Bloomberg Markets: The Shut 02/12/2024

A subdued start of the week for a lessthan subdued S&P 500. Live from studio to here at bloombergheadquarters in New york, I'm Romaine Bostick know what it feels like.It feels like a summer friday. Oh, does it?Yeah. Volumes like like the ones here.I know. It's very confusing.I'm Alix Steel. We're kicking you off to the closingbell right here in the US. So the S&P did touch another record highand then we kind of faded a little bit here.But again, volumes light, nothing really.

To write home about the Russell 2000though holding on to the gains really interesting and I wonder if when itconfirms some kind of real breakout here.We're going to get some analysis on that in just a moment.A Bitcoin at one point hitting the highest level since December of 2021.So in some ways it is a risk on day and NVIDIA barely breaking even here a 0%move, but it did overtake Amazon in terms of market value today so some riskon but overall really tepid movement into the headline index remain Yeahtepid movement pretty much across the board though there are some pockets ofstrength out there, particularly when it.

Comes to A.I..Another big day for some of those stocks chip maker.AAM rallied 60% last week. It started today with a more than 40%jump intraday that advanced briefly pushed the stock's gains to more than100% in the three sessions since aam released its results just last week.He had tiny competitor nano labs more than doubling in today's session andsoftware imaging company Beemer is up a jaw dropping 800% on news of apartnership with NVIDIA. A little bit more on some of those moveslater in the show as we are going to talk a lot about valuations.We do want to take some time to do that.

Because with elevated valuations in thebroader equity space, a lot of questions now about where we go next.The S&P 500 now trading at 24 times forward earnings amid lofty interestrates and a little demand for cheap edges.There's a big question now out there about the sustainability of the rally, arally that has pushed U.S. stocks higher for 14 of the past 15weeks, a rally, we should say, that has moved the market deeper into technicallyoverbought territory. Breadth is narrowing, momentumdiverging, and sentiment now starting to look lopsided.We're going to check in later today with.

BTIG, the chief market technician for aroad map of some of those technicals and where we might go next.Meanwhile, the market is also keeping an eye on macroeconomic conditions with thebig CPI report due out tomorrow. But based on market positioning, mostinvestors seem confident that disinflationary trend is intact betweencash outflows and capital losses. The combined assets of the ten largestinflation linked ETFs here in the US, they've tumbled by almost half fromtheir peak to around $57 billion today. ALEX That's about the same amount thatwas held in late 2020 before we started to get those big CPI prints to theUpside Year's Super Bowl snacks.

Were they more expensive or cheaper?There's a little there are about the same.They're about the same. OC One year maybe you'll feel betterabout it. And that's where I'm going with thischart. So this is the inflation expectationthree year ahead. We got this from the New York Fed today.The 1 to 5 year was a nothing burger. It just was being in line withestimates. But this is the lowest on record, 2.3,5%. I find this extremely interestingheading into CPI Tuesday, particularly.

When you have the Fed definitely lookingat these inflation expectations like a new miss as a gauge for kind of what todo. Now it's interesting because it doeswind up saying, hey, guys, maybe we do need to wait and see, though.This is in three years. A lot can happen in three years.Bloomberg Economics Romaine was saying that a lot of the downside that we'veseen so far is from supply chain issues resolving themselves, whereas the demandside issues are still really sticky and there's still that strong demand pullwhich could lead to just stickier inflation any way you slice it.Yeah, really being brings up a broader.

Question here, not only just about thestate of inflation, but how investors are positioned around it.Let's pose that question to our first guest as we kick you off to the closehere on this Monday afternoon. Noel Caron, portfolio manager forINVESCO Fixed income. And Noel, let's start there here,because inflation expectations really seem to be oscillating from some folkswho seem to think that the fight is definitely done and other folks whothink that, well, stay on guard. There could be potentially be a newresurgence. Sure.So our view is that the fight is done in.

Terms of, you know, the Fed is donehiking. They're starting to look towards cuts,but they're and they're starting to grow comfortable but not yet confident.So they're not going to you know, March is definitely off the table, probablylooking for cuts midyear or later. But really, you know, bond investorslove CPI. We have CPI Day tomorrow.We're looking, you know, as Alex mentioned, for the within the stickiercomponents, particularly around services inflation, especially because we havehad a bit of a mixed bag on the the wages data recently.So we want to make sure that those wages.

Aren't feeding in through to servicesinflation tomorrow. This gets to the broader questionthough, as well about the direction of rates.And it was funny last week I asked someone kind of about, you know, thenumber of rate cuts around it, and they basically said, you know, it doesn'treally matter if you are of the belief that the Fed at some point is going tokeep them. Let's face it, the consensus is thatthey will the Fed has basically said they probably will hear I would assumethat from a risk reward standpoint, that ends up being favorable terms forstocks, even if you just maybe get one.

Or two cuts as opposed to the five orsix that the market is pricing it. Right.The Fed has definitely made that clear that they are, you know, looking to cutthis year and you don't want to be late to the party, right.Like you don't want to have enough risk on.So we've definitely been we're probably more positioned on the neutral side.We don't want to be under risks here. We are cautious about where we're takingour risks, but definitely agree with you.You do want to be late to the party, You want to be late to the party, but youalso don't want to be early.

I think there's more analogies that Icould go to with that, right.But what I'm struck by is a Fed officials are Fed official just reallyconsistent with that message. We are not there yet.Michele Bachmann spoke earlier. This is what she had to say aboutinflation. I think it's too soon to have anexpectation that or to measure or projectwhen and how much I think we might be lowering the policy rate.I think the progress that we're making on inflation is is very positive.As long as we have continued progress at.

The current policy rate, I think at somepoint it will be appropriate for us to lower the federal funds rate.I don't see that in the immediate future and I don't want to prejudge what ourdecisions might be going forward this year now.Well, how much more do you think the markets need to reprice for the Fed?So the ten year we're looking for a range between 425, 450, and that'sprobably where we would look to add we're not that far, but we definitelythink some more, at least one more cut needs to be repriced a little bit in thefront end. So that's how we're thinking about it.Look, to add to the ten year around 425,.

Really not too far from here, but wethink in the near term the data is going to provide some volatility, some entrypoints where we're looking to add if we get that.Before I let you go, just I know it might sound out there, but do you needto hedge for a reacceleration of inflation?I know that that seems like really far fetched, but Citi was like we're just soone sided at this point that are we missing a trick?Right. Like you need to hedge for it.Tiffany Wilding, which I know Romain and Scarlett we'll be talking to later, alsosays there is a risk of re acceleration.

Are you hedging for that at all?Yeah, we're looking to hedge it through within the investment grade.We're kind of entering into the front end of the market as well as higherquality bonds. We still the problem is valuations arevery tight, right? So we want to make sure that if we dosee a backup in spreads, we want to be well positioned and have some sort oftilt to quality. So that's how we're looking to hedgethat. All right, Noelle, great stuff.Noelle Corum, their portfolio manager for INVESCO Fixed Income, helping uskick you off here to the close this.

Monday afternoon.Coming up, a closer look at the original thing.Diamondback energy surging after agreeing to buy fellow Permian BasinDriller Endeavor Energy a $26 billion deal.We'll talk about what it means for the Western Hemisphere, its busiestoilfield. Plus, our stock of the hour is ARMHoldings. You got shares soaring again today afterlast week's blockbuster earnings. We're going to have the latest.And hot or not, a lot of concerns here about overbought conditions in themarket.

Jonathan Krinsky, chief markettechnician at BTIG. We're going to get his take on whetherstocks are indeed overbought. All that and more coming up in a bit.This is the close on Bloomberg and. And. All right.Second biggest mover in the S&P today. Alex, I don't think I need to tell youit's Diamondback energy, the original FAANG, as I like to call it a big dealhere. I buy an Endeavour Energy closely heldcompany, a $26 billion deal. And I feel like we've heard this beforewhere you have one member of the Permian.

Basin buying another member.This just seems to be that trend of consolidation continuing.Yeah, I just wonder how much ROWE Run road running.Run road, runway run. Right.There we go. There will be left for the M&A scenario.So I like to look at Conoco because Conoco tends to do things a much earlierthan other companies and they're not buying right now.They already did their buying. So I wonder, like, when do we get to theM&A peak? But that said, there's still like abunch of private guys that still can get.

Bought out.We're looking at like the then 14 to 20 there's still left to be bought.And you know a lot about this company, Endeavor, right?I mean, I was kind of digging into the background of the company and thefounder and and obviously a big payday for him.But it gets to the broader question, too.I mean, they kind of characterize it as kind of the last man standing in theprivate privately held companies in that area.Yeah, but he's just one of like 20 of these private guys.So but yes, obviously a nice big payday.

What is interesting, though, is thatinvestors seem to be looking past the debt part of this.Yes, they do have to sit down back, does have to take on debt.They want to reduce it fairly quickly. I think there's questions as to, though,how they're going to do that, reducing their dividend.Do they have to do fire sales? I was listening to the call and theydon't want to do forced sales or anything.They want to be strategic. But at some point, how does that shapeup? Is there going to be a lot of overlaphere?.

Because I saw the shares are up 10%,which typically the acquirer usually doesn't get that gap pop from a deal,particularly one that has to be financed with debt.But is idea that once they complete this deal, they'll find some ways, I guess,to cut the fat, so to speak. So I was talking to Magnus earlier and Isaid it was like a merger of equals. And he laughs, So there's no merger ofequals. But in this particular case, why?I said, I'll just stop you there. We have a boss who very forcefully donot believe in a merger of equals. The reason why I say that, though, isthey literally have headquarters across.

The street from each other.If you take a look at the map of the acreage endeavors like smack in themiddle of what Diamondback has. So there is a lot of synergy from thatway. They're going to expand their boardmembers, They're still going to have some endeavor, people involved, etc.And there's no like technological advantage, like Exxon is going to bringsomething very specific to Pioneer as well.Same thing for Chevron to Hess. There's no special technology there.The same guys doing the same stuff. Now they can just do longer laterals andlonger wells for cheaper.

Is that is the cheaper part of this isthat's why we're seeing so many deals. It just lowers their production costs.Is that the idea? The idea they were saying that by 2025they're going to lower their cost per barrel of oil equivalent produce by 5 to10%. So basically you're looking at more oilfor less money and less rigs. At the end of the day, that's not a badproposition. One question I'm curious about is theregulatory environment, at least based on the oil industry's perception.They don't feel that the current administration has been very hospitableto them.

And we know there've been a lot ofproposals out of the Biden administration in terms of dealing withclimate change, as well as some of the national security issues with exportingour LNG. And so does this not become a concernfor these companies? Well, they're definitely regulatorslooking at all of this. The FTC is definitely good, the Exxondeal. They're definitely looking at theChesapeake deal in terms of Southwestern, for example.They're definitely going to look at this.Yeah, at some point they're going to get.

Nit picky about it.But but can they really say no when they want production?I don't know. At some point how do you say no tosmaller guys trying to rival the big guys and say yes to the big guys?Yes, I'll buy it. It's called having your cake and eatingthat too. I know.I don't buy it. It'll be stretched out, but I thinkit'll happen. All right.I think we got on the phone our Mitchell firming up.Bloomberg oil industry reporter, joining.

Us right now to talk a little bit moreabout this. And Mitchell, I was going over with Alexhere some of the contours of this deal. Maybe you can get us to a sense here asto whether is this kind of the end of this big M&A merger boom that we've beenseeing in this space? Or are we still kind of at the start,you know, there's likely still more M&A to come this year is what analysts aresaying. We, of course, ended the year with a tonof it and we saw the beginning of the year pick right up where where last yearleft off. And, you know, this was a sizable one.Endeavor was the last kind of remaining.

Private oil company in the Permian thatthat seemed to be on the block. And, you know, so now that they're out,you know, we're likely to see much more public to public mergers, you know, thisthis year. But yeah, no consolidation.All the oil executives are saying consolidation is needed.All right. Well, certainly the other big deal ofthe day, probably the biggest deal in quite a few weeks.Mitchell Furman there, Bloomberg Oil, a reporter keeping an eye on shares ofFang right now, up about 9% on the back of that $26 billion agreement to buy aclosely held endeavor.

And when we come back, we're going totake a deeper look into the commercial real estate sector as executives andpolicymakers weigh in on what appears to be the second chapter of that regionalbanking crisis. Is it a close on Bloomberg?They do have a concern about commercial real estate.You can feel the stress in the commercial real estate area, but wedon't see it as a sector. Where yet we see real opportunity.We have very little exposure in commercial real estate in the U.S.right now. I'm actually optimistic.I think that the markets are proving to.

Be resilient.There's enough liquidity to resolve these.I believe it's manageable, although there may be some institutions that arequite stressed by this problem. It wouldn't stun me if, you know, a bankor two ended up wrong footed. I would continue to believe that theseisolated instances like New York Community Bank are going to be resolved.I hope and expect that, you know, we've got enough capital to weather thatthat's a problem that'll have to be digested by the markets over a number ofyears. We are witnessing an adjustment period.The interest rates.

Are much higher than expected. All right.Let's get a view from the sell side with our top calls, the big movers on theback of analyst recommendations. And we start up with Lowe's upgradedover at J.P. Morgan to overweight for what theanalyst expects is going to be a turnaround for home improvementretailers. He says consumer wallet headwinds,they're moderating. And Lowe's is largest category.Appliances is further along in the deflation process.Shares having a pretty good day, up.

About 3%.Let's move on, though, to big lots, plunging the most since 1986.This after loop capital cut its hold rating to sell this following mediareports that suggested the discount home goods retailer has been reaching out tobankers and investors for new financing. Analyst Anthony Giacomo giving big lotssome side eye over what he says is a very concerning financial situation.And he slashes his price target to a street low $1 a share.Shares of Big Lots right now down 30% on the day.And finally, let's take a look at Vivian, a downgrade to Equal-weight overat Barclays with analyst Dan Levy saying.

While the company makes great EVs, hedoesn't think demand is going to be strong enough to avoid the pressures ofa broader industry slowdown. The softness implies risks from pricing,slower volume growth and a longer path to break even though share is movinglower by about 2% here on the day. And those are some of our top calls.We do want to stay in the sell side space here and take a look at anothersector experiencing weakness. That is the commercial real estatesector. Concerns of contagion are spreading toother markets. This after the recent investor sell offof New York Community Bancorp.

Joining us right now to share his viewon regional lenders is Alexander Yocum. He is senior equity analyst over at CFR.All right, Alexandra, let's get right to it, because everyone, I think, saw thosenumbers out of New York Community Bancorp.They weren't awful, but they certainly raised a lot of questions as to whether,I guess the mission Accomplished banner that went up after the regional bankingcrisis was way too premature. What's left?Yeah. So I think what we saw is there'sdefinitely still some stress. Right.2023 was was pretty tough.

You know, each quarter we saw asequential earnings contraction for regional banks as deposits started toleave the system. And as we saw, more deposit fundingpressure. So 2023 was tough.But at the end of 2023, we did see that big rally in bank stocks.But I think this sort of ruined the outlook.You know, there was a lot of hope that in the second quarter of 2024, we wouldstart to see earnings growth. But I think that sort of was replaced bysome fears that there may be more issues with certain regional banks.What tier of banks are we talking about,.

Alexander?I mean, we've heard from the big money center banks.They basically said, look, this is minuscule for us.The risk we've heard from some of those mid level banks.They've kind of said maybe a little bit more.But I think when you get down into the true regionals and those true kind ofsingular banks, they basically have one sort of degree of business.Are those the ones that we should all be worried about?Yes, I think that's a good point. You know, the largest banks in the U.S.are relatively insulated from this.

So a majority of banking assets in theU.S. are above 100 billion.And banks with above 100 billion in assets just have about 15% of theirloans to commercial real estate. We also looked at banks from 50 to 100billion in assets and you see commercial real estate exposure rise to 40% andthen from 25 billion to 50 billion in assets, that actually rises even furtherto 45%. So it's definitely a story which willbe, you know, below the 100 billion asset.Mark NYSE is definitely the outlier as they have almost 60% of their loans incommercial real estate, over 100 billion.

In assets.But second, most is about 30%. So, you know, definitely an outlier inthat category. What's interesting, Alexander, is itwasn't just CRT that kind of brought New York Community Bank to its knees.It was because they bought some of Signature's loans.They wound up having to put more stuff aside for regulatory issues.A bank under 50 billion is not going to have to do that.So does that. I appreciate they may be overexposed,but do they get a little bit of relief at the same time?Yeah, they were.

They were in a tough spot there withrising quickly. You know, we did see them increase thereserves modestly before this, but it definitely feels like there wasincreased pressure for them to, you know, raise their reserves.And, you know, it's just been a tough look for banks that have been growingquickly over the last few years. If you think about other banks that havegrown quickly, unfortunately, that list includes Silicon Valley Bank failed,Signature Bank failed and First Republic failed.So it's definitely been a tough period to grow quickly.And yeah, NYC unfortunately got caught.

Up in that.Well, it's one thing you say that because we were talking about M&A in theoil patch and we were kind of thinking last year that we would see time M&A inthe bank space, but we really haven't. And I wonder if that regulatory overhangis going to prevent a lot of that consolidation.Yeah, So, you know, I keep hearing people telling me that there's going tobe bank and M&A, but I you know, I haven't seen it andI'm a little bit skeptical. I say I'm more skeptical than the thetypical street. And that's because, you know, a lot ofbanks are playing defense right now.

Right.There is expectations that capital requirements are going to be higher.So banks are setting more, you know, capital aside, you know, they're not,you know, doing buybacks. There's not necessarily more capital,you know, laying around for acquisitions.And then the banks that can do acquisitions, they're much larger.And there's that regulatory overhang. You know, if you think about last year,there was a large bank, 80 billion plus bank in assets first horizon.They were actually going to get acquired and that fell through and that wasbecause of regulatory reasons.

So the banks that actually can acquirethese banks potentially might not be able to.What we've seen over the past few years is the time it takes an acquisition togo through actually rises. So the days it takes is longer andlonger and longer. So it's been a little bit of a headacherecently. It also raises the question, Alexander,do we even need that type of consolidation?I know some people will say, okay, you need that lifeline.But even some commentary that we've heard out of Janet Yellen and some othergovernment officials seem to have kind.

Of made it clear that they would perfectbe perfectly okay if we did see some attrition in this space.The idea that even if we lost a few banks here and there, we still probablyhave a much broader banking system than at least any other developed country.Yeah. No, I definitely think it's good to havea lot of banks. It's definitely advantage to the U.S.And, you know, most banks are, you know, in good shape.You know, we focus on the ones that struggle because there can be, you know,consequences. Right.We saw with Silicon Valley Bank that.

Caused deposit pressure for the entireindustry. But, you know, a majority of banks arein good shape. A majority of banks have set aside asignificant amount of money for bad loans and are well-capitalized should wesee a recession. So, yeah, I think generally speaking,the, you know, a large number of banks and if we lose a few.Generally speaking, the the banking industry should be okay.Alexander, thanks a lot. Really appreciate it.Alexander Yocum over at CFR joining us there.It does feel, though, remain that the.

One thing you do get it with you if youmerge is you may get some regulatory risk, but you also just get a biggerdeposit base, which would then help against everything else.So but we haven't seen that, though. And so I wonder, like, is everythingjust a little better than we thought? Well, I think so for certainly for acertain tier. And I guess the question is whether youactually need that type of consolidation.I mean, there's been a lot of talk about how the depositor base is actually moredispersed, I guess, than what it was at the time of the crisis a year or so agowhen it wasn't.

And so maybe that's the help we need it.And you don't necessarily need big tie ups.That does mean there might be a couple of banks that are kind of just going towither on the vine. But again, with New York Community Bank,it was like two loans. It wasn't like their whole loan book.And yeah, it was not great, but it was just too loans, too big loans to verybig loans, but nonetheless. And then if you get the Fed cutting andcutting cycle, does it kind of push off any sort of trauma?Like have you gone through it? Yeah.Mean, coming up, I love technical.

Analysis.I know a lot of people don't love it. I love it.What it says about the market rally, I guess it.Jonathan Krinsky, chief market technician at BTIG, it does tell youwhere the momentum is and how much more extended we can get here in the S&P.We're going to break that down. This is the close on Bloomberg. Just about 330 here in New York.This is the countdown to the close. I'm Romaine Bostick and I'm Alix Steel.So I appreciate that we're off the highs volumes.We light not that much going on.

Right.But I have to wonder, we've like blown past so many people's targets forstrategists for 2024. What does that mean?Like you did you did chase it here at this point?Well, the big question is whether now maybe you start to get more of arotation and you were talking a little bit earlier off camera about theperformance of the Russell 2000 outperforming the broader market likethe S&P today. I think the most all year certainly andcan remember the last two weeks on a weekly basis, it's outperformed the S&Pas well.

So kind of a little bit of a stealthrally there. So maybe some of that money you get someprofit taking coming out of those big cap tech stocks and maybe, just maybe,it flows into the Russell. But a lot's going to depend on technicalindicators as well as economic indicators, which is a perfectly that'sexactly why we want to talk to a technical analyst, because if thathappens, how quickly can those flows kind of shift or is this a fakeout likewe saw back in 2023? So joining us now is Jonathan Krinsky,BTIG technical analyst. So let's take a look at a plain oldchart, Jonathan, of the S&P.

How overbought are we and are we set upto crash up or crash down? Yeah, thanks, Alex.I think we would say we're modestly overbought on the S&P 500, much more so.And what we've been focusing in with clients in recent days is kind of theadd the factor correlation. And really there's parts of the marketthat make up the S&P 500 that are, you know, almost historically overbought.And then there's parts that are have really lagged.And so you kind of have a bit of both. In the S&P, it's it's kind of a blend.Obviously, those mega-cap tech names make up a large part of it.And some of those are pretty.

Historically overbought.But there's a lot of parts of the market that are kind of left behind and thoseare just starting to rotate, as you guys have mentioned, andbroaden out. And and so we have a bit of push pulland ultimately we think there's there's a bit of both going on,right? We think there's some profit taking insome of the high momentum areas that's probably going to accelerate over thecoming weeks. And there's some areas of low momentumthat people are trying to exploit and there's probably a bit more upside inthose and those as at the same time.

So perfect set up and that really echoeswhat Romain was just talking about. So let's get to some of that.So let's look at TMT momentum. Long Right.So that sort of taking a look more of the tech if I just broad stroke at righttech trade but there's been a lot of money thrown into it.You have a great chart that shows just how overbought we are.The RSI is the highest since 2004. Are we at a turning point here?Yeah, I think when you look at some of the areas of tech, you know,semiconductors are probably front and center.There's certainly some parabolic action.

Going on.You could look at ARM, which was up, you know, massively last week and then up1.40% today SMI in video.So those are the type of names that trend is unsustainable.And a lot of those names doesn't mean at the absolute high, but the rate of therate of ascent is is pretty extreme. And then, you know, just talking broadlymomentum, there's an ETF, Mtume, which trades about a 26% premium above its 200day moving average. This ETF has been around for over adecade. That's about as wide of a spread aswe've ever seen in the ETF.

And a lot of those high momentum namesare those those tech names. So I think,yeah, there are certain pockets that are a bit unsustainable by our work, butwe'll see if we can get that rotation into areas like like the small caps.But that gets so quiet. I mean, so once we're talking aboutfactors here, Jonathan, and while obviously momentum, at least for thestart of this year, it's pretty much ruled the day.You have seen a lot of activity, certainly in a pure factor basis aremoving into profitability, also embracing size.So less about momentum maybe.

And I guess maybe you can extrapolate alittle bit more about the actual fundamentals.Yeah. You know, I think we kind of got to thepoint in the rally and you see this over and over, and itdoesn't mean it's the end of the cycle, but, you know, you get more into qualitybecause that's been outperforming over the last,I guess, 12 to 18 months. Once those quality names get toextended, then the market starts going down, the quality scale and a lot ofthose lower quality names tend to be the highly shorted names.So I think you're seeing that today.

You're seeing a short squeeze.The the Goldman short basket at one point was up 4% or so.So typically what you see is is rotation into the short names, whether it'scovering de-growth seeing or just, you know, picking at some some of thoselagging names that tend to be more shorted.And then once you exploit the short side, that's when you can kind of getthe higher correlation sell off, where now you have really extended highquality names that are vulnerable and then you've kind of already squeezed theshorts and the low quality names. And we really haven't seen a, you know,a high correlation sell off since, you.

Know, it's called last fall asSeptember, October. So I think that's really the playbookthat we're looking for as we get into the back half of February, which, by theway, seasonally is one of the weakest parts of the year.So the setup is there for, you know, a bit more upside in the low quality shortnames. And then, you know, as that plays out,everything can probably fall together. How much if that scenario plays out, howmuch of that is also a factor that you do have a broader market right now withRSI levels in overbought territory? I know definitely on the S&P and theNASDAQ, and I think the Dow is basically.

Right on the edge.You know, overbought is is a funny signal.On the one hand, getting overbought typically is actually a good thing.Typically, momentum peaks before price. So a high momentum reading will befollowed by a higher price reading with lower momentum.So I don't think we're by any means at the final high for the S&P.But I think at the same time, like we said, some of the you know, when youlook at some areas of the market that are trading that extreme above the 208,there is a bit of air pocket risk. So I think that's where we're at,certainly in areas like Sammy's in the.

Nasdaq.And you see a little bit of that today. I think it's just a just the earliestsigns where you're seeing some you know, Nvidia was up three or 4% early tradedinto into negative territory. So that's the type of action that youcan see at the start of more meaningful pullbacks.So in that case, we just end on bonds for a second.What happens to the ten year yield? Because it feels like it's tried tobreak out a 4.19%, but it hasn't. So we set up for some downside on yieldsand sort of money flows into that. Yeah, bonds are tricky.We do think 420 is an important level.

You know, maybe we'll get some someinteresting action through that or not tomorrow in CPI.You know, last week I think it was notable you actually hadsome better data. What should have been better data forbonds, which should have pushed yields lowerand you couldn't get yields lower. I think the auctions were actuallypretty good. And you had obviously the cooler CPIrevisions on Friday, you know, that should have been bullish for bonds, youknow, bearish for yields. You couldn't really take yields downmuch.

So I think, you know, you can't can't godown on that type of news that's notable.So we'll see. But 420 is definitely key level.You get through that. I think maybe, you know, equities havenot cared about the creep up in yields to this point.I think if you get through 420, they might start to notice.Hmm. All right, Jonathan, great stuff.Jonathan Krinsky, chief market technician over at BTIG.A closer look at some of those technical levels, Alex, a closer look atoverbought conditions across the board.

And even when you look at sort of themore traditional metrics, sort of just as like a fundamental metric, like PE, alot of people are looking at that and say at least on a historical basis,things look stretched. Yeah, and that's why I love technicalsat this time, because when things start to not make sense, like you just needthe actual levels to understand how it might shake out.But I thought that was interesting, that we could see everything just go downtogether and that the end of February typically tends to be really bad.So I wonder if we actually get that this time when when selling has been reallyhard.

Yeah.Gotten rewarded. Have you sold.Yeah. And also keep a close eye on ourcatalysts, right? We talk about the idea that you have anearnings season that in theory is starting to wind down.We kind of know what the Fed's going to do or maybe not do, at least for thenext couple of months here. So it raises the question, are we justwaiting for some external shock, either positive or negative, to really move themarket? It's such a good point.Also, do we just like wait for the.

Elections?Like what will then move the tape? Because we know election electionstook them a couple months. So it's like that may be a pretty broadfield running, broad field, super broad, lots of different candidates.Yeah. We need some breath up.Yeah, talk about breath. Talk about improving your breath 100% onthat one. Yeah.All right. I heard if we get ourselves in troublelet's sell that and coming up. AAM extending its post-earnings rallyafter air spending bolstered sales.

We're going to have more on the chipdesigner and the market's hunger Alix Steel for the technology.It's our stock of the year on there and it's coming up next.This is the close on Bloomberg and. All right.It's time now for our Stock of the Hour. A closer look at ARM Holdings.The chip design company. The shares there had doubled at onepoint today off of its earnings report last week.Let's dig a little bit deeper into what exactly is going on, Abigail Doolittlejoining us right now.

And Abigail, this is a stock we shouldpoint out, the rally like 60% last week. As of right now, it's up another 37%here. And this is all based on that earningsreport. It's unbelievable.No, it's not all the earnings report, at least in terms of the numbers, becausethey did put up a solid report. I think that they beat sales by like 10%and earnings by 18%. But what really happened was they gavemore color on a. Usually when I hear that, especiallywhen I see this stock trading like a meme stock, because when I first whenthe stock was first proposed to me to.

Cover, I was like, why do we want tocover this? It's just like one of these other memestocks. But then when I dug in, it's very, veryinteresting because there is real they are actually the third eye chip companyout there. So first of course, there was Nvidia andthen there was AMD. There's all these other companies thatinvestors are scouring. This happens to be the third one on thecall. They mentioned the fact that they gaineda contract revenues coming in this year. So it's a real thing.They have tremendous operating margins.

Because they're an IP companies that canreally flow right down to the bottom line.So people want in. Early on you had the serious investors,then you had sort of the frothy institutional and now you have a lot ofretail. Everybody's piling in.But there does seem to be a good reason for it because they actually have an AIproduct. Right.And they are widely used. They have the royalty and licensingagreement, too. So the way they make money is a bitdifferent than the other guys, but still.

It's $154 billion company that likeshouldn't move this much in theory. When you look at the chart, are weoverbought here? So we're very overbought and usuallythis would be a chart that I would not like at all.But if we go into the Bloomberg terminal and we take a look at this chart, thisis actually a good chart. It reminds me a lot of Tesla back in theday because you can see there clearly a parabolic uptrend, typically per physicsthat will fold in on itself. A 90 degree angle can't hold the onlymarket place, and I'm aware of that. The parabolic uptrend has not reversedis Tesla.

I think this might be a second one andif you take a look at the RSI, it is very overbought.It's at 91, but it's higher highs. So these highs are being made onmomentum. The S&P 500 right now it's RSI is muchlower than it had been in December, and yet the stock market is higher kind ofwhat Jonathan Krinsky was talking about, a bearish divergence to some degree.Interesting. Okay.I mean, hey, if you can make a 91 RSI seem okay, well go with it.Well, you know, they have a really a lot of good stuff going on.The chip fundamentals is not matches.

There and you're going to continue tohave that interest until they mess up. I think you're going to see this stockhigher may consolidate, but good stuff. All right, Abigail, thanks a lot.Really appreciate it. Abigail Doolittle.So, yeah, that's the whole idea remain is that you might need someconsolidation. We can make the argument for all the toptech stocks, but like it's there's some fundamental stuff going on here.So you wonder if we get that real dip, how much that dip would actually be.There's some real nice dough to it. And I think the I mean, I'm not going toget into whether that 60% rally.

Yesterday, last week and the 30 or 40%rally today is justified. But there is sort of a real undercurrenthere that they're making a real product with real customers.This isn't just air hype now. It's just a matter of the market tofigure out what's the proper valuation. But as anybody will point Abigailpointed out, there's really only three players in this space right now.Really only two, if you really want to be honest about it.And maybe they become the third one. And it does seem like the first moveradvantage is real. Yes.For the for the air chips different like.

If you look at, say, the weight lossdrugs and sort of that's sort of the air of Europe.You may not be a first mover advantage in the same kind of way, but I guessdefinitely. All right.Kind of. Yeah.That would be 500 hitting and wall after touching some record highs, KatrinaDudley will give us her point of view. She'll be joining us next.This is a close on Bloomberg. This is the countdown to the closeRomaine Bostick alongside Alix Steel. Just about 10 minutes until we get tothose closing bells.

Alex we talk about a market rally onpause. We should point out that's true for theS&P and the Nasdaq, not for the Russell 2000.That rally continues exactly and also for the S&P Energy index.So the idea is the laggards before continue to outperform.Now, clearly, the S&P energy index is helped by Diamondback, but nonetheless,that's the theory. Wow, look at that.Dead flat for the S&P. I also want to point out V.F.corp real quick because that's the best performing stock on the s&p only was notexpecting it.

That's from a Reuters report aboutactivist investor getting involved that their earnings just weren't that greatthe other week. It's always interesting to see theseactivist investor stories because I maybe my memory is off, but I don'tremember a time where we saw this much of a reaction in the shares to just theannouncement that, you know, Einhorn or Peltz or somebody has been kicking thetires on whatever company. It just seems like investors are reallyon edge to really see any kind of improvement.Yeah, like just because someone outside wants to do something different, you'relike, Yeah, I'll go buy that stock.

I don't know.Maybe they really need the help. They make bands.Yeah, absolutely. Here.Well, for the most part, maybe the fundamentals are cooperating.Maybe the technicals are or are not cooperating depending on who you talkto. But what about the macroeconomicconditions? Investors are eagerly awaitingtomorrow's CPI print and what it could signal for the future of Fed policy.We had a chance to talk to. And that's those Noelle Corum just asecond ago.

Take a listen.The Fed is done hiking. They're starting to look towards cuts,but they're and they're starting to grow comfortable but not yet confident.So they're not going to you know, March is definitely off the table, probablylooking for cuts midyear. No, no.El Carmen Speaking a little bit earlier on the program, Katrina Dudley joiningus now to help us count down to those closing Bells.Portfolio manager, an investment strategist at Franklin Mutual Series.Katrina, let's get right to it here. A triangle of attention, right?Is that between interest rates, growth.

And what else?And we've got inflation as well. And that's obviously there's a feedingmechanism with all these parts of the triangle.But I think if we look at inflation, you can kind of give the Fed a bit of acheck the box on that. They've got it very close to that 2%target. Okay.And then in terms of interest rates, they've been very, very sensible, verydata dependent. And growth is an engine and it just issteady. And I think we're kind of in thatGoldilocks moment.

Goldilocks for who, though?For the Fed, for investors or for everyone?Well, I think in terms of investors, I mean, we're looking at the S&P marketkind of, you know, going over that 5000 level.So I think for investors, we're seeing the top of the spectrum do very, verywell. You know, like they have only one thirdof their wealth in their homes. The rest of their money is ininvestments and they're obviously benefiting.But we're we're starting to see some signs of a little bit of tension and alittle bit of concern is that low end.

Consumer.So would you be hedging? Would you be hedging right now, hedgingfor a lower S&P? Would you hedge for a possible reacceleration in inflation like you need to be hedging that stuff at this time?So the problem with the S&P is it's an index that's representative of 500names. Within that you have the MagnificentSeven and obviously there's been so much of that that's been driving this market.And I think as we look at those names, we've been surprised at how they'vecontinued to have strength. But I think that we're starting to seethem back at that gap level to the rest.

Of the market that they were when we hadthe last tech bubble and the last, you know, kind of bust there.I am not saying that these companies have similar characteristics in terms ofno profitability and you're buying just eyeballs.But I think what we've got to be concerned about is that that gap can'treally widen now. That gap can close two ways.Obviously, you can have a compression in the seven, or you could have the rest ofthe market catching up. And that's when we come back to the factthat we do have this triangle and it's positive.Okay.

So this goes back to your point.My main be selling tech and you buying small caps.Like is that what we're going to have to do now?We have been bullish on small caps, probably a little early, but I think ifwe look at what are the drivers of those small cap stocks, we are very happy withthe positioning that we have now. I think in the small caps, you need tobe an active investor, not an activist, but you really need to understand whatyou're buying. And so real work pays off in thatsector. But if we look at the characteristics ofwhat's happening, if we look at, you.

Know, all the investment that's goinginto the United States, small caps, locally based businesses are going tobenefit. And they really didn't participate inthe rally that we've seen in the rest of the market.But you have to be selective there. There was some analysis, I think, lastweek by Bloomberg Intelligence kind of showing the earnings track record forthe Russell 2000 companies, and it was, well, underperforming what we saw on theS&P 500 in terms of earnings growth as well as revenue growth as well.Exactly. So you've had them as laggards.But I think what you're looking at is a.

Situation where you want to make surethat you've got companies that are well positioned in their market that haveexposure to the United States of America.Okay. And the growth trends that we're talkingabout there and that finally and not over levered.So we want to look for companies that have got manageable balance sheets andthey're the types of stocks that we like.Forgive me for smiling because when I hear what you just laid out, I think,shouldn't I just go buy Microsoft or Apple or Google or Alphabet orsomething?.

I know, but I can give all of this toyou. It's such a discount on the multiple.So that's the differential is that you we talk about, you know, a growth stock,but a growth stock has a valuation component to it.And the small caps have some of these growth characteristics.Yeah, they've been and they've been overlooked.So the multiples are cheap. Why is that different than six monthsago when the same thing happened? All of a sudden there was a rush in thesmall cap stocks and it faded real fast. It does.I mean, I think investors have become.

Very, very fickle.But I do think if you're patient, what happened with the small cap universe isthe fears of recession is one of the things that people get very concernedwith them. So they're the first place that youexpress it. When people are fearful of a recession,they're not talking about turning off their windows.They're talking about whether or not they're going to buy more or less of aproduct. And most of that tends to express itselfin small cap stocks. They tend to be also a little morethematic.

So the idea is that if we don't get arecession because we're going to get Fed cuts doesn't mean we're going to getseven or eight. But if we get three or four, that's notrecessionary. Therefore, small caps can hang, can hangtough. I think you need to take that premiseback, though. You're talking about the fact that theFed is going to be cutting rates because they fear a recession.No normalization just for normalization. But that's not going to be that they'recutting rates in a recession or two to kind of deal with a recession.I think that that's what people need to.

The signaling that comes from that ratecut. It's going to depend on why they'recutting, right. So they cutting it because they've beenvery successful in what they've done and they've been very successful in meetingthat 2% inflation target. So they can kind of take a little bit ofthe steam off. But if they're starting to cut ratesbecause we see a sudden spike, for example, in unemployment, that's notwhat we're expecting. But if that's what they were doing, thatsignal is very, very different and it's very different interpretation for themarket.

Well, we have about 30 seconds left.I do want to get your thoughts, though, on corporate debt, specificallyinvestment grade and whether that rate scenario and that economic scenariomakes that attractive as well. I think if I look at where corporatedebt is at the moment, you need to balance it out with the ability ofcompanies to generate cash flow. And that's been one area they've beenvery, very strong at. So I think you've got a lot of companiesthat can manage their debt, that balance.And in the investment grade space, I think you're going to be safe.All right, Katrina, always great to have.

You on and great to see you in personhere in studio, too. Katrina Dudley, portfolio manager andinvestment strategist at Franklin Mutual Series.We've got about 2 minutes until we get to the closing bell.Alex, S&P 500 down fractionally on the day, but Russell holding up Russell 2000up about 2% here on the day. A good day.And I think a lot of folks will take it as we move closer to those closingbells. Sit tight.We're about to take you to the bell and beyond.Beyond the bell, Bloomberg's.

Comprehensive cross-platform coverage ofthe U.S. market close starts right now.And right now, we are 2 minutes away from the end of the trading day.Romaine Bostick alongside Alix Steel. We're counting down to the closing bell.Ahead, I'll take us Beyond the bell. It's a global simulcast with Scarlet Fuhere in our TV studio in the radio booth, Carol Massar and Tim Stanwick aswe welcome our audiences across all of our Bloomberg platforms, includingBloomberg Originals and our partnership with YouTube.Carol Massar A bit of a pause here in that big massive rally that we saw inthe S&P 500 leading up to today.

Yeah, it's been quite a run up, right ina short period of time if you really go back to the end of October.Having said that, you know, I'm thinking about the CPI print tomorrow.I think about what Tom Barkin just told a club.I think it was the Atlanta Atlanta Economics Club and just saying that howcompanies businesses may be slow to cut prices because it's been so great totheir margins, their ability to actually raise prices, you know, so that pricingpower and I feel like I live it see it constantly that companies are stillfeeling it. Yeah that they really haven't cutprices.

I don't expect that they are going tocut prices. I just think they will Hopefully theywon't raise them as fast as they were. Yeah, hopefully.Hey, speaking of prices going up, the price for bitcoin has been going to seethis highest today since December 27th, 2021.I don't know if there's any sort of sentiment indicator here.I, I can't tell you that. But what I do know is that this one hasbeen a long time coming. Momentum begets momentum, right?I mean, the ETF, the spot Bitcoin ETFs has encourage more people to buy intoBitcoin, which of course boost those.

Spot Bitcoin ETFs as well.This is going to be a story that kind of keeps on giving as we see more and morerotation into some of these more riskier parts of the market.Yeah, absolutely. Here, keep an eye right now on thatBitcoin level above the 50,000 level as we turn back to what's been going on inthe equity space here, coming off what has been a relatively torrential rallyhere in U.S. equities, a bit of a pause on thisMonday afternoon. The Dow Jones Industrial Average isgoing to finish the day in the green, up by more than 100 points or about 3/10 ofa percent.

Meanwhile, the S&P 500 little change onthe day, down by about five points or roughly about a 10th of a percent, stillholding above that 5000 level, while the Nasdaq dipping back below 16,000, 15,00942 lower by about 48 points or 3/10 of a percent.But as Alex Field is talking about a little bit earlier, the Russell 2000really shining here. It's outperformed the S&P for twostraight weeks now and now starting off the third week with its biggestoutperformance versus the S&P 500 all year long.Yeah interesting to see that outperformance.Having said that, I'm just going to go.

Back to the S&P 500 here.Despite the kind of met or unchanged here on the headline number, you'reseeing most of the names in the index higher today, guys 334 to the upsideScala 167 to the downside to unchanged. All right.Let's take a look at how the sectors stack up right now.And what's interesting here is leading on the downside.I'm going to look at the red part of the pie there first.Infotech is the biggest drag off by three quarters of 1%.Reads also lower. But you also have consumer discretionaryand communication services, which tend.

To house some of those big techcompanies on the upside, utilities, energy and materials.You don't see those all gaining on the same day very often anymore.All right, guys, let's get to some of the individual gainers.I think I saw you guys talking about it on the TV side of things, obsessed withwhat's going on. But thank you for watching, girl.I do. I'm a fan.I'm a fan. Arm Holdings up 42% at its highs today,finishing with just shy of a 30% gain. I mean, kind of the cray cray category,if you will, in terms of outperformance.

We know it semiconductor device company.Soaring again. Now it's up, I think about 100% so farhere in 2024, extending last week's rally, which was more than 60% as well.That was fueled by that revenue forecast that the company put out, specificallythat far, far exceeded the average of analyst estimates.So it's interesting, there wasn't anything specific today, but investorscontinuing that three day jump to more than 93% in ALM so pretty remarkableenergy that space overall outperforming in today's session when we look at majorsectors Fang Diamondback energy thing of course is the ticker up 9.4% here at itsclose it was among the top gainers in.

The S&P and NASDAQ 100.I feel like I should just let Alex talk because he did invite me on radio, youknow. I know.Well, next time call because we thought about the same thing.We got into it a lot, like, where's Alex anyway?She knows. She knows the space like no other.But it's fascinating to see the continued consolidation.Diamondback energy surging after announced that $26 billion cash andstock deal to buy Endeavour Energy Resources.And they're right across the street from.

Each other.Isn't that wild? Yeah.Just pack up your boxes and walk across like it's that easy.Or don't or don't pack up your boxes because we're going to save our costsanyway. But nonetheless, a deal.Airbnb. I just want to point that one out thatto Odom, back energy, I mentioned about 9% here at its close.Airbnb was among the top gainers in the S&P 500 and NASDAQ 100, up about 4.2%here. Reports earnings tomorrow after the bellhitting a 52 week high today, highest.

Since about April of 2022.So some outperformance there. Alex, you are welcome Every time.Any time you just knock on the door, just walk.In fact, we'll see. All right.All right. You know where you know where we live.Hey, let's talk about some of the decliners today.I want to start with shares of Amazon falling 1.2%.We did learn late Friday that Jeff Bezos unloaded 12 million shares of Amazonstock this week. It's the first time that he sold stocksince 2021.

That was last week, I should say.Those sales took place on Wednesday and Thursday of last week.It netted him just over $2 billion. That's according to a filing.We didn't know this was going to happen at some point throughout the year.Amazon did disclose on February 2nd that Jeff Bezos plan to sell as many as 50million shares of Amazon over the next 12 months, cashing in on that stocksurge that's put him within reach of becoming the world's richest person onceagain. I should also note at one point today invideo did surpass Amazon to in terms of market cap, but it fell a little bitbelow that by the end of the day.

So for now, Amazon still worth more froma market cap perspective than in video. Big Lots.Look at this. Shares of big Lots taking a real hittoday. It was downgraded to sell from hold atloop capital markets. It says the organization says that offprice home goods retailers in quote an increasingly precarious financialsituation amid a growing net debt balance.Shares fell as much as 28% earlier in the session.They closed out, well, 28% lower. Yeah, we should say.Bloomberg did report exclusively on.

Friday that Big Lots has been seekingnew financing as it grapples with years of losses and dwindling liquidity.That's according to people with knowledge of the company's efforts.Before we move to yields, I just want to add another decliner here.Shares of Express, they had been halted during the regular session.They were down about 12%. They're now down about 30% here in afterhours trading, which you just point out. This is on the back of a report by TheWall Street Journal saying that they are looking now at some sort of debtrestructuring and it's currently in talks with lenders on debt options.This is, of course, the the retailer.

Express down 32% here in after hourstrading. All right, let's get deals for a second.Nothing happened. Moving on.And I say that really because really anything is moving.Well, you're looking at one 9% on the ten year.We haven't reached it. We're down there not far from it.Yeah, absolutely true. I do want to go back to some otherearnings as well. We've been talking a lot about the movesand aam I just want to point out the cadence design is also lower here inafter hours trading down about 7%.

This is the big a chip software designcompany here. Basically their one cut guidance on EPSis a big big miss there and then want to turn to another sector here and thisinvolves the car rental space Avis budget out with earnings those sharesalso down in after hours trading down about 4% here.Revenue numbers for the most recent quarter coming in a little bit light,2.76 billion. The Street was looking for 2.81 that weshould point out. EPS beat by a mile, $7.10 a share on anadjusted basis versus street estimates of 415.So assuming that a comparison is.

Correct, you're a big beat on the bottomline number, but a bit of a miss on the top line.You know, I'm curious about this whole thing with the big tech stockscontinuing. I know that they were kind of flattoday, but the S&P 500 continuing to hold up even with people saying thatit's overbought sort of antennas. Sarah Vegas of Bloomberg Intelligence.I did some research and it was fascinating.He found that a lot of the buying was probably coming from overseas investorslike from Canada or Europe, and they're piling into US stocks faster thanAmerican investors because they're.

Trying to make up for lost.Time, their indexes have not done as well.Their benchmarks have lagged behind the S&P 500 and they've got to make up.All right. I don't have an easy segue right here,so I'm just going to go to it. I am so tired because I stayed up latewatching the big game. So there's debate in terms of the SuperBowl, right, that whether or not we should have a holiday on Monday or if wejust move it to Rome. Why do you why do you support that?Yes. Yes, I agree.Romain, you're saying yes.

Why is that?Well, I time did you a home? I didn't come straight into work.Just came straight. And that's how committed I do it on aSaturday. I think.Sorry, guys. Hired.Were you at the game? Yeah.No. Yes.No one was okay. Can I.Can I interrupt this witty banter? Yes, I can hear.I just keep an eye on TripAdvisor.

Actually, shares are moving higher here.Actually, the company considering strategic options, if you will, forminga special independent committee where they're going to, I guess, look at theiroptions. Doesn't quite say what those optionsare. But we've seen these types of statementsbefore here. And they says that they do have amandate to evaluate any proposals here, though shares at one point were up about11% here in after hours trading here. So interesting.We've been talking so much about consolidation in other areas, whetherit's energy and some of the other spaces.

Here.Are we going to start to see this in travelworks? I mean, does it have a lot of travelguys to do that? I don't know.There's I have to say, over banks, but are we over traveled?There's also a lot of online travel sites.I don't know about you guys, but it's like it's a little overwhelming when yougo to look for a trip. And it's just there's a lot of folks outthere. And I wonder, is there someconsolidation within that industry?.

Did you use TripAdvisor to go see this?You know, you know what I use I is, you know, delta dot com or whatever it is.See, I just I actually go I prefer just to go straight straight to the airline,straight to the hotels myself. I feel like you don't really.Yes, really. And I feel like you don't really saveanything by using, you know, whatever it is, Travelocity, Expedia, TripAdvisor.I've ever talked to someone who goes right to the hotel.Now, this is like an Alix Steel for. Oh.All right. Nice to meet you.Nice to meet you, Alix Steel.

They are increasingly, though, they wantyou to use their apps. I do the same thing.Hotels, airlines, like I use. I just use their apps.Yeah. And also, I feel like you preserve moreof your, you know, your points and rewards.Good talk, guys. Good talk.There you go. You guys are very conversation.Was it was it was it a fun time? Or maybe I should have taken advantageof it, just like I represent Carol. That's nice.I don't think we're can hear me just.

Ignoring my question.Oh, I have. I'm tired of walking.I'm running on fumes right now. So I saw you and Taylor on the screentogether. Did you were you really there or waseveryone just joking? Yeah.You didn't see me right there when Usher and Ludacris came out in the back.You're really down For what?Alex? No.You're a co-anchors. Why do you think he was there?All right, we have to wrap.

They're like, telling us, please leave.I tell you, please leave. We're done with all of you.All right, guys, I'm glad Monday is almost over.All right, That's a wrap across platform radio, TV, YouTube and Bloombergoriginals, including the Super Bowl going remain.We will see you again, same time, same place tomorrow.All right. Coming up here on the big program, ourcoverage continues. Rebecca Patterson on deck, former chiefinvestment strategist at Bridgewater Associates.Stick with us.

This is the close on Bloomberg. And. Welcome back to the clothes.I'm Scarlet Fu with Romaine Bostick. Let's give you a recap of what happenedin today's trade. The Monday after the Super Bowl, weunlocked 5000 at the end of last week. Now what?Not a whole lot in terms of the main index down 1/10 of 1%.Even with M&A announcements in the energy sector and the biotech sector.You look at what's happening in the yield space, not a whole lot going onthere either.

The ten year yield inching lower to4.16%. Of course, we have tomorrow's big CPIreport expected to show a to handle for the headline year over year number.Oil prices marginally higher by 2/10 of 1%.And it's not for lack of geopolitical headlines either.WTI has actually traded within a band of $10 for most of this year, even thoughthere's plenty of alarming headlines coming out of the Middle East.There's also plenty of supply thanks to the US shale and lukewarm, lukewarmdemand out of China. Bitcoin, however, seeing plenty ofaction and currently up about four and a.

Half percent, breaching the $50,000level for the first time since late 2021.Of course, the record high here that we're all watching as 69,000.We're not quite there yet, but because of that move in Bitcoin, you're seeing alot of big moves in crypto related stocks like Marathon Digital, likeCoinbase, like MicroStrategy, like Clean Spark.Those are all higher as a result. Seem to be therapeutics a big winnerhere. I mentioned M&A up 25% at the moment.This is, as Gilead Sciences says, that it is buying all outstanding shares inthe biotech company at 30 to 50 a share.

That works out to about a 27% premium toSigma base last close on Friday. Big Lots, we mentioned earlier downabout 28%. The discount home retailer, home goodsretailer actually came out with preliminary fourth quarter results thatwere in line with its guidance. That's what the company says.But look, capital markets doesn't see a whole lot good going forward for biglots and says that the company has lost customer relevance, which is verydifficult, if not impossible, to regain. And Monday dot com losing 10% on the dayretreating from a two year high. But the thing that you need to keep inmind here is the stock has gained about.

70% since October.So the fourth quarter results were fine overall remain but the outlook looked abit modest. And again, that big run up means thatjust a little bit taken off at the very end here.All right. A couple of other big movers today inthe chip and I space arm having a phenomenal day, up 29%.And at one point in NVIDIA briefly topped Amazon in market value which sortof made it the fourth most valuable U.S. company by market cap Kunshan somebodyjoining us right now from San Francisco. He's our senior chips analyst over atBloomberg Intelligence.

And could, John, all the talk used to beabout Nvidia when it came to the AI chip space that expanded to AMD?I guess now you can put ARM in that group as well.Are those the big three that we're going to be focusing on this year?Well, definitely. In terms of the three who can, you know,recognize the revenue from A.I. starting now, those would be the topthree. And so if those are the top three andthis gets to a broader question here about valuations, whether they become alittle bit stretch, I mean, anybody could look at the technical indicators,you could even look at the fundamentals.

And you can say, look, on a historicalbasis, none of this is justified. Is there a justification, though, if youdo believe in the promise of what I could bring for these companies?I mean, look, at this point, the reality is there is a scarcity of semi names whowho are true A.I. players right now.And you look at Nvidia, even the run up it has had, it still remains the largestbeneficiary of the AI spend in datacenters in the near future.So if you're an investor who wants an exposure to the $8 in semis, it still isthe largest dollar growth and earnings story.I need to go back to Nvidia for a moment.

Here because of that monster move andits market cap now surpassing Amazon. According to Reuters, other companiesnow want to design their own custom A.I. chips for their own specific needs, andNVIDIA is ready to help them by building out a unit.Focus on designing chips for these cloud computing firms.Is NVIDIA essentially offering to do what an ARM currently does or would bedoing? Well, it would be more similar to whatBroadcom and Marvel currently do. So when it comes to ASICs andaccelerators as an alternative to GPUs, that's what Broadcom and Marvel do forthe large customers that are Nvidia.

Virgin Media is now trying to get intoKundra and somebody out there in San Francisco, senior chips analyst for usat Bloomberg Intelligence. I want to continue this conversationright now about big tech's dominance and of course, all the discussions hereabout valuation. Rebecca Patterson joining us here onset, former chief investment strategist at Bridgewater Associates.All right. I mean, I don't even know where to starthere. I mean, everywhere you look, everythingseems to be overbought. A lot of the technical indicators wouldsuggest things are stretched.

And even some of the fundamentalindicators which suggest that as well. But I'm told by a lot of folks, youknow, in fairness, people who are definitely bullish on AI, they'rebasically saying that when you look at A.I.and the promise there that maybe these valuations aren't as extreme as youwould look. Well, the challenge today is that.No one knows exactly what the benefits of AI will be in five years or tenyears. So there's a lot of educated guessinggoing on on what the right valuation should be on these stocks when you takea longer term view.

But when you see what is possible, thebreadth of implications for a I, whether it's health care or security consumer, Imean, there's so many uses for it, it's very different than something likeblockchain and crypto for, for example, that it does seem to suggest that thereis a lot more upside. How much we don't know yet.We just don't know. At this point, though, if you want tohave exposure, right. You look at the big companies and one ofthe things that I think is supporting the big tech companies is that they havesuch strong free cash flow. This is such a big buffer.If the economy slows down, they're good.

And if the economy speeds up, they'regoing to have more opportunities to invest it.That could set the whole debate as to whether some of those big tech companiesare really growth stocks in the traditional sense or more of the valuestocks. I mean, I know that seems kind ofanti-fungal to some folks, but when you mention the balance sheets and the freecash flow and they're all hybrid, they're an absolute hybrid.I mean, think about these stocks. There is a cyclical element to what theydo, for sure, but they're also organic growers.They're not going to depend as much as,.

Say, banks or some of the consumerdiscretionary on growth picking up, which is why I think they've kind ofkind of balanced in the middle for the last several months.I want to get your take on ALM we mentioned it earlier with so on just amoment ago and it's a curious because it's a UK based company traded in theUnited States. Is it seen as a pure play Europeancompany that can invest in. I mean there's a way for Europeaninvestors to invest in and it would be through ALM and there's not a whole lotof companies like that is there. Right and I think right now people arelooking to get geographic.

Diversification and they're trying toget exposure to tech and I specifically. And so if you can find companies thatare listed in different companies but get you that exposure all the betterbecause then you can tell your your investors I'm getting youdiversification too. So whether we're looking at an arm,whether we're looking at some of the other Europeansemis stocks or some of the tech related names, there aren't that many.And of course, because of regulatory differences in Europe, they're notnearly as large and they probably won't get to me, which gets us back to why theMagnificent Seven or whatever number.

We're using these days are so stillattractive at these valuations. They've got the the business ecosystem,They've got relatively friendlier regulation.They have a comparative advantage because we're training highly skilledlabour all the time to go into these companies and then they have that freecash flow which allows them to continue to compound on everything they'velearned already. So they just they have such a big headstart and comparative advantage against the rest of the world.It's hard to find anything equal outside the US.So where you can find some diamonds out.

There, you pick them up and you seethese reactions like we got today with ALM.So when you look at the Magnificent Seven it feels like everything you justdescribed should not include Tesla at least right now given what we know aboutthe company and its struggles with cutting prices and you know, gettingthings off the ground. What could replace Tesla as amagnificent seven company. I am not someone who picks securities soI'm not going to be able to give you an exact stock that I should think shouldbe in that mix. But I do see investors trying to broadentheir horizons and say, okay, maybe I.

Have Amazon and Mehta and Nvidia, butgiven the valuations, given all the good news priced in, I want to try to lookmore broadly than that. Maybe the companies doing the picks andshovels, so to speak, for maybe some of the industries that are going to benefitfrom some of the productivity gains faster than others.So you are seeing that happen. But again, I guess my bottom bottom lineon this sector is that, yes, there's going to be hiccups.There's going to be periods of underperformance.We have a lot of regulatory stuff that's going to come down this year that couldcause profit taking.

But over the next ten years, growth isgoing to come down to productivity. Labor, labor in the US is decliningsomewhat because we're getting older, we're retiring, not us, but others.And so you need productivity and that comes from tech.And because the US has this advantage, we're likely to get stronger growth thanour peers overseas and that's going to support US equities, it's going tosupport the dollar. And I think we can have another decadeof exceptionalism. Is there are there any sort of parallelsin history, at least in your career, that you've seen, that is even close towhat we're seeing right now?.

Well, the best parallel for the techpart of it is probably the personal computer.And when you look at, well, what were the productivity gains, they weremassive. And there are some analysts who thinkthat could be similar lift productivity growth maybe by a percent and a half ayear for a decade or so. That would double productivity growth inthe US, which would be a major lift for GDP.So it doesn't happen often, but the personal computer would be a good recentexample. And then certainly further back in time,things like the automobile, you want to.

Go far back.We can start talking about steam engines and looms.I bet you're going to go back to like the wheel or something like that.Quite that far back. But but.It would be unusual to see the US market outperform two decades in a row.That doesn't happen very much. Rebecca, always appreciate your joiningus here. Rebecca Patterson, everyone, formerOlympic rider. Coming up, we've got the top three wherewe focus in on the top three movers and shakers at the center of the day'sbiggest stories.

This is the close.I'm Bloomberg. All right.It's time now for the top three, where every day at this time, we take a deepdive into the people at the center of the day's top stories.And first up is Joe Biden. The president's re-election campaignlaunched a Tik Tok account in a bid to reach younger voters.It was unveiled during the Super Bowl last night, which remained you attended.Did you see this commercial? Are you able to watch commercials atthis? I did not see this commercial and Iprobably won't see it.

But I mean, good for him that he'strying to reach out to the youth, as they say.I know it's tick still young people. Yes.But my son told me the tick tock is over.Oh, really? What is he is going to God only knows.So it's something that his parents can't see.The binary election campaign is going to go on.But yeah, I mean, you know, good. He's trying to pull out.But I heard about the little means and making fun of whatever conspiracytheories there were about how Taylor,.

The Taylor Swift, apparently break thiswhole gate. Yes.Yes. Yeah.And of course, he embraced his own alter ego called Dark Brandon.So there's that as well. Oh, you're watching Beauty.Good for him. And I'm keeping an eye, of course, onall those Super Bowl commercials that we got.Those are pretty good ones. And of course, a lot of talk right nowabout Beyonce trying to steal the show from Usher.I thought was actually because.

Apparently this commercial aired rightafter his performance where she was talking about breaking the Internet andthen the end of it as, of course, her teasing this new album, which then youhad to go online to actually get the details of it.But it was a pretty good flex on our part.I mean, I think she's all about flexing and she legitimately flexes.My question is, it was an ad for Verizon, but does anyone even rememberwhat it was for? And all you know is that you're lookingforward to her new album. I did remember it.Verizon.

It didn't make me actually go out andbuy anything Verizon related. It did probably make me go out and buyanother Beyonce album next month. But, you know, I think I got theattention. They wanted it.They got the attention they wanted. She looked fantastic there, by the way.All right. Let's talk about Tiger Woods.He's our third person, the golf star starting the new year with a new lookafter ending a 27 year relationship partnership with Nike.He's got a press conference scheduled at 7 p.m.Eastern Time to discuss what he'll be.

Wearing in the limited tournament thathe does play. So what is the new look?Because there's still no details on that.No, we have to wait. The press conference at 4 p.m.Pacific, we saw the picture, which, you know, you got to see the logo.And obviously it's apparel. It's apparel.But who is he working with? It's a similar meet is apparently thereporter. So it is tailor made.Well, it's not yet. He hasn't announced it, but we'rethinking it's tailor made.

Okay.And I hope they're paying him more than Nike.Well, they've already filed for trademark applications with the USPatent Office for Sun, Red and SDR. He always wears red on Sundays.All right. When we come back, we're going to take alook back at this day in history and the bursting of the dot com bubble.And a question for you, scarlet Pets.com IPO 24 years ago, how long did it stay apublicly traded company? That question and answer when we comeback. And.

All right, here we go, folks.24 years ago this week, Pets.com made its debut on the Nasdaq.At a price of $11 a share. It was a rocket ship ride from theprivate to the public market for an e-commerce company that had onlylaunched its website barely a year and a half prior.But a quirky sock puppet mascot, an expensive Super Bowl ad and heavydiscounts and promotions helped the pet supply company lure more than 1 millioncustomers to its Web site at $11 a share.Pets.com, the ticker I pet was valued at about 50 times its 1999 revenue rival,PetSmart, which operated 484 brick and.

Mortar stores at the time, boasteddouble the sales of Pets.com, but was valued at less than one times revenue.But Pets.com wasn't long for this world. Aggressive discounts and free shippingpulled in customers at a speedy clip, but it also had the company burning cashat an even faster rate. And that brings us to our big number andthe Question of the Day. How long was the run for Pets.com as apublicly traded company? The answer, ten months, barely tenmonths from its February 2000 IPO to an announcement in November 2000 that itwould shut down operations. It was the worst performing IPO of thatyear and one of the fastest descents for.

A newly listed company in U.S.history. Furthermore, it would come to define theexcess of the dot com era and demarcate its end.Now, to be fair, Pets.com had plenty of company.Remember value America furniture dot com Mother Nature dot com.Yeah, exactly. All told, around 140 dot.com companiesclosed in the year 2000 alone. And other names like Webvan, eToys, askGS and Dr. Koop.They followed into the trash bin back in 2001 and beyond.And while there certainly are some.

Similarities between the current stockmarket rally and the dotcom bubble, including narrow breadth and sectorallocations dominated by technology. Overall market valuations in the early2000, they were significantly more extreme than what is observed today.And the handful of companies going public today, they have something a lotof those dot.com names didn't have a quarter century ago, free cash flow andan already profitable business model. No sock puppet needed for that.Scarlet, thank you for that trip down memory lane.I totally forgot that the ticker was iPad and it turned out Pets.com wasahead of its time because now it's.

Pretty much chewy or Chewy has taken themantle there. All right.Let's move on to a big, big data point that's coming out tomorrow, which isCPI. According to Bloomberg Economics, theJanuary CPI report will likely show inflation running at a similar pace tothe past few months. Consumer prices, together with producerprices on Friday, could give us some significant clues about the future pathof Fed rate hikes. Joining us now is Kathy Boston.She is chief economist for Nationwide Mutual.Kathy, so good to speak with you.

The consensus estimate is that thatheadline year over year number could show a two handle, which is somethingthat gets us to that 2% ish target that the Fed always talks about.Of course, CPI is not what the Fed focuses on, but this is pretty key,isn't it? It is.And happy to be with you to discuss it, Scarlet.You know, they target PC inflation, but the CPI gives us a heads up as to whatto expect for PC inflation. And PC is personal consumptionexpenditure. The what the Federal Reserve has told usis that they want a continuation of the.

Good data they've seen over the lasthalf year. So they don't need better inflationdata, at least on the month and month readings.But because the month to month readings have trended in a desirable way and havebeen lower, that's allowed the urinary highway to to move possibly below 3%.And symbolically that yeah that's that's a nice reading to have you know to havethat 2% handle. Yeah absolutely.I mean, if you're just looking at what happens by the end of the day, if we getthat two handle, that's something that certainly people will fixate on,especially those who are in the.

Disinflation camp.There's also going to be some revisions to inflation numbers to how messy couldthose revisions get? Yes.So we got some heads up on that on Friday.So we got the seasonal adjustment factors and the revisions are alreadybaked in. So we're not looking for any bigsurprises there. I think what we're really be focused onis things like the three month annualised change rate.So, you know, how much is inflation moved over the last three months.Yeah.

And you do get that continuation of ofgood numbers. Right.To allow the Federal Reserve at some point here to just start to cut interestrates. We think that's May.And you know if you look at the releases we'll get three inflation reports of CPIand the PC price index will. Three separate readings, monthlyreadings for the May reading, and we think that'll be enough to encouragethem to cut rates starting then, if not, May, then in June.Cathy I am curious just about the complexion of the disinflation thatwe've seen.

We know a lot of this has come from thegood side of the economy and there's been a lot of discussion as to when westart to see a material disinflation across the board in services.I know there are some pockets already that that started, but do you expect tosee maybe a little bit more help from what is effectively probably a moreconsequential corner of the economy? It's a great question.And all the Fed commentary over the last, you know, really since the meetingin the last policy meeting has been on core services and particularly the supercore services. So that's stripping out rental inflationbecause we think rent and the Federal.

Reserve thinks that the most recent rentdata, the new data suggests rental inflation are all over, but it's all theother service prices that they're focused on.And the reason is core goods inflation is probably gone prettymuch as low as it'll go. There's a little bit more downward moveit. Perhaps they get back to absolutedeflation of what we had pre-pandemic, but it's at zero now, fell from 12.So that really puts the onus on the and the core services.And what Fed officials are worried about or maybe concerned is that if we do theleveling off of core goods prices, with.

Super core services still running 4%,that's still well above the level they would need to get back to 2% inflationoverall. I know it's kind of hard to to lookreally far out, particularly for things that aren't necessarily going to bewritten on paper. But you have to sort of be mindful of, Iguess, a potential external shock, the idea that, you know, this wholeinflationary spike that we got ourselves into was largely to a certain extentborne out of the pandemic. And there could certainly be somethingmaybe not as severe as the pandemic, but something else, whether it's geopoliticsand the wars that are going on around.

The world here.What do you keep an eye on most that could maybe disrupt whatever thatdisinflationary trend is trying to tell us right now?Yeah, there's a valid point. You know, we know shipping costs haveincreased because of tensions in, you know, geopolitical tensions in theMiddle East. And we also know that there's otherissues with the Panama Canal where low levels of water have increased shippingcosts. So that could feed through to importprices and therefore goods prices here in the US.So import price data that comes out on.

Thursday, we'll be watching that.The ISM service report that we got, the non-manufacturing report and yes, theheadline index moved higher delivery times, but also in the commentary there,she's seeing upward pressure on price, especially construction, because of thegeopolitical unrest and shipping costs. So those are the things that, you know,you can't exactly forecast. But we see some risks there, especiallyin the goods sector. Well, speaking of risks, I want to getyour take on what we've seen with regional banks and commercial realestate and that exposure to commercial real estate.There is some renewed stress in the.

Regional banking sector.How worried are you about the possibility that, you know, this slowleak of headlines that comes out could lay the groundwork for some kind ofrecession down the road? Yeah, it's something you always have tobe sort of concerned about. You know, there's still you know,obviously, you know, it was about a year ago when we had the bankruptcies, bigprofile bankruptcies and and that really shook the markets.Now, luckily, there are steps taken and I think sort of settle down.It doesn't seem like it was systemic. But then we've had a renewed pressure,right, with the New York Bank here.

So there's the fragility underneath.The headline is still there. Interest rates are high and and thosethings can happen. I think, you know, aside from that, wedo see a risk of still of a slowdown more than the markets anticipate.We need more data. I mean, clearly most recent data havebeen on the upside and we recognize that it's upside potential to our baselineforecast. But if you look at how the Fed's goingto hold interest rates, you know, a bit higher here than normal and cuttingrates very slowly because inflation's sticky, that means policy staysrestrictive for longer.

And we have to see how that plays outfor the economy. And I would just add, the consumer ispretty extended right now. They're not prepared for an employmentslowdown if one unfolds, which makes sense why the Fed is moving so slowly.Kathy, really appreciate your joining us.Kathy Rancic, chief economist for Nationwide Mutual and remain.We have about 20% of outstanding debt on U.S.commercial multifamily real estate maturing this year.So it might be a come to Jesus moment for a lot of these banks that hold theseloans.

Yeah, it'll be interesting to I mean, atleast we've seen the tempering of interest rates.And if you believe what the Fed says, interest rates aren't going back up, atleast of the base, the base of funds rate here and most likely to go down, Iwonder if that's going to be soon enough to help us Some.of these companies that are facing that refinancing.Exactly. All right.Let's take a look at how markets closed on the day.We're above 5000 for the S&P 500, but we didn't really move too much beyond that.The S&P 500 at 5021.

Little change on treasuries across theyield curve. The ten year currently up to 4.17%, justbarely as we await that CPI report tomorrow.Dollar a little change as well. And crude oil holding at that $77 abarrel level, really staying within that $10 range.And if anyone's keeping track of Bitcoin remain.It surpassed 50,000. Oh, wow.Yeah. Next stop, 69,000.I mean, given how Bitcoin moves, who knows, right?This is the close Bloomberg.

And. And former President Donald Trump isproposing a 60% tariff on all Chinese imports.That is a plan that his rival, Nikki Haley, is calling ludicrous.We spoke with Nikki Haley earlier today. China is different now when you talkabout Trump wants to do tariffs across the board from every country.China we have to deal with differently. We have to understand China is beenpreparing for war with us for years. That's not an exaggeration.They're already here. We know that they bought 400,000 acresof US soil, most recently near Grand.

Forks Air Force Base, where our mostsensitive drone technology is. They're putting millions of dollars intoour universities, stealing our research and spreading Chinese propaganda.They've got Chinese police stations throughout our country.We know they had the Chinese spy balloon that was doing surveillance over ourcountry that now connected with a US Internet company and sent thatsurveillance to China. They're building up their militarythreatening America. What we need to do is when we look atChina, you look at it through a national security lens.You look at it and say, if China pulled.

The rug out from under us tomorrow,would we be ready? Think about what happened during COVID.Everybody was told to wear a mask. Who made the masks?China did. Everybody was told to take a COVID test.You turned it over. It was made in China.Go into your drugstores right now, all of those medications are made in China.We've got to focus on what do we do to change that narrative, to make sure thatthe American people are not dependent on China.But we move that trade either to where we make it in south care, make it inAmerica, or we go and we make it with.

Our allies and our friends.And that was Nikki Haley speaking a little bit earlier on BloombergSurveillance, the former South Carolina governor, of course, vying for theRepublican nomination for president. She's got a long road ahead of her tocatch up with Donald Trump, the former president.But no matter who gets elected in November, whether it's Donald Trump, JoeBiden or someone else, it's actually unlikely that U.S.policy toward China is going to change all that much.Mackenzie Hawkins joining us right now, industrial policy reporter for BloombergNews with the story here.

A 25% tariff was put in place by theTrump administration. Everyone thought the Bidenadministration might do away with that. They haven't touched it.And now we're hearing from the former president saying that if he's elected,that tariff is going to go up to 60%. That's right.So we spoke with Trump last week and he said that he's considering a tariffacross the board of 60% or even more on goods from China, which would basicallyshrink a $575 billion trade pipeline between the two countries to practicallynothing. Meanwhile, the administration hasmaintained the Trump tariffs throughout.

His entire tenure in office, and there'sbeen this, quote unquote, imminent review of those so-called Section 301tariffs for many months now. But it's unclear where the Bidenadministration will choose to act, where they've preferred other tools ofeconomic statecraft, like restrictions on ship exports or on investment flowsfrom the U.S. to the US, his main geopolitical rival.That's a great summary of their different approaches.I wonder if you can compare and contrast and kind of summarize why they choseeach of those approaches, because both Biden and Trump have proven to be prettytough on China, and they see this as a.

Popular move with the electorate.And so Trump sort of introduced or blew up the China trade relationship.He introduced the US-China trade war with this across the board, 25% tariff.That's kind of a blunt instrument of economic statecraft.And the Biden administration has held those tariffs constant.There's talk of potentially increased duties on electric vehicles, some otherclean energy goods from China, some older generation semiconductor chips,that sort of power the global economy. But they've said, let's leave that lawand look at some more nuanced approaches that attack specific types of criticaltechnology.

Still, a big concern in the US-Chinatrade relationship is semiconductor chips.These are the electronic components that power your phone, your car, nuclearmissiles. And there's concern that there'soverconcentration of production of those chips in East Asia and particularly inChina and Taiwan. And so the Biden administration saidwe're going to try to cut off that choke point technology for China and preventBeijing from catching up to the US in terms of cutting edge technology.So it's not that the Biden administration has done away with themoves that Trump has made, but rather.

They've turned to things like exportcontrols, things like sanctions or increased sanctions on individualcompanies, which were introduced during the Trump administration but reallydoubled down under Biden and opening new fronts, like potential restrictions ondata security or the ability of cloud service providers to provide services toChinese companies, which are measures that may well come between now andNovember. I am curious, McKenzie when we talkabout all this, we talk about it from the side of the U.S., in addition to thetariffs and all the efforts to near shore is Nikki Haley seem to be alludingto here, or at least diversify away from.

China.But we kind of forget this in China, kind of diversifying away from us.Do they even care about all this nonsense?They certainly do. But there's been a sort of dogma inBeijing for some time that you need to de-risk.That's the the word on the U.S. side as well.But nobody in China really sees the U.S. as a friend here.And as much as the Biden administration, you know, tries.That's how it we have a we're guarding a small yard with a high fence in terms ofthese critical technologies trying to.

Make and having successfully made somediplomatic inroads with Beijing. The sort of overwhelming consensus onthe Chinese side is that Americans are trying to hamper their economy.And, you know, we talk to folks in China asking them, who would you prefer?And the answer is it almost doesn't really matter, because either way, Chinahawkishness is the bipartisan consensus in Washington.All right, McKenzie, great stuff and a great story on the Bloomberg terminal,not only talking about the potential options out there, but reallyquantifying the potential impact on China should either one of thesecandidates actually make it back into.

Office and actually follow through onsome of those pledges? Scarlet, with regards to those newtariffs, yeah, one thing that was really interesting in that big tech story thatMackenzie and her colleagues wrote together is that certainly while theChinese government has no official preference for who wins the election,one thing they do point out is that Trump is unpredictable and aggressive,but he does like to strike deals. So he might be quick to compromise tosomething and call it a win and move on. Yeah, interesting to see what happenshere. All right.Stick with us A little bit more coming.

Up here on the show, including settingyou up for some of the big potential market moving events tomorrow.This is Bloomberg. And. All right.As we start off the week here, Scarlett, we still got some earnings that we haveto sort out as the week moves on. Two of the biggest ones that investorswill be keeping their eye on tomorrow are Airbnb and Lyft.Mandeep Singh joining us right now, senior tech analyst for BloombergIntelligence. And Mindy, let's start off with Airbnbhere.

I mean, we talk so much about the growthof this company and more importantly, all that sort of revenge spending,revenge travel spending, if you will. Is that all over?Not really. I think from the prints that we haveseen so far, discretionary spending, consumer spending seems to be holding upquite well. And when you look at travel, you know,whether it's Airbnb or Lyft, they're exposed to discretionary spending.So what Uber told us is they can keep growing 20% now.Uber is the category leader. So is Airbnb, but not Lyft.And that's why that disparity in.

Valuation.I mean, Lyft rates at one times, DVD sales, Airbnb trades at ten times Q2sales. So clearly expectations are much higherfor Airbnb because it's a profitable business model.In the case of Lyft, they're still struggling to, you know, show that theyare ever profitable like Uber is. And so that's where investors will befocused on ten Lyft. Get there just by focusing on ridesharing, or does it have to enter a new business?I mean, in the what we have realize is with marketplaces, the only mode you canhave is operational efficiency and.

Scale, and that's what Uber hasdelivered. I think Lyft's problem is they neverexpand it in these ancillary categories like food delivery and grocery delivery.And in hindsight, that was a mistake, even though that would have beendilutive to their take rates, that would have been the right thing to do becausenow they're struggling to boost supply and they just don't have the rightfrequency to keep the consumers on the platform.There's no loyalty. They'll go to where the ETAs are lower,where the prices are lower, and that's what Uber is able to do.Why am I supposed to believe, though,.

That Airbnb is in a better position?Do they have the ability to cut costs? And I know their market leaders here,but is there some sort of brand loyalty to Airbnb?Yeah, I mean, look at the direct traffic they have verses and Expedia.Expedia printed results last week they spent 7 billion on sales and marketing.Compare that to Airbnb, less than 2 billion.So it's all direct traffic and that's why Airbnb's margins are like 30% withno margins, whereas Expedia is are like, you know, low teens.So clearly that leverage in sales and marketing is huge.All right.

Mandeep Singh, our thanks to HelmBloomberg Intelligence, a senior technology analyst here.A look ahead to Airbnb and Lyft going to report tomorrow, Scarlet.But a lot of other things also taking place tomorrow as we go around New York.Special election to replace George Santos in Congress and is going to takeplace in Long Island. It's very contentious.A lot of spending on this election already, including during the SuperBowl. Yeah, absolutely.Here. But there will be a big election towatch and maybe it actually gets.

Disrupted by that snowstorm apparentlyon its way to New York. But what's not going to be disrupted isthe release of that CPI report, 838 on Washington.And this is why the markets were at a standstill today, because we're waitingfor this number. The year over year headline number isprojected to fall to 2.9% from a three hand.We'll see if we get there, of course, is a precursor to the PC, which is theactual number that the Fed really cares about.Absolutely. Here.But the trend line, it's been.

Encouraging, right?I know that trend line could break, but at least for the last few reports, we'vegotten certainly encouraging and we get a slew of earnings.We mentioned Airbnb, Airbnb and Lyft, but we get some other ones as well.That really runs the gamut of the US economy.Biogen From the biotech space, you have also Coca-Cola, so you continue to see alot of consumer demand kind of companies and themes coming up.And of course this is kind of the lead in to the retail earnings that will comeup later on. All right.Well, a lot to cover here.

And please join us tomorrow.Scarlett and I will have a full breakdown of all of those earnings afterthe bell. And stick around later tonight.Balance of power coming up right after this show here for all your politicalnews, including, I guess, coverage of that New York snowy New York specialelection. All right.Thank you for watching. Have a great evening.This is Bloomberg.

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