC, I think, kind of saved the day. Right. They basically came out and said, look, all the pain we've been seeing in the tech hardware space, that at least in their view, that's reached a bottom. Yeah, they see growth in 2024 and as a bellwether as the chipmaker to Nvidia and Apple, this is great news for the chip ecosystem.

I was taking a look at a couple of other indices too, particularly if you flip up the board here that track a lot of the Asian chip makers and chip equipment companies here, including the Bloomberg Asia-Pacific Semiconductors Index, as well as the fact that China Semiconductor index here. So this includes Taiwan semi S.K. Hynix, just go Samsung, those names like that there. I don't know if we have the chart here, but we talk about the underperformance that we've seen in a lot of those names relative to the broader markets in Asia as well as the broader markets worldwide. Now, maybe potentially you're going to

start to see a rebound in that space. Time will tell. And of course, ultimately it's not going to be about what TSMC says or what behind it's what say is going to be about what Apple says is going to be about what, you know, the car companies say basically the companies that use their basically make the final product. They're the ones who are going to determine the path and how much demand there is from consumers. You take these apple. No, no, no. Not into that thing.

No, no, not early adopter when it comes to technology. So what else has to be the guinea pig? And yeah, you know, maybe I'll sign on. Okay, I'm not into that. All right? There's got to be some individual movers out there, right? Yeah, absolutely. Let's talk about some M&A in the

homebuilder space. You have MDC soaring right now because Japanese builder, a Sekisui house, is buying it for $63 a share in cash. That's a 19% premium to its last close. Sekisui actually now is the number five

homebuilder in the U.S.. Yeah, I saw this is a pretty interesting deal here. I'm I don't know how this is going to be received longer term by investors here, but interesting move. What else is moving to Humana and it's dragging down the health insurer space.

I was kind of surprised by this. I mean, the numbers were just awful. Yeah, but rising medical costs is not a surprise if you've been to the doctor lately. Okay. Yeah, but I thought they were passing that on to share. Apparently some of it. And some of the air, apparently. Yeah. You can see Humana down more than 9%, down as much as 13% it preannounced.

So the official report doesn't come out till January 25th. But you see all the other health insurers are falling in sympathy. Yeah. Any bright spots?

Yes. Well, actually, no I don't Birkenstock. Oh, but I had to bring it in because I have like 40 pairs going on. They're down for a while. Only 8%. Yeah, only 8%. Well you know they did have their first

earnings report. As a public company, revenue may grow 18%, but clearly investors wanted more back below its IPO price. As we move closer to the closing bell, stick with us. Our coverage starts right now. Countdown to the close.

Bloomberg's comprehensive cross-platform coverage ahead of the U.S. market Close starts right now. This is the countdown to the close. Romaine Bostick alongside Scarlet Fu, we're joined right now by our colleagues Carol Massar and tim sandvik. Welcome to our audiences across all of our bloomberg platforms, television, radio, originals, our partnership with those folks streaming on YouTube and, well, no halo behind Tim, but a relatively bright day right now in the U.S. equity market. Yeah, yeah, yeah, definitely right.

The bulls in charge it feels like and it really feels like in the what the last 60 minutes or so we will get a move to the upside. Having said that jams jellies and gummies are on our mind on this Thursday. I don't know where this is going. Slow your roll when it comes to gummies everybody first up, we're gonna talk about J.M. Smucker. This story actually, Tim it came on his radar. Our own team, Joe Constance, reporting. She got like 5 minutes. She does the series but talked with the head, the CEO of Smucker, Mark Smucker.

He's I think, fifth generation of the family to run the company. But related to the original, I think it's, you know, I think his parents just knew that he was destined to take this job. So that's how it worked out. Smucker, Smucker Anyway, he's talking about core weeks for his employees. So basically you can be in the office

every other week doing like a Tuesday to Thursday. Really? Yeah, This is pretty cool. Pretty cool, right? And it's actually we're in the office three days out of ten days. Yeah, that's right. And you work remotely on Mondays and Fridays and then the non-core stuff and you can actually live anywhere in the country you want. It's on your dime to get to the corporate offices, which are just outside. Out of Cleveland, Ohio.

But you don't have to do that a couple of times a month. And it's says it's working out really well. He says, working really well, being a success. Right. Retention and attracting employees and other companies are contacting him. That's what I like to hear. More interesting. Yeah.

He said, look, there's a difference between what we do and, you know, what the big banks are doing. And he mentioned Jamie Dimon and David Solomon and their return to work. He said, you know, it's not a one size fits all approach, but it's working for us. Do you want to put it in the suggestion box? Well, I don't know. Maybe I'll use this as an opportunity to announce my departure from Bloomberg News. I'll be joining J.M. Smucker as the new host of their Jam and

Jelly Countdown segment. Well, let's talk about gummies, too, because that's a big exercise. I know Romaine is a big, big fan of gummy candy because I've seen him eat it during break.

Does he really? Yes, totally. Oh, he snuck a couple in. Bloomberg visited Haribo. Did he go? That's something new. Yes, I know. Charlotte's lying. No, no, She never lied. Bloomberg visited Haribo, its first production plant in Wisconsin, to make their gold bears their gummy bears.

The video is fascinating, but this is also my favorite candy. So I love this. This is a hard day for me because first I learned the J.M. Smucker has this great policy and I

learned that we sent one of our reporters out to the house. And it wasn't you and it wasn't me here. I don't. What am I here for? Don't answer that girl. What I learned in this is that the flavors they need, we know that they always have different colored gummy bears.

But the flavors are raspberry red, lemon, yellow, orange, orange, pineapple, white and strawberry green. The green is strawberry. Yeah, this is. This is great. As soon as I saw this story, I sent it because there's nice animation and send it to my son to see how they think. I never really knew how these things are made.

2024-01-30 11:12

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