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tv   Bloomberg Surveillance  Bloomberg  April 25, 2022 8:00am-9:00am EDT

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>> i think we are going to end up living with more inflation. >> stagflation has two parts of it. you've got to focus on the stagnation as well as the inflation. >> many consumers are going to falter even further under the weight of what is likely to be more interest rate hikes. >> i don't think the markets should take comfort in that. >> this is still an economy that is operating above trend that can be resilient to some shocks. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.
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we welcome all of you to markets on the move. yes, it is about a follow on from what we saw friday afternoon. dow down 900 points are you china front and center in the story. but jon, corporations continue to move forward with transactions and combinations. mr. musk front and center this morning. jonathan: the offer from elon musk is $54.20. twitter trading pretty close to it as all reports suggest could, i emphasize could, have a deal as soon as today. tom: in all the reporting over the weekend, the single sentence, i'm going to give bloomberg credit for this, morgan stanley steps in in some way to assist here. there is a difference between mr. musk alone and mr. musk wall street. jonathan: and it is not just morgan stanley. it was mufg, bank of america, barclays, a whole range of banks backing up elon musk's offer. that is clearly what changed
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things for this board, taking that offer seriously. at the time it came out, the jokes about whether this was serious or not. once we you get wall street involved in you throw them over to the board, that is when the board takes this a whole lot more seriously. tom: michael nathanson will brief us on this this hour. we got to look at every thing else as well. some catharsis, to say the least, friday afternoon. jonathan: this for me over the weekend continues, and it really bleeds into what is happening with china. it starts with shanghai and lockdowns, bleeds into beijing. it shakes things up in the equity market. the shanghai come down by more than 5%. the nasdaq this month is down 10%. that is a monster move, the biggest move we have seen on a monthly basis going back to 2008. this week for big tech, what a week we've got coming up for those earnings. tom: including apple on thursday. all of this we touched upon in washington at the about global slowdown led by a fragile china.
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lisa: that really has been the dominant story until twitter came into the sphere this morning. but how much does that really change the backdrop in a dramatic way? for europe in particular, i think this is important because we were expecting euro strength after the macron win in france. it is dollar strength, everything else weakness that is really dominating across the board. tom: we will have nathanson on here. there's been a few other stories as well. on a data front, i am going to suggest a more constructive tape than what we saw in our ago. jonathan: on the nasdaq 100, down 0.9%. we have a $96 handle on wti. really speaks to that slowdown story out of china. yields lower by nine basis points, 2.81% on the tenure. tom: a lot of news flow this
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morning. let's get right to a guest. gene tannuzzo joins us, head of global fixed income at lumbee is red needle. -- at columbia threadneedle. i call it recalibrate monday. how do you recalibrate in fixed income after the april we have enjoyed? gene: enjoyed is a strong term for those in the bond market. it has been a pretty volatile year, and recalibration i think really is the right word. we have been recalibrating fed expectations all year long, and now we sit at a point where we are pricing the fed to get above its own estimate of neutral pretty soon, so i think it puts a risk premium in the market that when you have periods of volatility coming from places like china what we saw today, you have an opportunity for bonds to act like that diversifier. jonathan: let's take the china story. that is the knee-jerk move this morning. treasuries doing well, yields firmer. how do you express to see -- how
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do you expect to see investors express that in this market? gene: the first is this is a commodity negative shock, so we are seeing that play through the system in the very short run. that may take just a bit of pressure off the fed, who's probably getting a little hot around the collar when you look at 10 year breakeven inflation in the u.s. as recently as the end of last week. the second is a tightening of financial conditions. you just mentioned of the nasdaq being down over 10%. we are starting to see a combination of tightening financial conditions start to bleed into early indicators of economic activity. so i think we are starting to see the brakes on the economy that the fed has started to put on show some deceleration. lisa: when you say it might take some of the heat off the fed, it implies they are looking for a reason not to hike as much as people might be suggesting. i am reading into what you are saying, but doing it
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deliberately because what we are seeing in the market is a disbelief that the fed will go as quickly as perhaps would be necessary to bring down longer-term inflation to the 2% level that the fed has traditionally targeted. is that your view, that the fed is going to look for off ramps to not go as quickly as the market is saying you have to go in order to curtail inflation? gene: eventually, but i thing we have a long way to go from there looking for an offramp. we are looking at a couple of 50 basis point hikes over the next two months. it is going to take the fed funds rate to the mid 1% area. maybe when we get to late summer, early fall we will be looking for some opportunity to decelerate, but i still would not call it an offramp. we will see the fed funds rate approaching 3%, if not higher, and that is where you start to get more of an inverted yield curve, not the modest version we have seen so far. lisa: do you think interest rate risk is already priced in, that the concern we saw in selloff driven by interest rates earlier
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is going to shift to concern about the credit worthiness of companies that are going to be facing the slow down with a lot of people are talking about? gene: i think eventually that will be true, but it is too soon to say. the fed has only hiked 25 basis points so far, and companies are any really good place. balance sheets are strong, and we look at margins and measures of profitability and leverage and they are better than they were in 2019. so it is not going to be a month or a quarter that weakens that narrative, but as we move into 2023, that could start to change. i think you start to look at a long treasury yield of near 3% or over 3% on some maturities, and that starts to look cheap relative to the fed's long-run expectation of 2.4%. tom: what are people doing with their money? they have an intuitive understanding in the equity markets. what do people do in your world when price goes down? gene: i think the knee-jerk
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reaction is a low bit of sticker shock, sort of alligator arms, not particularly comfortable putting money in the market right away. we have seen the larger institutional investors really move back into this market particularly as you can build portfolios of high quality bonds with a 4% to 5% yield. it is really the theme here, that in the bond market, quality is on sale. that is what we are seeing looking at investment-grade corporate bonds, looking at municipal bonds. high quality sources of income are as cheap as they have been in the last decade, so this is an opportunity we have been waiting for. it certainly comes amidst uncertainty around inflation, uncertainty around fed policy, but that is the way the market works. jonathan: gene tannuzzo of columbia threadneedle. barclays spoke to this last week when they said the following, that the fed has emphasized they are largely content with hiking to neutral, perhaps a bit above. to your point in your piece,
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this is what they said. "investors are interpreting the fed's strong desire for a soft landing as signaling greater comfort with above target inflation for longer." that, which is the heart of your piece, is what the bond market seems to be picking up on. lisa: absolutely. even today when we see a bit of a bid, you are not seeing a commencement move when you look at the expectation for inflation over the next five to 10 years. it is still hovering at the highest levels going back to 2014 at 2.56%. just to give you a sense, people are not thinking that the fed is going to perhaps err on the side of not hiking few much, which is going to lead to a prolonged bout of higher inflation. jonathan: pushing this story out to 2023. tom: the timeline goes out, and it is about how far they go, to the point of lisa's essay, mizuho says the summer here is a
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possibility of a fed where the bark is worse than the bite. that is this idea of not having the pendulum extend out to true restriction, but some form of neutrality. there's a whole group of people that don't even think we get to neutrality. priya misra, i think, is in that camp. we get along. jonathan: there's been a lot of barking and not much biting so far. you can read the column on and on the bloomberg terminal, as always. futures down on the s&p by 0.8%. in the premarket is one stock to watch. twitter up by more than 5%, let's call it $51.50, just moments away from catching up with michael nathanson of moffat nathanson. tom: not only twitter, but also the entertainment sphere he works in. these erosions in some of these stocks, netflix and warner bros. discovery printing under 2020
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premarket. these are real markdowns. jonathan: it was very tough for netflix last week. it has been tough for the whole of the nasdaq 100 through much of the last month. we have talked about that move lower on the nasdaq 100 by almost 10% this morning. nested 100 futures down 0.8% and the s&p 500 negative zero point 75%. we will be talking about twitter with michael nathanson of moffat nathanson. what this means for tesla as well for twitter firmly or in early trading. tom keene, lisa abramowicz, and jonathan ferro. for our audience worldwide, heard on radio, seen on tv, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. it could be one of the biggest internet acquisitions ever. bloomberg lynch twitter is in
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the final stretch of negotiations about a $43 billion sale to elon musk. an agreement could be reached as soon as today of negotiations go smoothly. musk met with twitter executives sunday. the company started warming up to a potential deal after a financing plan. secretary of state antony blinken and defense secretary lloyd austin met with ukraine's president volodymyr zelenskyy in kyiv late sunday night and promised more military aid. the u.s. also says it would start sending diplomats back to ukraine. in france, emmanuel macron has won another shot at convincing the public that his pro-business, pro-european vision can for them. he beat nationalist marine le pen with more than 58% of the vote. macron acknowledged much of his support came from people who don't support his ideas, but wanted to keep le pen from winning. the price of oil fell below $100 a barrel on concerns that the spreading coronavirus outbreak in china will hurt global demand. wti futures fell almost 5%. china's demand for celine,
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diesel, and -- for gasoline, diesel, and aviation fuel is expected to fall. consumers returned to much of their pre-pendant behavior and the world's largest beverage company emerged from a long period of shuttered venues. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
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>> i do think this will be somewhat painful. i do not think i will be able to acquire.
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i should also say if the intent is to retain as many shareholders as is allowed by the law in a private company. jonathan: that was elon musk speaking just a week and a half ago. elon musk in the news again this morning. we are reporting here at bloomberg that twitter and elon musk are closing on a deal which could be announced as soon as today. the stock is up by 4.5%. additional reporting that elon musk is said to be lining up equity partners for his bid with other co-investors. the offer price, $54 20 since. that is the move. tom: i am in absolute silence over where it is. there are others out there that have published on this, and we go to the experts. craig moffett and michael nathanson joining us now -- craig moffett, and michael nathan's and joining us now.
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i will go to a price to sales analysis. you've got to be kidding me. it seems a tad rich. michael: it is a tad rich. if it were not for this bid, we would be down. the peak earnings for twitter were in 2018. we thought margins would be close to zero. this is just a gift. we said take the money and run. we have been saying that a lot. there's no other bid coming. jonathan: what do you say back to people who say this stock traded in the 70's a month ago, why are we selling this at $54.20? michael: because that was a bubble. roku was at 400. that was a bubble. it made no sense then, and this price makes no sense now. lisa: why then are other investors on wall street getting
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involved with elon musk at this price target? michael: because he has made money for everyone. he's basically someone you want to bet on. if you are in the stock already, if you can let it ride with elon musk, why not? he has not laid out his plans for a turnaround except for his views on free speech. so we don't know what he is going to do on the cost structure. betting on elon musk has been a good bet for everyone, so why not continue with us but -- with that bet? lisa: is this going to be a media company or an ad based revenue structure that will be the driving factor that could make this a little bit more profitable? michael: we talk a lot about a subscription model here, and i think there's traction. if i don't want -- if i want to select to i pay attention to and
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get breaking stories from, there's a subscription model. you can have what we have seen in media now, an ad tier and a subscription tier. that would make sense to me. tom: i know you have seen barbarians at the gate 14 times. to be honest, the fancy bankers i'm of the smooth guys in menlo park, they all read michael nathanson cover to cover. what has changed in the last 48 hours when we see morgan stanley and other legit bankers are involved in this process? what does it mean when the barbarians are ready to tweet? michael: it means there are not a lot of great ideas right now on the backside. this is a big idea. you help elon musk achieve his goals and then you tag along for whatever he does next. maybe you will buy some other assets. tom: do they get equity in a private institution as mr. muska alluded at that ted talk -- mr.
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musk alluded at that ted talk? michael: i think they would tag along. who would ever think tesla would be worth what it is today? tom: jon ferro is the only one who got it right. jonathan: i don't know about that. i am thinking about a future platform and whether twitter once to be a part of that. we know the increasing view of multinationals, let's say the walt disney company, as a shift to a more aggressive freedom of speech model at twitter under 11 musk. how do you think multinationals will view that platform as may be they want to advertise? michael: i think that is a major problem. we have been writing for the longest time, really since 2016, that social media has major content quality issues. if you take away all the moderation twitter and facebook have put in, it is going to make advertisers much less willing to participate. they are not going to want to be stuck in content that they
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deem is not quality or safe, so i thing it is a major problem. if they can move to a subscription model, drop the advertising move there. that is something twitter had been trying to clean up. it is a risk to the monetization in the next couple of years at that happens. jonathan: help me understand your buy on meta platforms with everything we have talked about so far. michael: it has been a tough place for us to be, but facebook has made their business based on targeted performance-based advertising, even with all of these changes. they still have strong first party data on who you are. they are able to target you anyway that twitter has never been able to. so our bet is on the long term opportunity that is targeting advertising online, and facebook has a dominant position there. there's been a bit of a headwind from macro, from the movement to
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reals. i should really good about facebook in the next 12 months, but they are in a different business than twitter. putter is all brand advertising. -- twitter is all brand advertising. tom: have we seen a true structural shift in the streaming game? michael: i think we have seen a true structural shift in the investors' willingness to pay five years out for the streaming game. we have seen investors reason you can't pay for revenue multiples you get for earnings, and in terms of the shift, you have asked me over and over is this a good model, where is the top on spending. netflix is telling you they cannot spend as much going forward. that is opportunity for others to catch up to them. so it is really interesting. i would argue that people now have an open door to compete with net looks on their own terms. it is advertising, sports, more theatrical films. it is an opening. it does not mean this is a great
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business for anyone, but it means the playing fields will be more level than anyone thought about a week ago. jonathan:jonathan: fascinating stuff. michael nathanson of moffitt nathanson. to call it a bubble, the move in twitter last year, that was a bubble. roku, that was a bubble. the viewers say mr. nathanson of moffitt nathanson this morning. lisa: i said come are you surprised at no other bidders have gotten? he said not at all. the fact that there are other investors and this speaks to elon musk's ability to wrangle support from investors because right now the model does not suggest exactly the value. jonathan: look at what he has achieved with tesla. what an achievement against all the naysayers. that is why many people don't want to bet against him right now. tom: absolutely. and let's not forget paypal. the guy has a track record going of getting things done.
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everybody is focused on the politics, the bill gates stuff and that. what if this guy financially stabilizes twitter growth? jonathan: he's got a track record going back decades. the offer, $54 20 cents in the premarket. tom: should i tweet on the break? jonathan: go for it, tk.
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jonathan: monday morning. we are hitting the ground running on tv and radio. this is bloomberg surveillance. price action aggressively lower in china, down more than 5%. equities lower in europe. lower stateside. the nasdaq down .6%. the s&p also down .6%. concerns of lockdowns from shanghai to beijing sending yields lower on the 10 yellow -- on the 10 year. crude had a look at a $96 handle comic $97.27. tom: blackstone to buy ps ps business parks. it does not end. jonathan: dealmakers are making
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deals. elon musk is a dealmaker. the offer is $54.20. there's a conversation about a deal -- about a deal getting done as soon as today. he is still looking for co-investors. tom: 28 million square feet in the ps business parks. dealmakers are doing what they do, they keep going. jonathan: did you just do that again? the square footage? tom: 28 million total square feet. jonathan: the voice? tom: i cannot do that again. andrew hollenhorst will save us. the chief economic density group. there is a phillips curve, now there is the andrew hollenhorst curve, which is a certain number of interest rate increases. where on the curve does jay
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powell become restricted? andrew: a great question. thanks for having me. that is what we are seeing. fed officials trying to find where that restrictive point is. we have had a concerted shift towards the hawkish direction and inflation continues to run strong. you're looking for a point where the economy slows down. we have mortgage rates higher, above 5%. maybe that will slow down the housing market. the jobs market is where i would look. still does job openings for every unemployed individual. needing a lot of restrictions to slow the economy down enough to take away that inflationary pressure. jonathan: what is the data point for you, the employee -- the employment cost index? andrew: this was the data point for q4 when chair powell looked at the data and we started to
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have this concerted movement towards more hawkish rhetoric from fed officials. indicating the appropriate level of policy rates. it was that broad-based wage pressure, that is the fundamental supply demand imbalance in the economy, if you have a shortage of workers you keep pushing up wages, if wages keep pushing up you will have a spiral of rising wages and rising prices from fairly early stages. that is a key number this friday. lisa: where is the -- is it that it will actually come in hotter than expected or weaker than expected in terms of how the fed will respond? andrew: i think that is right. it is hotter than expected. if you look at the underlying data, what is going on with wages, the atlanta fed has the wage tracker that controls characteristics of workers.
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that has really picked up in recent months. you are seeing this broad-based wage pressure. it is not just wages, but also the benefits. that is where we are seeing some of the increases around the edges where some firms are reluctant to increase the wage rate or increasing other benefits. all of those things great upside risk to the employment cost index. lisa: i'm trying to get my head around this idea of peak hawkish nest which a lot of people are talking about. can we get to a point when we are talking about a bill dudley 4% fed funds rate if the eci comes in as hot as you expect or you if you are started see other indicators support that view? andrew: that's right. if you look at where inflation is running now, it would not be that extreme to think the policy rates could get upwards of something like 4%. the market is not fully pricing
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that yet and to your point we need to see more evidence inflation continues to run strong. the other aspect is how much i financial condition tightened? your talk about mortgage rates moving higher. equity prices are lower. that is what the fed has to figure out. how far you need to push expectations to get financial conditions tightening to slow down the economy. tom: how much will trade pay into this? i am taken by the imf world economic outlook of global trade slowed down. how much will that pair off u.s. gdp in full right into the fed discussion? andrew: i think there's a gdp component and an inflation component. in the short run we have a lot of supply chain issues and that is impacting gdp. auto sales have been week.
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if you think of the longer-term implications, if we have a move away from globalization towards regionalization, you are moving away from lower cost or protection technologies for higher cost of production technologies. the reason the globalization occurred is defined the low cost producer. that kind of global downshift, disinflationary force, that is not going to be there in the same way. michael: -- tom: are you suggesting we stand alone? i am calling it recalibrate monday. we have to recalibrate to a new aloneness of the american economy? andrew: i think trade will always be part of the economy. there will not be a full away from trade. do we need to recalibrate to a world where there is less global pressure on prices? i think that is the case.
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jonathan: market pricing has followed you. sometimes that is original. often you get strategists and economists market to market. you came out a month ago and look for four 50 basis point interest rate hikes in a row. that was march 25. a month later it is consensus and largely priced. can you tell me what guided you into that effort and where you are convinced this federal reserve will not only go to what they think is neutral, but they will go beyond that. for me that is the debate right now. many people doubt they will take that next step beyond neutral. they say there's not much appetite to go beyond that. tell me what guided you to that call and what guided you to believe they will go beyond what they think is neutral? andrew: but we start with are the fundamentals.
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the number one driver of that hawkish call, we saw persistent inflationary pressure, we saw inflation that was going to continue to deliver above target. the analysis there was if you have inflation delivering above target, nothing organic will bring it down. that is where we differ from other forecasts that say the supply chain will normalize. we saw nothing organic in the economy that would bring down inflation's that means the fed needs to fight inflation. then you go to number two, which means the need to get interest rates to neutral if not above neutral. if you're trying to get to at least neutral, the minimum neutral estimate out there is two to 2.5%. 450 basis point rate hikes will only get you to that area. four 50 basis point rate hikes
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made a lot of sense. on that topic, it goes back to inflation, are we going to see inflation slow down enough? we see employment cost rising. that inflationary pressure will only be brought down by putting restraint on the economy, which means interest rates above neutral. jonathan: at the moment they do not have to choose between growth and inflation because growth is abrupt -- growth is robust. their people teeing up a decision whether to have to make that choice. you think when they have to make that choice they will keep going to the inflation side of the mandate. i wonder what is guiding you towards that. some people have their doubts that when the choice comes, most people believe they will tolerate higher inflation and support decelerating growth. why do you take the other side? andrew: i agree with the idea that choice will get a lot harder. there may be a real trade-off
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between growth and inflation. i think the emphasis will continue to be on bringing inflation lower. carefully, cautiously. i think that officials are trying to achieve the best version of a soft landing they can. at the end of the day this is a country that experienced the 1970's, and if you are a fed official, the risk you are protecting against is a repeat of the 1970's. what happened in the 1970's was concern about growth which led to not enough concern about inflation and a decade plus overshoot that became very difficult to bring down and a worst scenario for growth that involve multiple recessions. i think that is what the fed is protecting against and that is why they stay focused on inflation. jonathan: it has been brilliant to follow your research. the world has moved much closer to you. andrew hollenhorst of citigroup. thank you as always.
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this is the issue. the fed wants to get back to what they think is neutral. the debate is what they do after that. lisa: you nailed it when you said when they actually have to choose between growth and inflation are they going to choose fighting inflation over hampering growth, that is a key debate at a time the fed has not shown the willingness to do that in the decades that came before. jonathan: we will have that conversation with oksana aronov in the next hour. will be talking about the equity market with seema shah and jay pelosky. looking forward to that. dan ives of wedbush on twitter as we report we could have a deal as soon as today. from new york, this is bloomberg. ritika: keeping you up-to-date with news from around the world with the first word. twitter is on track to reach a deal with elon musk on that
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takeover offer as early as today. elon musk is lining up partners for the acquisition and continues to speak to potential coinvestors. talks are said to be fluid and a deal could be delayed or ballpark. it would be one of the biggest internet acquisitions ever. secretary antony blinken and lloyd austin met with president zelenskyy. the u.s. promised ukraine more military aid and said washington wants to see russian forces browned down so they cannot attempt a repeat of the war. in china the coronavirus outbreak has gotten worse. jitters about an unprecedented lockdown in beijing. lawmakers are trying to avert a shanghai style prices. blackstone is expanding its real estate bed across the u.s. is it -- it has agreed to by ps business parks. the deal gives blackstone about
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27 million square feet of industrial business park, office, and rental housing properties and locations in california, miami, texas, and virginia. the supreme court hears arguments in the case of the brain football coach. he lost his job after repeatedly taking a need to play alongside his players. the case gives the court's conservative majority a chance to relax the separation between church and state. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪
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>> we see a bit of excessive hawkish nest driving markets at
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this juncture. at the end of the day i see a rate background that is more conducive of equities and it is a relative call. at this environment the place he did not want to be as fixed income. tom: jean boivin of blackrock investment institute. someone widely predicted to one date run the bank of canada. here on your equity debacle of friday and on the continuing debacle this morning, gina martin adams joins us, our chief equity strategist. what is your single clarion note this morning on what happened friday? gina: i think friday was a continuation of what happened all week, and that is the market starting to get quite concerned interest rates would go much higher much faster than we had anticipated and some concern the fed will attack the balance sheet with quantitative tightening.
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i think the market was tiptoeing its way into pricing a tighter fit, but now we are just going full steam ahead. tom: is there a partition of profitability? what i see is profitability company seem to be doing ok and the less profitable companies are getting hammered. gina: that is absolutely the case. one of the problems we have is the maker cap stocks that were the most profitable in 2020 and 2021 when we were all sitting at home, those stocks are getting creamed because not only are they less profitable than anticipated, but they are guiding us to suggest they may produce lower growth pace into the longer-term future. that, combined with higher interest rates, reduces the amount investors are willing to pay for those stocks. this is the group in the index that is the most expensive, but also the biggest. you see this distortion play out as a result of those stocks in
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particular, the index is down. in the aggregate earnings are fine. they are beating expectations. it is difficult to notice when the mega caps are missing. lisa: i was looking at a jonathan golub of credit suisse that stronger results cannot get respect. it has all but in the profit margins which held up well better than people expected. no one cares. it is all macro. at what point to the margin start to matter? gina: our view is margins are mixed. which government point were net income margin growth was extraordinary. over the last few quarters we have seen some chinks in that armor develop. we need to see stabilizing condition in terms of the supply chain which we are not seeing right now. we need to see inflation peak before we get confidence margins
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will be fine. that said, companies are beating expectations on the top and bottom line. this margin weakness we are seeing when specifically highlight margins is not showing up in the aggregate. it is a sector by sector specific phenomenon. unfortunately the results of that are these giant companies that really dominate the s&p 500 are proving to be areas of weakness, where the tinier companies, the energy stocks, the materials and industrials companies are generally doing ok and in many cases better than anticipated, but they are smaller. lisa: this is somewhat radical. people have been saying the biggest companies are able to have pricing power, a.b. to pass along some of the costs to consumers more easily, able to absorb supply chain issues. you are saying the earnings are showing the opposite? gina: so far the communication
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companies have been very weak. let's take netflix as an example of a major cap -- of a mega cap company, used to be in the top five companies, now it is down to the top 50. this is a company that has been a darling of the market. this is this quarter's biggest weakness. last quarter we had the same thing happen with meta-, formerly known as facebook, really disappointing expectations. it is not that they are disappointing short-term expectations, they are disappointing long-term expectations as well as they cannot sustain the pace of growth they had during the pandemic. in many cases, you have regulatory pressures emerging out of europe over the course of last month, you have rates rising, which depletes the valuations for these companies, and that underlying concern about earnings and the longevity of this growth story that is hammering the space.
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it is communication stocks more than tech stocks. we will find out this week from apple as well as microsoft if it is embedded in the textbased. it is more than communication, media, that is proving to be the biggest weakness. tom: you and lisa are way too young to remember where utilities had value. last 10 years they stunned me, up 13% on the dow jones utility index. it has cratered 3% off the peak. is a traditional, you can hide in utilities? gina: i think some of it is traditional. we have seen consumer staples and health care stocks perform well as investors have moved into low volatility. the risk is they also low-margin entities. tom: they are not as profitable. gina: they are not profitable companies. they are low volatility, and
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investors hide there, but will they produce the probability the rest of the market will, no? investors move into them in a short-term basis looking for opportunities to emerge as volatility columns down. -- as volatility calms down. the other thing that is a big risk is of the longer end of the curve starts to take off, this space is very debt funded. they are very reliant on the debt market. you have to be careful not to over attribute to some of these low volatility securities. tom: i look at the standard & poor's last decade, up 15%. utilities are up 13%. do i want to give up only 200 basis points for that kind of comfort? lisa: and what does comfort meet in an era of rising rates and utilities that attract that market more than anything. i want to point to twitter
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shares up 4.6%. i want to point out on twitter, trending is r.i.p. twitter. there is a lot of disagreement about the future of this platform and unease i can feel about what free speech means. i'm not offering up an opinion because it is hard to say what it is. there is a fear of the unknown and what elon musk's version of free speech is at a time when a lot of social media platforms have become the town square, the place where people give their message. i think that will be a massive discussion as we head forward to talk about elon musk. tom: there is a massive distinction as we presume it will be a private company. lisa: that is the presumption. we do not understand who is participating. the fact that elon musk got broad-based support from wall street speaks to the strength of this bid. tom: it is an ongoing story
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through the morning. futures and -19. dow futures doing better the two hours ago. please stay with us on bloomberg radio and bloomberg television. good morning. ♪
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jonathan: live from new york city, good morning. equities down hard in china. in the united states were cover little bit.
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futures down one third of 1%. "the countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, we begin with the big issue. lockdowns and china radley investors. >> the chinese element of the story is dominating. >> widening lockdowns across china. >> china is continuing to be very strict. >> that concern is intensifying. >> we are having a risk off moment. >> china is just one of the factors. >> all of the cyclical dynamics we are seeing are unprecedented. >>


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