tv Bloomberg Markets Americas Bloomberg July 22, 2022 10:00am-11:00am EDT
>> from the financial centers of the world, this is bloomberg markets with alix steel and guy johnson. ♪ alix: it's 30 minutes into the u.s. trading day on thursday, july 22. you got a global bond rally fizzling with yields tumbling and investors flooding into the belly of the curve. you have some serious pmi pain,
recession fears mount in the market is rethinking rate hikes stop twitter revenue missing estimates and lowers is outlook. what earnings are saying about the economy. from new york, i'm alix steel. welcome to bloomberg markets. i thought the news was going to be european pmi. 15 minutes ago, we get services pmi which is in contraction territory and it's a stunner for the market. anna: you are getting bad news no matter which side of the atlantic. some indicators suggest economies are already in contraction in europe, the conversation has been that bad but does that mean central banks
will not hike is mike -- as much? alix: is the bad news now good news? let's tie all of this together. earnings plus economy equals hu h? what are earnings telling us about the underlying economy? i thought we were going to lead with snap and twitter but what's going on with the pmi services data that's underlying week as. kriti: when you look at the equity market, it's a different story but the bond market, you are seeing some crucial moves and a lot of that stems from europe where you so the week german data. the you kate data is still an expansionary -- the u.k. data is still expansionary. you still have the whitening spread between italian bonds and german bunds and the german
bruins are driving the sentiment at the moment stop anna: stocks in the u.s. are all over the place. but instead of buying stocks in europe and fixed income, let's go to technology because that's where the earnings news has come from. that's what we thought would be the top story this morning. what is the big takeaway from this tech readout snap and from twitter? ed: there are inflation cracks showing in the early part of the earnings season and i wouldn't regard snap and twitter as tech not in penetrable to the macro headwinds across corporate america. you have these bullish signals on whether we peaked in what the fed might do and the nasdaq 100
had three straight days of gains. it was exciting and we've rethought this. we started to worry about how difficult this inflation will be for tech companies to manage. you also have the hiring freeze in the background. alix: our companies that usually advertising retrenching or cutting costs? are the products not selling because those will tell us two different things about the economy. ed: i said if you read snap earnings report, it's a very kitchen sink approach to what's happening. in the last 90 days, there has
been some deceleration in the ag market and there are competitive what -- headwinds. snap is going against tiktok which is doing increasingly well and twitter was interesting because the consistency is macro economics, higher inflation and uncertain tea and signs of pulling back through the first half of the year. the difference in the twitter case is that there is uncertainty around the elon musk to buy the company. anna: that's very specific with twitter but more broadly, not just in the tech space, we are getting a host of different factors being brand with the macro environment and that is relevant to the tech sector but some companies are still talking about the strength of the dollar
and the shortage of employees. it's a gloomy earnings report step alix: it's also a sense of deja vu, one of the big standout pieces was that we were looking at the tech trade . kriti: the tech trade was not bundled. they were un-performing the tech trade and that's significant step in the face of uncertainty, do these businesses want to spend any advertising at all? people were pulling back on advertising with a lot of the same names saying if we can't get the products on our shelves, we want to be advertising to
consumers. now you have a confluence of both factors with recessionary concerns and supply chain issues but there's really not that much to advertise to begin with in the face of a recession. it brings back the point when you look at the broader market, you have a return of the tech trade and haven trade but within that, there are nuances like in social media that have the cyclical exposure and that could become the achilles' heel of the entire market stop alix: then you have the macro part which is the dollar. what do you expect to hear on the front next week when we get into the big tech guys like google, apple and amazon? kriti: you want to see if they pivot their strategy.
the real story is a lot of their exposure is international. these are american companies that have multinational exposure. the microsoft computers are in every had porter around the world. bringing the profits will be key. you are seeing a consensus trade that this will be strength that does not abate. they might pull back on their international exposure a little bit and i think that's the trade-off we could pay attention to. anna: ed, you mentioned the job losses and it will be a focus next week? ed: certainly, particularly apple where there is hiring being frozen. these are companies with strong balance sheets in this move by apple was seen as somewhat conservative. if you don't subscribe to the
tech watch, you might miss that. we've gone from thinking about the growth narrative to protecting the bottom line at all costs. many of these companies are trying to on wind the boom they went through during the pandemic. they become bloated in many areas and there are many duplicates where they have two people doing the same job and the environment has changed eckley and you wonder how closely the language will be watched on how cautious they are about the second half of this year and whether hiring freezes turn into job cuts. anna: thanks very much for joining us. we had some breaking news on the grain front. in istanbul, we understand the
russians and the ukrainians have talked about getting grain that's been trapped in ukraine out. the u.n. secretary general talked about this. we will get more details as to what that means. we have a guest in the second hour of the program to talk more about it stop coming up next, more on what earnings are saying about the connelly? this is bloomberg. ♪
>> the alternative to let your foot off the brake for inflation has come down, let it settle at four or 5% stop that's just a recipe for another recession down the road with prolonged pain, making the agony longer and longer over years. alix: that's the richmond fed president saying the fed will do whatever it takes to get
inflation down. what are earnings telling us about the economy and what does the economy tell us about earnings? we will go to the federated senior equities strategist. services really disappointed with a huge move in the bond market here in europe and earnings that are confusing but shows that consumers will spend and do stuff but tech is feeling pain. what are we learning? >> good morning. i think what we are learning is it's a big mess out there as you said just. there is a lot of uncertainty and it seems the markets are moving quickly from one direction to another. the direction which the bond market has priced in an impending recession as quickly as it has done is really quite amazing. we think we may skirt a
recession next year we think the 10 year bond yield should be around three point 25% and if you believe that you wouldn't be buying bonds even if you were nervous. the consumer in the not just united states was quite -- is quite healthy. the tech sector probably over hired stop the job market is very tight and i think that's what the fed will look at as they do what they must. anna: i wonder -- you sound pretty gloomy on the earnings story so far. they say this is the weakest earnings season. how bad does it get in with the link between that earnings season and what stocks are doing? >> the stocks look forward to the stock market has been worried about the current earnings season.
capital expenditures are up 7% year to date this year. that is a bullish move in terms of the economy. there is still some bullishness on the hiring in certain areas. so it's not particularly gloomy but we are very much interested in what they have to say about the new church and i think they could be more conservative looking in the future maybe more of a malaise. alix: earnings worries are out there. bank of america in the global survey said the gloom is not actually felt in the global equity funds and people have not sold. they are worried but they have not sold yet.
what kind of volatile week is that mean we will see in the next couple of weeks? >> there is too much money on the sidelines with too many people watching very closely and they want to -- they are not positioned terribly defensively although margin debt is down dramatically since 2009 but there is still a lot of money on the sidelines because there was so much money printed. a lot of people are saying i will wait and buy low. the vix is uncomfortably low. white want to go up? they're still too much money on the sidelines waiting to buy the dip. we need boring is what we need, we have spikes. anna: i look forward to boring. let me ask you about oil. you said it could drop quite
significantly. where does that leave you? is that because of a slow down and the global economy will produce that and what does that mean for energy stocks? >> people have piled in and it's a place to be invested and it was the best sector this year to date and last year. you see these stocks coming down and i think people are saying that i made a lot of money in the stocks and i will take this money off the table. these are fast moves that are suggesting not that the price of oil goes to $85 but it could do that. if it doesn't do that in the near term, that might help consumer sentiment. in the end, we are a list on energy and have an overweight there and you could see it go up dramatically this winter and
europe and germany are suffering winter. alix: companies are spending billions now. it depends how fast that comes to market. in the meantime, you want boring so do we buy bonds? that is the trade of the day? what you do with that? >> we like cash and cash is king. the long bond yield is too low. as stocks go, we still like the high quality dividend paying stock so if we like energy and we like health care, health care in general but if you are a good
stock picker, you can go to europe and find some hike polity names that are stable companies that pay a dividend and will suffer whatever recession europe must suffer. anna: you mentioned your views on europe. how does that stack up against the u.s.? we saw pmi data today and one of the big headaches over germany is access to gas. we are getting further headlines about gas coming through and is looking very opaque right now but what assumptions do you make that inform your european stock team? >> it's a big mess. who thinks they can suggest things working out? germany has high inflation and our that is doing what it can to raise rates. they cannot raise rates because they have so much to deal with.
you could say europe is inexpensive versus the united states. the united states is still a safe haven. we are raising rates which we must do. europe is going to be a great buy but it would seem premature to get involved in that. anna: we heard the message. thank you very much. let's go from europe to china. we are getting some headlines about china. this is a real estate firm based in china and there is news around the company. it became the poster child for all of the troubles the property institute was facing. they are talking about a new ceo.
they've named a successor and they are talking about appointing an internal controller so changing the risk management procedures. late in the day on a friday in china, you can see whether this has impact on evergrande or the broader property sector. we will certainly watch that on monday. still ahead, one of the big names in etf's is shutting down one of her funds. she is not the only fund manager making choices about those funds. we will talk about that next. this is bloomberg. ♪
this... is the planning effect. this is how it feels to have a dedicated fidelity advisor looking at your full financial picture. this is what it's like to have a comprehensive wealth plan with tax-smart investing strategies designed to help you keep more of what you earn. and set aside more for things like healthcare, or whatever comes down the road. this is "the planning effect" from fidelity.
bloomberg business flash. kriti: ritika: american express hit a record and it raised its forecast for for your revenue. verizon has cut its full-year profit and revenue forecast. on thursday, at&t warned that some customers are not paying their phone bills. the world's biggest oil firm forecast at least 27 william dollars with second quarter profits looking better at social numbers and -- at schlumberger. alix: cathie wood's is closing down one of her etf's and it focuses on companies that receive high scores on transparency.
her management has pulled the plug on an etf. she is not alone. closures are also piling up after drawing billions of investors bracing for a recession. i would also argue that part of this is a tech thing. if you look at the members within the etf she had to close, it's spotify, net licks, nvidia. that's a similar theme. anna: absolutely, this was a confluence of two challenging themes, one with tech and one with etf's and transparency. a lot of investors do want to talk about this we are also still have the war and that changes people's perspective. alix: coming up, a quarter for
millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction. that's a whole lot of happy campers out there. and it's never too late to join them. get unlimited data with 5g included for just $30 a line per month when you get 4 lines. vo: when times get dark, switch to xfinity mobile today.
alix: in our into training. the s&p flat on the day despite the horrible pmi numbers of the u.s.. ritika gupta is back. >> the nasdaq underperforming. volatility with the stock market . it feels like perhaps there is a wait and see cautious mood in the benchmark level of what you are seeing. you want to keep an eye on the sectors because underneath the hood, if you look at the stocks,
that is where it is down. a vic's -- on the vix, what we talk about the normal gauge of post obit at low volatility is up 20 handles. if it drops below 20, that might be's iniquitous signal to hop back into the market to escape -- that might be a signal to people to hop back into the market to escape the volatility. bad news for snapchat. they came up with better than expected numbers for users but suspending third ford or -- third quarter -- they are concerned about the advertising story. investors punishing the stock, looking at a 10 handle on the share price, 36% drop already, translating to other so still --
other social media names. twitter is lower .4%. they came out with earnings in talking about missing revenue estimates. for that price, it might be more about the legal battles. we will dive into that in the hours ahead. it is not just the social media part, it is semiconductors. apple, microsoft volatility, ripples in the stocks, nvidia, micron. you are seeing massive selloff pressure. that might be a good sign if we are talking about the case for tech broadly. on the macro spirit, less bring it back to bonds. the 30 year dropped below a 3% level. duration has been a major trade. i wonder how much will be the haven trade, how sustainable
treasuries now? lisa: -- anna: in the minutes ahead, another blow to twitter which has seen a fair share of blows the past few months. it reported disappointing second quarter sales on top of the huge legal battle with elon musk. with us now is barton crockett, from rosenblatt securities. his -- let's start with twitter. you have the price target and you have seen what they said today. i guess your target is based around the legal decision going to be made about whether elon musk will walk away or not. what are the assumptions you are making? barton: our reading of the lawsuit, with help, is that must is very likely to see very
clearly from the judge that he will be compelled to do the deal. so the $52 price target is a slight break from the deal price, assuming there is a moderate deal with think there is a lot of leverage on twitter's side. you can see that it is nice to see something other than fundamentals to drive a stock which is what we get with twitter. alix: part of the story everyone is digging about is off-line they will negotiate a lower deal for twitter, maybe in the 40's. what is the probability of that happening? barton: i don't put much possibility on that. the board at twitter has to move ahead and maximize value for shareholders. the judge, we think, has very clear precedent. so far early it is helpful and
it is a clear reason to compel musk to do the deal as agreed. that would be a huge confession and there is no reason to do that. i think the better bet that it will do better than that. anna: you think musk has to end up paying what he said he would pay. where does that leave twitter? there would be uncertainties about where elon musk would want to take twitter, even if he remained a willing higher. now by your reasoning he is going to end up being a buyer who doesn't want to buy that, especially at the price. what assumptions can you make in the future of the is this in that environment? barton: it is not going to be in our lab but it will be on elon musk's lap. the board is working with the shareholders. i have tons of sympathy for the employees of twitter. it is a terrible circumstance.
i don't know what elon will do. i don't know that any of us do. i would hope you would refocus and use some of his genius to figure out the best road for twitter. there could maybe be a good outcome at the end of the day. alix: you are looking at a neutral rating on snap and that is down 36% today, destroyed before that. the price target is 14. 14 feels far away. how do we get there for snap? barton: the this is an incredibly -- this is an incredibly volatile stock and the fundamentals i believe warrant the neutral rating as compared to a stock that has clearly moved a lot. who knows where it will be in a couple of days after it settles down. the $14 price target is based on the assumption this is a real business.
there was much that was difficult in the ag recession and the big step downs of growth of the first quarter and trending suggesting it is getting worse in the third order . they didn't grow users at snap and at a time when the macro recovers, we could see growth again at snap. there is a business and if you are long-term enough, there might be entry points that are interesting but right now we are not pushing that. anna: should this story from snap be as impactful on other big tech names as it seems to have become? this is the second time we have heard bad news from snap and is taken down big names. alphabet is down 3.3%. these are the big drives on the nasdaq right now.
does that make sense to you? barton: look, i think it does. i am still recommending alphabet. i think they are add exposed but have had a lot of strengths relative to peers. that would be a company you would like to own bring a recession. the valuation is not demanding their. what we see is obvious deceleration, macro headwinds at snap and twitter. looking out of time, in terms of headcount, controls, cost controls, chatter from media companies on the tv side at the conferences tells us this is real. you look at the telecom companies which are big advertisers talking about cautious consumer environments. things are getting tougher and we will see that next week with the other reports. so you have yourselves, do you want have any exposure, if you
do i like alphabet and i think they will come out good on the others. alix: where does that leave apple, barton? there have been price target downgrades this week and part of the story is just a weakening environment, reporting next week on thursday. morgan stanley is bullish on the service. if we are going into an recessionary environment, apple will be longer hit. how do you do it? barton: avenue troll rating on apple. -- i have a neutral rating on apple. i do believe that in services, they can't escape add headwinds. google is seeing it and they will see it. in service, they are extracting larger fees and i think google play has conceded a lot on the
app store revenue and it was down in the first quarter. apple isn't seeing that but they are likely to have to go there. china never ending covid zero is a different cash difficult backdrop and the stability of production. a lot of smartphone sales we saw, the strength we saw at apple was 5g driven. at&t was talking yesterday about expectations for less sales of this generation of phone than a year ago. for apple, you want to see a new product. apple card is it going to happen in a supply chain disruption. a difficult spot for apple. that is why we are neutral. alix: good to point out, my phone has stopped working.
2021, a 17 month low with manufacturing and growth almost stalled. fed chairman jay powell will probably slow the rates. they may switch to a quarter basis points in the last two meetings. a man with a pointed weapon tried to drag congressman lee selden to the ground before being subdued no one was hurt. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. anna: bank of america chairman and ceo brian moynihan sees inflation peaking quote we are not quite there yet. he said the fed has more work to
do. he spoke to david westin. brian: i think the fed is raising rates quickly which is the tool they have and telling people what they are doing and being transparent and you see some adjustments being made. there is still work to do. in a day, the fed's toughest job is a fed that it is trying to slow down an economy which has strong employment and wage growth and a strong spending. that is an unusual case to see that all going at once. and with the u.s. being one of the strongest economies in the world, they have a top job ahead of them -- a tough job ahead of them but they are using the tools and telling people what they are doing and you are seeing the markets adjust. alix: one of the big -- david: when the big questions is, do you think inflation has peaked?
what would you say? brian: it would be different for different areas. in some areas you are seeing it slowdown and tip over but other areas, wage growth is strong. economists would say it is peaking. our team basically says that the fed will continue to raise rates and the research team at bank of america as your end recession that they made a call on but a slight recession and it is not accompanied by high unemployment. it is more the impact of the fed raising rates. so it is peaking that is more appropriate than peaked. alix: that was brian moynihan speaking with david westin. joining us now for more on the inflation challenge and what it means for the consumer and is this is is steve steinour,
chairman, president and ceo of huntington bancshares, inc. they are the smallest -- they are the biggest mall business loan creators. you are in the heart of the country and have huge exposure as well as commercial businesses. what are you hearing from your clients? steve: think you for -- thank you for being able to join you. our clients are concerned. there is talk about recession as a consequence of inflation. the fed clearly has to fight inflation. as well expect, there will be rate increases that will help doing that. they have been labor constrained and supply chain constrained for years.
--benefits the midwest and other factors. we are seeing a lot of capital expenditure and bringing it up. anna: to get more of a sense, when you talk to them, do they think businesses are starting to hurt already? steve: we are very early into it. there is a worry about a slight or shallow recession. they are not spending money unless they have to at this
point, but they are in very good positions generally. there been a number of significant years they have deal averaged. we are -- de-leveraged. demand is very strong and not being fulfilled in many sectors. we see it in our day-to-day lives, restaurants, hotels. there is not enough labor and that is going to be an ongoing problem that will work ultimately to the advantage of a slight recession. alix: steve, along those same lines, we hear a lot about on ensuring. -- onshoring. our companies actually doing it? will they spend the money? steve: we say massive amount of
investment going on in the country. there is a huge amount of investment that is being made. usually the fourth quarter is the best quarter of the year, so the backlogs are strong. we are excited about what we see going forward in terms of investment, both in terms of equipment for onshoring and also for building. there are still massive amounts of liquidity by consumers, businesses, and state level government. anna: imagine consumers. let me get your take on where we are with the u.s. consumer. companies have strong balance sheets coming out of the pandemic. at the same time, we see banks talking about the amount customers are now relying on credit cards. that may plow away for -- play it well for banks and what does
it mean for the consumer? steve: there have's been so much more get rate finance over the years, it has increased substantially disposable income. the consumer has never been in better shape. i think with the fed is focusing on inflation and trying to bring it down, the coasts -- cost of energy and food, and the near term is imperative, and that will help all consumers and business as well. alix: as we are moving into this very uncertain environment, steve, would you be interested in buying more stuff. you bought capstone partners and things will no doubt go on sale, particularly had of a slight recession as you are intimating. steve: capstone partners was great for us. they are a middle-market company that has generally worked with what our businesses revolve around.
this is a marriage made in heaven. we also bought a payments company in the second quarter that is a business consumer and a terrific opportunity for us. there may be others that present themselves, payments related or somehow building out capabilities. we would look to pursue those. but the focus is on the core here we had great growth in the second quarter, record levels. we are very focused on continuing to do that. anna: steve, what are your hiring plans right now? steve: we are hiring in student businesses. we just a year ago completed a large acquisition and the combination has given us great new markets, colorado, minnesota. we are no a meaningful presence in chicago, and it has also given us wonderful national businesses. our inventory finance and a host of new businesses are doing well
anna: welcome back to bloomberg markets. we are coming up to the european close. less affected by they negativity around tech. stocks are up. it was volatile but now flat. the german five-year yield reflecting data we had where we see money going into bond markets, buying stocks and also buying bonds with the expectations around the ecb and how much hiking it does. that is the story in europe as