'Bloomberg The Open' Full Show (02/28/2023)

Closing out a really tough month of February life in New York City this morning. Good morning. Good morning. 20 feet just trying to bounce by about a tenth of one percent. The countdown to the open starts right now. Everything you need to get set for the start of us trading. This is Bloomberg, the open with Jonathan Ferro. Live from New York, counting down on side as European inflation accelerates Goldman’s Investor Day kicking off in New York. And Target delivering a cautious forecast. We begin with a big issue, the American consumer. This debate around whether or

not the consumer is healthy, consumer is extremely strong, strong, strong and resilient. There’s just so much data that has come out, that healthy consumer spending number that tells us that the consumer is very strong. The state of the consumer right now looks pretty good, feels pretty good. The consumer in the U.S. is still in a good place. You have this really golden environment. The labor market is just remarkably resilient, incredibly resilient. The consumer will increasingly have more discretionary income. Consumers will have you believe the economy going. The question really becomes, how long is that going

to continue? We need to keep things in context. At some point later this year, you’ll start to see the consumer. Frank Tom Keene offering another look on that story has blamed those

county lines. Hi, Kelly. Yeah, well, the backward look, at least, John, is pretty healthy. The consumer clearly hasn’t cracked yet because Target actually blew it out of the water on earnings per share, a dollar and eighty nine cents. The street was only looking for 148 in comp sales actually were up about seven tenths of one percent, whereas analysts thought they would fall one point

seven percent. So backwards look, thumbs up forward. Look, however, is a bit of a different story. Target’s saying at the maximum they expect to make eight dollars and 75 cents a share this year. That is about 50 cents below what the street was looking for. And that is due to just a lot of macroeconomic uncertainty, a lack of clarity around what is going to happen to consumers, discretionary spending. This is a very similar story to what we heard from Wal-Mart last week. That said, when you look at the notes coming from the sell side this

morning, they don’t seem to be too concerned. Some of the words they used in those notes this morning include an unsurprising forecast, conservative, better than feared. And another reason the street is finding for optimism is the progress on working down inventories. Remember, during the pandemic era, Target did not have enough stuff and too much demand that quickly turned into a story up, too much stuff that people no longer wanted. Demand went down and we saw massive built in inventory between 30 and 43 percent in several quarter period starting a year ago. But finally, target making

progress. Inventories actually falling two point nine percent in this period. So that is a very important part of the story. It is leading to improving improving sentiment in the stock, which is not the chart we are looking at here, I believe. That is a chart about inflation. But if you take a look at Target’s performance on a year to date basis, not only is it up about 11 percent after its worst year since the year 2000 last year, a 36 percent decline. It is also outpacing Wal-Mart. That said this morning, though, John, the stock down

about four tenths of one percent in premarket trading. So now it’s not a massive that stock so far this morning all over the place. Candy lines. Thank you. I think was down for 5 percent, then up around about 5 percent. Got some breaking news just moments ago. Want to cross over to Abby’s pick up on that. I have a page on what we do indeed. Have breaking news on Tesla. And they have announced that they are going to be building a plant in Monterrey, Mexico. This according to Andres Manuel Lopez Obrador. And Lo, the president

of Mexico and the United Mexican States. This stock is holding its gains. It’s up about one point six percent. I think the important takeaway here, John, could be, of course, because they’ve been discounting recently, there’s been some concern about demand. But the fact that they’re now going to be bringing more supply online in Mexico, which suggests that maybe it’s somewhat healthy. Again, the actual headline is that Tesla will be building a plant in Monterrey, Mexico. That stock is up by that one point six percent in the free market, features positive by about a tenth of

1 percent. Let’s talk about this consumer in America with cross marks, Victoria Fernandez, Morgan Stanley’s Andrew Sullivan to the bias here. Thanks for being with us. Victoria, first to you. Something you’ve said, you said you can think this economy looks great, but I don’t believe it. Why is that? I mean, Jonathan, we we look at all these things that people say, you know, look, the economy is strong, the labor market is strong, earnings maybe weren’t as bad as people expected. PMI ISE are doing well. Wages are up and that’s all true. And I can see

how that supportive of the economy. But look, you know, I manage fixed income, too, so I have that risk averse side of me that says, wait a minute. Leading economic indicators are down 10 months in a row. We have earnings expectations continuing to come down at a pace actually over the last quarter. That is the highest it’s been in the last twenty five years without being in a recession. We still have the lagged effects of 400 and 50 basis points of rate hikes coming in. The inflation story that we can talk about with the labor

market as well. And we’ve talked about into money growth falling. So those are the items that say. All right, hold on. Hold your horses here. I don’t think we’re in a sustainable bull rally. I think the consumer does have some strength on their balance sheet because of the stimulus payments that are still there. I think we have about a trillion left of that. And because wages continue to be strong, because outside of the tech sector, you’re seeing labor hoarding going on. And so I think because of all that, we’ve got to be a mild recession

coming, but not a deep recession. And that’s all because of the strength of the consumer. I just don’t think we can say it’s at all clear from here. I want to share some work from an incident with Morgan Stanley. I want to keep country out of trouble. Someone asking me to comment on this. I’ll ask Victoria centric. Just be patient if you can. This from Ellen Zentner just moments ago. In the last 24 hours, she said, labor market catch up, excess savings, low energy prices, the boost in the consumer, but a slowdown is still coming.

We see the first CAC delight to March 24, followed by more torrential easing. So pushing out this rate cut. Cool. Victoria, given what you’ve just said. Does that stack up? It does. I mean, Jonathan, we talked about a few weeks ago and I said I can’t believe that the market is actually pricing in rate cuts for 2023. I actually think we’re going to see rate hikes continue probably into the June meeting, maybe even later into the year, depending on if consumer demand continues to be as high as it is. You look at that labor market

right now, construction jobs, there’s over 400000 openings for that. You look at manufacturing, almost 800000 openings in manufacturing. They’re going to have to see wages continue to go higher because we don’t have the migrant population that used to fill these roles here. Right now, there’s a structural change in the labor market and that’s going to cause wages to go higher. It’s going to make inflation stickier. And all of that, even though it’s positive for a consumer that tells the Fed their job is nowhere near done. And we’re seeing two year yields across the board, not

just in the US, but you look at Canada, Mexico, Singapore, India, around the globe at cycle highs. I think that tells us we still have a ways to go and no cuts until 2024. Look at Europe this morning as well. You want to look at the Treasury market full, right? He went on a two year of three basis points on a session. Andrew Credit where it’s due. He came into 2023. You said there was upside risk to the equity market that’s materialized. I guess the question for you now, sir, given the sell off this month,

what now? Well, I think the setup into March is much better than it was in February, which is, you know, after a roaring January sentiment got a lot more optimistic. The relative strength index got very overbought and we were set up for a bad, bad February. Now that, you know, we’ve had a bad February, inflation higher and so forth. I think the setup is better. Into March. And, you know, something that I would say about the consumer is, look, I’m an equity manager and what I care about is expectations. And if you look at Target

today, you know, last year, if they report this number, I think the stock would have been down a ton, but it was down thirty six percent last year, Kaley said. And therefore, it’s been deemed risk. And the fact of the matter is that the earnings. Right. Their earnings estimates got absolutely crushed last year. So the rate of change in their estimate cuts is actually slowing. So this is the key point. I think people are missing, which is it’s the second derivative of earnings revisions. And for many companies, not all. Probably not for the tech stocks,

for them, for many companies. The rate of revision negative revisions is actually slowing. And that’s why the stock is not down, even though it wasn’t, you know, they lowered guidance for the future. So things aren’t just getting as bad as as quickly as they were before. Interesting. Sadly, I don’t get it. Well, then it’s about championing equity. So where’s that theme more pronounced? Well, I think you want to search for companies that have been that were crushed last year. That estimates have already been depressed. And I think there’s a perfect example. Many consumer stocks have

been depressed, not the market overall. The mega cap, tech stocks, you know, if you look at earnings revisions year to date, roughly half the negative revisions have come from six mega cap tech stocks plus a few energy stocks. I would be careful on those numbers names simply because they didn’t d risk last year. Many of the consumer discretionary stocks did risk. Last year, they were absolutely hammered into me. That’s where you that that’s where you find your best opportunity. So ISE, I think inflation is going to remain sticky, but we’re going to really find out

how sticky to the second half of the year. I still think the first half of this year sets up pretty good for equities. And then we’re going to find out more about the economy, about inflation in the second half. Well, Andrew, to your point, discretionary yesterday on the S&P 500 of 20 percent worldwide, the airlines absolutely fine. Forgive the pun, in Europe, too, got Lufthansa about 26 percent from the close yesterday, not including what’s happened today. Air France up by more than 40 percent yet today. Victoria, where are you on some of the discretionary names

at the moment? Yes, I think you do have to have some exposure to these discretionary names. We were at a conference last week with a lot of our clients. And the question was, how do we position our portfolio? Well, you need to have some exposure to some of those staple names. We like some of the health care, some of the HMO names. But you need to have some exposure to the cyclicality in the market as well, because I think it is going to be a churning market from here till the end of the year. I

don’t mean to be a Debbie Downer, but I mean, I don’t see the market doing too much for where we currently sit for the next nine months. So that tells us you have to be opportunistic and tactical. Look at some of those cyclical names when they’re up, trauma when they’re down. As Andrew was saying, then you can go in and buy some of those names. It’s where the quantitative component of your model comes into play, not just the fundamental side. Look at the trends. Look at those that have sustained themselves above their 200 day moving

average. You go into them, some of those cyclical names, some of those discretionary names that works with credit cards. We like American Express. We added a little bit to American Express this week because, again, the strength of the consumer. So there’s some opportunities there. I think you just have to be very cautious and be choosy. Luxury in Europe. M.S. Carrick LVMH all up anywhere between 17 and 18 percent from the close yesterday, yet today. I look at the airlines here in the United States century American year today. Twenty three percent high. United 34, 35 percent

higher, down to 15 percent higher. And then reasons, Andrew, than to stick with some of those names. Well, I have a free fall. Yeah. Consumer discretion is up 12 percent, but it was down 37 percent last year. Jonathan Ferro. Let’s keep that in mind, first of all. Number two is, you know, keep in mind the University of Michigan consumer sentiment hit an all time low, 45 year low last year. So the rate, again, the second year of it is about that things are going to improve. The sentiment is improving. So I wouldn’t necessarily buy the

strongest ones. I would look for areas that have been hit like the home furnishing. Those have been they were crushed last year. Home apparel, I understand they’ve had balances this year, but to me, that’s a very intriguing area because. I think things are stop getting worse. Let’s throw some research into the mix. Mike Lightfoot, thanks, America. This is what he had to say yesterday, said a big slow down to consumer demand might be needed for inflation to return to 2 percent. This could require several more Fed hikes. Civic toy. Let me ask you this. If

you love consumer discretionary, you find in effect no. And Johnson, you know, I’ve said all along the market was fighting the Fed and I couldn’t understand why they were doing that. And we’re not saying go 100 percent into consumer discretionary. We’re saying have some exposure because there’s gonna be a lot of volatility in this market. And you want to be able to have some balance in your portfolio and take advantage of that. But I don’t think you fight the Fed here. They have told you over and over again they’re going to be higher for longer.

Look at what the Fed funds futures have done over the last few weeks. They’ve gone up, what, 50, 60 basis points? I think it’s around a five thirty five. Now, we still have a ways to go. So I don’t think you want to fight that. But I think you can be opportunistic at a little bit of fixed income. And there look at those short term yields. If you see some opportunity on the long end of the curve, lock some of that into because we’re probably getting closer to the top on the long end of the

curve because of what inflation expectations are doing. So I think you have to tie all that together. Don’t go long. All in one area. You have to be choosy. And look, targets set today, inventories on discretionary are down 13 percent. That was the issue they had last quarter. So the consumers are out there. They are buying. You just have to be cautious. Teaches just about unchanged on the S&P Victoria entry is going to be sticking with this this case. And maybe we can do that with. Happy morning, Abby. Morning, John. Well, we take a look

at the shares of Chevron. We are going to see that they are popping. Yes, oil is higher on the morning. But we also have Chevron announcing that they’re boosting their buyback program by about 17 percent from 15 billion to about seventeen point five billion dollars. It could go as high as 20 billion dollars, really trying to create shareholder value. So those shares, again, popping, really popping, really almost soaring, moderate. Sorry. I guess I would say zoom up, four point three percent out of the doldrums for at least now. The stock, of course, from its peak

down more than 87 percent. But in the most recent quarter, it was OK. They also boosted the profit forecast to ninety six cents to ninety eight cents, about 13 percent better large customer solid. So right now, a little bit of life resume. And then finally, Norwegian cruise line, not so much, down six point four percent. The fourth quarter loss was wider. The forecast is a bit disappointing. What’s interesting is bookings are solid, revenue solid, John, but it seems as though they’re not managing the costs so well with Tom Cruise on this show, you know. Thank

you for that. That’s the latest of some of those names coming up. Eurozone inflation surprising to the upside. Inflation is returning. And this must be the biggest concern for the central banks. So in order to avoid that, we must move much more towards targeted intervention, targeted support. That conversation up next. Inflation is returning and this must be our biggest concern from the central banks. So in order to avoid that, we must move much more towards targeted interventions, targeted support and not the big water hose splashing water everywhere. That will only fuel inflation. And that is

the worst thing that can happen. Inflation surprises to the upside in Europe. Spanish CPI unexpectedly Santa writing. France delivering a record high print this month, sending bond yields across the eurozone higher, with investors briefly pricing in a full 4 percent ECB terminal. Right. Mike McKay. Mike, do you remember? Not even a month ago when Chairman Pounds said that disinflationary process is started. Then a day late to present that got turned round. And she said the risks around inflation are becoming more balanced. That feels like a lifetime ago. Well, it was only this morning, John, that

Philip Lane, the ECB chief economist, went out on that same limb. This is what you don’t want to be saying when you get surprise inflation numbers. There’s significant evidence that monetary policy is kicking in. Mr Lane told Reuters today. And then a couple hours later, we got inflation reports from France and Spain that shocked to the upside. France, supposed to be unchanged, goes to seven point two percent from 7. And the Spanish inflation number six point two percent from six. And on top of that, both of them setting records for euro zone era participation for

their headline and core rates there at new high levels. And because of that, we’re seeing quite the reaction in European markets. Break evens have gone to new highs for the year and for even longer than that. We’re seeing rates rise significantly across the eurozone and even in the UK, 10 year break evens at a two month high. That’s a reaction to what’s going on in Europe. We are seeing the reaction in U.S. bonds here as well. And as you mentioned, the ECB benchmark rate trade has really gone up. You can see where we are now.

And you can see where the terminal rate is now forecast by the markets just under 4 percent. So at this point, all bets are off. And the interesting question it was brought up this morning is if the ECB is going this high and the Fed is going as high as we think it’s going to go, that we’re going to have a really synchronous tightening of credit around the world that may feedback on itself. Just surprising to see the numbers at these levels in Europe. Just remarkable. Matt McKay, thank you. I think my question my counts

is really, really important victory for them this week and a half mile hike to the ECB, more hike and the Fed Reserve to go back to the Fed early this month, Fed one February 1st on a Wednesday. Chairman Power Disinflationary process is starts at the second Thursday. President got turns round. Assess the risks around the inflation outlook more balanced. What on earth happened? Well, I think people were looking at just certain elements of inflation and they were looking at goods producing sectors, which we’ve seen disinflation there. And we knew that that was going to happen

as supply chains improved across the globe. I think when you look at Europe, there’s some expectation that because the energy crisis was not as bad as what people expected, that you would see some disinflation coming in that area. And what’s happened is that there’s other elements that are feeding through that are keeping levels, higher services, inflation in the US. I understand people think rent inflation is elevated and it’s higher than it should be and that’s going to come down. But let’s look at other elements. We talked about the labor market. We talked about labor hoarding

that we have there. I think we’ve got a debt ceiling debate coming at us that’s going to cost them some more issuance. We’ve got stimulus packages around the globe. There are going to be causing some issues. You’ve got China opening up. So there’s all sorts of underlying elements, kind of undercurrents that are feeding that inflation component on the services side. And people have been so focused on the good side. We also have to look at are they going to stick with a 2 percent inflation target? Jonathan, I think this is a key issue. People have

to look at the central bank, say, yes, we’re doing that. I’m not so sure. I think they get around 3 percent and they’re going to say maybe that’s good enough because they don’t want to push the global economy into a deeper recession. We’ll have to see. You’re not the first person who’s asked that question. I imagine a lot more people would do the same thing. Andre, the ECB, we are pricing maybe a 4 percent peak, right? I’ve got no idea if that’s going to be achieved. We’re talking 550 potentially at the Federal Reserve. In reality,

I can get 5 percent right now on a six month CPO. Andrew, how much of a challenge is that to your equity market? It’s a big challenge. It’s a big challenge. I hear all the time from advisors, why should I take the risk of equities where I can get, you know, four or five percent risk free? And that’s that’s that’s the issue for four stocks. The problem with that is, you know, if you lock in a year from now and rates do eventually come down, I think. Victory is dead on, right? Which is I think

we’re going to 3 percent or not growing at 2 percent. You know, then then equities will be higher and you won’t get the same yield. And that’s you know, it’s kind of classic, Jonathan early cycle, which is, you know, in the 90s I was a financial advisor and clients would come see us and say, I’m not greedy. I just want 10 to 15 percent returns without a lot of risk. And now people are saying I’ll take 4 percent risk free. It’s a sign of, you know what, Warren Buffett says, people drive looking in the rearview

mirror. You can get 4 percent risk free. And last year you lost money. You take the 4 percent. But if last year with the markers up 20 percent, you don’t take the 4 percent. So I think it’s just a sign of where we are in the cycle, which is very early. There’s a lot of uncertainty, but uncertainty creates opportunities, as Victoria said, not across the board, but selected one. Again, I see that very early in the cycle, having very late in the cycle. Andrew Sullivan, Victoria Fernandez, stand by. Thank you. As always, in the bond

market, these moves in bonds up 13 basis points on a two year in Germany, pushing three 20. Coming up, the money comes in later. Hi, Thomas. Patrick presents a single opportunities in energy. He’s turning just a little bit Lagaan into the open and powerless case of Monaco’s first that Bank of America downgrading Dish networks to underperform, pointing to higher marketing expenses and adverse pay TV trends. Next up, Susquehanna downgrading lending tree to neutral, seeing limited upside with macro headwinds, parting companies stop negative 8 cents. And finally, Citi tank grading Dick’s Sporting Goods to neutral, expecting

crowded inventories to continue weighing on gross margins. Coming up, target shopping earnings estimates, but delivering a cautious outlook. We’ll talk about next with Patrick Rosetti of Hightower. Closing out the month of February, we were looking for a day of gains and that state’s going into the open in our futures negative a tenth of 1 percent on the S&P and the Nasdaq down two tenths of 1 percent and heading towards a monthly loss for the S&P 500 and for the NASDAQ say things are happening fast, which in the quarter get to the bond market month. Today

yields much, much higher off the lows of a year, off the lows of the month. We are higher on a 10 year on a two year on a two year. Buy something like 80 basis points in and around on a 10 year run. Now at 4 or 5 basis points on a session three ninety six. That’s a euro dollar high the month one cent thirty three. That was the same day as the ECB lower the month one of size thirty. Right now what I 624 positive a tenth of 1 percent euro just a little bit

stronger. Next stop here is CPI day out of the eurozone and a couple of days and a read on German inflation which comes tomorrow. Get this nice, lovely regional breakdown and consider it out for yourself. We’ll get that tomorrow. Look at crude at the moment, 77 40 on WTI, up by two point three percent. Amazing to see inflation expectations start to build again without a rally in crude, unlike what we’ve seen over the last couple of years. So the open then about 45 seconds in your equity market looks a little something like this. The S&P

down a tenth of 1 percent. The Nasdaq down about a tenth of 1 percent. Also, one stock to watch Target all over the place this morning. The retail that’s helping earnings estimates, but delivering a tepid outlook. The CEO said this We’re planning on business cautiously in the near term to ensure we remain agile and responsive to the current operating environment. AP has more. Happy. Hey, John. Well, this is interesting. The trading action on the morning this early, of course, it had been lower, now slightly higher. And we do have CEO Brian Cornell presenting here in

New York. And he just made comments saying that the coming year will be more like pre pandemic error. In addition, there are comments from the chief growth officer, Christina Harrington, saying that they’re going to expanding more than 10 private label brands. So that’s probably offsetting some of the weakness. I really like the way that Kailey Leinz put it earlier, saying that in the past. Thumbs up to the future, though. Thumbs down. But it seems like a little bit of a mix here. So they’d really be in a big way on both the top and bottom

lines. But you can see here that what folks are concerned about for the fourth quarter, their comp sales did raise seven tenths of 1 percent for the fourth quarter. So they estimate down as for the inventories for the first time in a year. This is another bright spot. They are actually trending in the right direction. They are down to perhaps again, this is perhaps some of the piece of why investors are cheering the stock higher despite the challenging environment and the pullback in discretionary spending that they’re saying that this company, of course, their store somewhere

between. Nice to have a need to have discretionary up 12 percent on the year. That, of course, is also Tesla and some of the travel stocks. But into today and now with the gain, we have target up about 5 percent on the year. Staples not so much. So it’s an interesting morning that we’re seeing here as investors reconsider the strength that they had and thinking that maybe some of it will, maybe that the idea that they’re a little bit conservative, but that outlook John. Abby, thank you. Goldman weighed in on some of this. Here’s a

quote from Goldman Sachs and its team this morning. They said, Hard to decide how to treat this. A very mixed bag come sounds are still intact and they guided sales as expected. The issue is gross margins missed by about double what most expect it. And they did guide a bit worse. The stock, just about positive in the early part of trading, will keep an eye on that. Stock it up by about 1 percent. Sticking with earnings, Zune video crushing Q4 estimates delivering an upbeat forecast. The stock’s flying cost cutting measures, helping offset slowdown in sales.

The CEO sank this while the macroeconomic situation continues to negatively impact our overall growth. Zoom is dedicated to maintaining a careful balance between growth and profitability. On that story is about Lake Isabel. Hi, John. That’s exactly right. So if you think zoom in, other pandemic darlings and their days are numbered, you might want to think again because its own shares are rallying today. It’s on track for its biggest gain in three weeks. That’s after the company reported first quarter, fourth quarter results that beat estimates and also outlook for adjusted earnings that were much stronger than

expected. GM expects earnings to fall around a 90 6 9 8 cents, and that’s higher than the 87 cents estimate. So what’s driving this? Well, you know, we’ve seen a slowdown in sales, but the company did employ aggressive cost cutting measures. So recall that earlier this year they slashed around 15 percent of their workforce. That’s more aggressive than some of its tech peers. But it seems to be paying off because analysts were very positive about the company’s earnings margins, rather, and did not that its online business was continuing to decline. So that’s not really a

surprise because people have been doing much less, you know, with a return to where policies we have been doing much less. It seems that many of its customers defections have come from casual users. So this includes small businesses. So it remains to be seen what becomes of zoom. Zoom is now touting products related to artificial intelligence. But if anything, the fourth quarter showed that doom is back on its footing. The stock soared in 2020, but lost most of its value in it. In the next two years. So it remains to be seen what will happen

in this year. It’s become an adjective, after all. But people saying resuming down more than 80 percent from the highs of. 20 incredible turn around. Is My league is about thank you to stocks up just marginally in the early part of this session, four minutes into the session, one more stock to have a look at. Shares of Norwegian Cruise under pressure, posting a wider than expected quarterly loss. The company’s saying, quote, We’re undertaking a broad and ongoing margin enhancement initiative. That’s some real sea sweet speak for you in hopes of trimming costs this year. Katie,

what do you make of that line undertaken abroad and ongoing margin enhancement initiative? Margin enhancement seems like margins are the focus of this earnings season. And let’s get specific on some of those numbers. You had fourth quarter adjusted loss per share came in at about a dollar and 4 cents. Analysts had been looking for a loss, about eighty seven cents. Then you look at adjusted EBITDA loss. There was about 41 million dollars estimates for eight point six million dollars. So a lot of daylight between those two numbers. You add that together shares are down about

6 percent right now and net income was also in the red. And unfortunately for no reason, that’s a trend. It hasn’t posted a profit since the start of the pandemic. Now, Bloomberg intelligence points out that bookings occupancy, they are solid, but cost cutting efforts, they need focus. That campaign is underway. We’re going to see if that actually does enhance their margins. But this comes after more than a fifty five percent plunge for Norwegian over the past three years. If you stack it up against other travel stocks, you can see the carnival is down at, what,

60 percent in that timeframe. Airlines down about 19 percent. Not too bad. Your relative outperformance is actually Royal Caribbean. It did bounce back more than more quickly than some of those peers. And that does include Norwegian. That three, a story that you just painted that looks bright. So category four. Katie, thank you. The broader story right now, about six minutes said no real trauma was down about a quarter of one percent on the S&P. The underperformance coming from utilities coming. Consumer staples, the outperformance just relatively speaking, just about positive on the session. Energy. We’re going

to talk about that right now with Patrick. See if Rose advises that Hightower. He joins us right now. Patrick, great to catch up, as always, buddy. I know you like this sector. You like energy. Tell us why. Yeah, sure. Look, I mean, when you look across the sector, no higher cost carb capital for marginal producers. China’s reopening its economy, which is probably one of the biggest factors. And, you know, there’s still significant elasticity of demand by, you know, poor nations around the world, emerging market countries. So, you know, we still look to the energy markets,

an inflationary environment to be very well supported. Patrick, it’s amazing that we started talking about China reopening and treats barely moved. It’s pretty much dead flat on the year so far. Do you need crude ceramic to make that energy equity story work? Eventually you do. I just think there’s been nothing to really change the supply side of the equation, right. I mean, that the regulatory environment is still pretty stringent. But demand has been it’s been pretty consistent. And I see that improving throughout the year. So I think eventually you’ll see the price reflect that. Look,

there’s been a lot of economic noise in the data. So I think that’s probably part of the reason you’ve seen a shift in sort of the weakening of the dollar and the strengthening of the dollar. And then you see inflation numbers come on Europe today. So maybe another slight weakening in dollar. So there’s been a lot of fluctuation of start the year with the capital returns look good. Chevron stands out this morning, that’s for sure. Patrick. Chevron coming out and saying we’re going to have a rate of buybacks of seventeen point five billion annually beginning

in the second quarter. Previously planned, 15 billion. Are you expecting that across the United States, some of these big energy plays to expect it from the European names, too? Yeah, I think I definitely think so. It’s about capital discipline, returning money to shareholders. I mean, it’s certainly one aspect of that. It’s whether it’s buying back stock, special dividends. We’ve seen that in some of the parts of the sector as well. So I think it’s just an attractive area to have some exposure to this type of environment. And it doesn’t take much to really be overweight

the sector. I mean, it’s still a measly four or five percent of the total market. So I think to have some exposure make some sense in this environment for sure eventually when things get tough. People say things like we need to get defensive. We need to get defensive. And defensive can mean a bunch of things. It often just means whatever works when things are tough. And last year, energy was defensive because that worked when things were tough. Energy was up 59 percent on the year in that group. What’s defensive in 2023? Sure. So I think

that term defensive means, you know, what could potentially work in the environment we’re in and knowing that, you know, if if you’re wrong, you’re not going to drastically outperform. So when I think about defensive other than energy, I think precious metals will do well. I think a lot of consumer businesses. You know, there’s there’s a lot to be said. I know you talked about Staples a little bit earlier. I think while maybe household products underperform an inflationary environment, I think, you know, things like beverages and, you know, areas in the food industry could work very

well. And then. Obviously, in the consumer side of the energy equation, is that discretionary services in the mix as well for you. Yeah, absolutely. Absolutely. Because, you know, that’s one area where you can pass along inflation pretty easily. You know, it’s in the services sector. So, you know, we’re beginning to see, you know, across the board, particularly in the stocks we’re looking at, you know, look, there’s always stocks to find in any environment. I think, you know, Peter Lynch coined the term, you know, far more money has been has been lost in the corrections themselves.

You know, it’s all been lost by investors to anticipate corrections and in the corrections themselves. So I think just you have to be active in this environment and trying to find the right companies and diversify your portfolio appropriately. Well, let’s talk about diversification then. How do you diversify in a world where bonds and stocks fall together? Well, you it depends where you are in the spectrum. Right. So when you look at stocks, there are certain stocks that underperform dramatically last year. You know, you just look at some of the speculative excesses, particularly in tech. But

then there are sectors like energy, consumer healthcare that did very well last year. And in bonds, it’s about duration and credit risk. So where are you on the spectrum so you can be further out on the credit spectrum? I wouldn’t be playing in sort of the the non investment grade market today. I would I would stay in high quality names and I am staying sort of short to intermediate duration. So I think that’s that’s what you need to do to protect capital this year. Patrick, appreciate your take on the market, as always, Patrick, for of

Hightower. Looking at the market right now, about eleven minutes into the session. Equities are just about negative by not even a tenth of 1 percent. The Nasdaq just about positive. The story of the morning, though, it came out of Europe, upside surprise in France, in Spain, on the inflation side of things, you get a read from Germany tomorrow, then the overall eurozone a day later. But for the bond market in the United States, it means yields are higher by 5 basis points at the front end for 82 on a 10 year up six basis points.

Very, very close to 4 percent. Again, on a 10 year maturity, let’s call it three ninety eight right now and round this one up and take a look at what’s happening in Germany, because in Germany we’ve gone from talking about negative rates. Twelve months ago, I think the 10 year or the two year run that was negative about 70 basis points at the front end of the curve in Germany right now. We’re high by 11 or 12 basis points to three point one six percent. And we’re pricing in potentially the ECB peaking at this rate

hike cycle is something close to 4. These were numbers that were totally unthinkable 2 1/2 months ago. And now we’re having a real conversation about them. We’ll pick up on that story a little bit later on throughout the day and of course, tomorrow as well. We get another breakdown of German CPI coming up. Goldman see David Solomon taking center stage in New York. There were some clear successes, but there were also some clear stumbles on the direct consumer businesses. We found the more challenging Goldman’s Investor Day. Up next. There were some clear successes, but there

were also some clear stumbles on the direct consumer businesses. We found the more challenging it became clear that we lacked certain competitive advantage and that we did too much too quickly, which affected our execution. Goldman Sachs and Chevron both kicking off their investor days this morning. Goldman leaders hoping to rally investors around the stock after profits slumped by half last year. This is Chevron is raising its share buyback rate despite falling gold prices. Your team coverage starts right now with Glenn Beck, Sonali Basak and Annmarie Horden. Let’s start with the ocean, Ali. Just how big

how great is the pressure on the shoulders of that man? Of course, there’s a lot of pressure on Goldman Sachs at this point in time as the environment gets tough out there, John. But I want to point out a few numbers here, because there are some really big proclamations being made here at the Goldman Investor Day, one being that they could cut another billion dollars in costs. We’re going to see where those costs can potentially come from. Remember, Goldman Sachs already had a big wave of job cuts. But then the other here is this idea

of considering strategic alternatives for that consumer business. So you heard David Solomon himself just say, you know, there were some real wins here, but there were also some stumbles. The question here is they’ve given you a two year track to get to profitability for this consumer business. Do they end up doing something different before that? Consider strategic alternatives. Typically means a sale or other alternatives for a business like that. Different story makes for Shaeffer on Shall We Talk D.C. buy backs and let balloons? Yeah, seriously. It is. It is. This is going to be something

that’s going to certainly get a response at some point, Jonathan. Right, from the White House. What you’ve seen over the course of the past year is that this administration has lambasted the oil industry for what they say. And the president said this as recently as February 7th on his State of the Union. These excessive, outrageous, what he says returns. And instead of putting them into the ground and pumping more what he says to bring down gasoline prices, they are giving them back to shareholders at the same time. Jonathan, it’s an awkward line, right, for the

administration to walk. They’re asking the oil industry to pump more. At the same time, this administration, they came in, they wanted to be president. I don’t want to be a climate president who’s trying to get rid of the product in the long run that at the moment he’s asking for more of when you do those news conferences with whoever it is from the administration. Do you think someone might read that quote from Warren Buffet from over the weekend, MRA this quote here when you told the old repurchases are harmful to shareholders or to the country

or particularly beneficial to see, I wish you were listening to either an economic illiterate or a silver tongued demagogue. Is that something that might come up in Washington later? It, sir, might certainly. Well, Jonathan. And without naming names, you can tell potentially where Mr. Buffett was pointing his finger out when he’s talking about that in the same State of the Union speech. The president reiterated something he’s been calling for, which is quadrupling the tax on share buybacks across the board. So obviously, the oil industry took a hit, but then he was leading at corporations writ

large that these share buybacks should have a higher tax. And that’s something he continuously calls for. That’s if I’m not citing a way donk out anytime soon. Emory Hilton, Don RTS, gnarly looking forward to your conversation. Like it. Just a programming note. See what on message. Now my interview with Goldman Sachs as president and CEO Jim Welch and a conversation between the two. At 12:00 p.m. Eastern Time, so that two hours and 10 minutes from now, the count for that ended a bit later. So the focus today on an Investor Day for Goldman, for Chevron,

tomorrow, its test, this test. This coming as the stock has more than doubled from its January 6th low fishing Tesla, closer to becoming the fifth most valuable U.S. company all over again. David Welch has more on this. David, what are you looking out for? What should we be looking out for tomorrow? What’s the continued growth story here? Clearly, the shares are on the rise in anticipation, at least in part, to what he’s going to see tomorrow with the master plan 3. We could see the Tesla Model 2, which is the 25000 or thereabouts inexpensive Tesla

that could give the company a lot of growth in an area where right now they’re just not playing. Really, nobody is except for maybe General Motors and to a smaller degree, Nissan. So we can get detail on that. Maybe he confirms that the cyber truck will actually go into production at the end of the year and talk about how much growth will get there for the company. That’s sort of one of the, let’s say, several things that had stalled the shares out until this recent rise was investors are wondering, is the bloom off the rose?

Is all the competition from the legacy automakers starting to eat into Tesla’s growth? And if you’ve got a new small car, if you’ve got cyber truck and some volume there, that could all help. I think he will talk about supply chain and how they’re going to secure battery minerals and metals. Maybe they’re going to start investing in mines and companies through a General Motors has. And then, look, you’ve got news this morning that Tesla is going to build a plant in Mexico. Know, I don’t think it’s for the Mexican market. You know, Mexico has 40

or 50 free trade agreements with countries around the globe. So that could be a big export hub for Tesla to open new markets and just thing with some cheaply made vehicles. Yeah, that’s what you will get all the auto plants down in Mexico. It’s a huge export hub because you can get parts in tariff free and you can send vehicles out tariff free and you make them with cheap labor. So there could be an export story from Tesla coming out of this. I it we’ll catch up tomorrow nights out on the Investor Day. David Westin

on the license, terror, a plane, thick Puerto equity market down about a tenth of 1 percent on the S&P, pretty much unchanged that flat on the NASDAQ. Got some breaking news, economic news just. Go my NIKKEI. How’s that for you? One of my Morning Joe will make this quick because it’s not particularly good news. Chicago PMI comes in at forty three point six is down from forty four point three last month and it was expected to rise. So raises questions along with some of the other regional PMI is that we have seen about what I

assume will show, which is out tomorrow, 10:00 a.m. Wall Street time. It’s expected to rise to 48 from 47 for now. The ISF manufacturing index has remained below 50. Services have crossed above. We get services later in the week. So a lot of attention will be paid to those making more data. Still to come will avoid that one. Find out because that one was unexpected, I guess comes in below expectations, forty three point six. The estimate, forty five point five. As Mike’s pointed out all week, the ISE a little bit later this week. That is

the one to watch. We’ll pick up on that a little bit later in the week. Got some time, some sector price action. We can do that as always, without pay. Hey, Andy. Hey, John. Well, we have another low volume day today at this point. The S&P 500 down slightly. Not surprisingly, we have the sectors relatively mixed. No sector moving more than 1 percent. Most interesting, the sectors on the bottom, health care, staples, utilities down the most. That has to do with the fact that they have high dividends. Yields are higher today. So those stocks look

less attractive. As for Norwegian Cruise line, of course, it’s down on the day on the outlook. But on the year, these travel gains that we’ve been talking about, John, it’s really out of control. Hotels, the leisure sector, and then, of course, the media index all in two months up really sharply. Abbi, thanks for that. That’s the breakdown of the sector price action. Up next. You’re trading, Tariq. Run about 25 minutes into the session. Equities totally unchanged on the S&P 500. Similar story in the Nasdaq as well on the session, at least on the month. We

are lower and yields are a whole lot higher. We’ll pick up on that story through the week as we wait for Eurozone CPI in a couple of days time. Your bond yield on a two year right now for 82 as the price action hits the trading diary. Coming up, consumer confidence. Top of the hour. Chicago Fed President Goolsbee speaking at 2:00, 3:00 Eastern Time. President Biden discussing health care at 3:00 p.m.. I said manufacturing and says this Investor Day on Wednesday. And finally, President Biden meeting with German Chancellor Schultz at the White House to close

out the week on Friday tomorrow. Fantastic lineup for you. In Napa City, Stewart Kaiser, Morgan Stanley’s Mike Wilson. We’ll catch up with those three tomorrow morning. Looking forward to doing that with you from New York City this morning. That does it for me. That wraps up my morning. Thank you for choosing Bloomberg TV. Good luck for the rest of the trading day. This was the countdown to the openness. Esplin Vic.

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