tv Bloomberg Markets Bloomberg July 22, 2022 1:30pm-2:00pm EDT
>> stocks down on the david up on the week. tech leading the selloff. this is "bloomberg markets." ♪ kriti: pain in the stock market but we had a series of good days. positive days. s&p 500 down 1.1%. nasdaq is taking it on the chin. the upper performance in the key tech stocks has been the theme of the week, not of the day. that has to do a snapchat, twitter as well.
look at the 10-year yield. that's a different story. pmis are coming in weak. you see the 10-year yields down 10 basis point, retreating far away from the 3% level. look at commodity complexes. a lot has to do with the agreement. russia and ukraine coming together on a green agreement. we will digest all that in the next 30 minutes. we start with what the economists are saying. the federal reserve chair jay powell is likely to slow the pace of interest rate hikes after a 75 basis point hike next week. inflation remains front and center in the minds of investors. the white house director of the national economic council speaking about that strategy. >> our strategy is to go everywhere to bring prices down. to do so in a way that folks don't have to give up economic
gains we have made. kriti: for more on this topic let's bring in our very own anna wong, chief economist for bloomberg economics. such a huge and monumental we coming up next week. i'm curious about the 75 basis point story. talk about the difference between 75 basis points and what some wall street strategists are calling for, 100 basis points. anne: i don't see the pace 100 versus 75 making a huge difference for inflation this year. if the fed goes 75, if they go 100 bits, 25 in september. i think what the fed aims to achieve is to get the 3.5% by the end of this year. kriti: what other things are they watching? you have a housing market extremely tight. a labor market that is extreme we tight here.
yes, maybe they are trading in on recession. i'm curious about the signals they have to watch that might be on the radar. anna: unfortunately this is unusual times. normally the fed does watch for other things. right now the number one priority is inflation. they will be paying attention next week to -- we will be getting pce deflator even though we already saw the june cpi. the pce could surprise on the upside in terms of core. it is down to inflation right now. even the risk of a recession, an earlier recession has risen substantially. kriti: let's bring it back down to the bond market. we were speaking to alix steel about this question. retreating 10-year yields, how low can they go? anna: that complicates the fed's job. right before the 75 hike last
month, that is the kind of 10-year yields we are seeing. now we have returned to our financial condition as easy as before that 75. it means ironically with heightened fears of recession, it actually causes financial conditions easing that forces the fed to do more. kriti: fascinating stuff. anna, thanks as always. get your rest this weekend. chief u.s. economist for bloomberg economics. a pleasure to have on the show. another pleasure to have of the show is john ryding. thank you as always for joining us. we were talking about the significance of potentially 100 basis points on the table. speak about the psychological level or damage that 100 level might do. john: i don't think we will see 100 basis points next week.
after the cpi came in at 9.1%, which was very uncomfortable, the markets moved the price in -- to price in the basis points. governor waller came out and walked to the markets back, saying the markets were ahead of themselves and the market is data dependent. if you look at the data, that included not only the cpi but the university of michigan 10-year inflation expectations. that is now at 2.8%. if the fed walks it back -- if we were to see 100 basis points, that would seriously hurt the fed's credibility. what are they doing by way of guidance? i would personally prefer an ecb approach. meeting to meeting, not get
guidance, do with the right decision is, but we are not in that world. we are in the world where people expect to be guided. the fed will five basis points in all probability. maybe given other numbers they might have preferred to 50. -- 250 -- two 50s. it is not the best way to be -- ford guidance should be off the table and should believe in the fed's commitment to live in places. kriti: 75 basis points, you made it clear if the cost of that is a recession, it is a cost the reserve is willing to pay. i'm curious about the actual economic activity right here right now. we are talking about recession on the horizon. if you look at the divergence between consumer sentiment and consumer spending, the divergence does exist.
people are still spending. fears of a recession really warranted? john: i think the fear is near-term and overblown. i have been losing language that a recession is inevitable because the fed is letting inflation out of the bag, but it is not eminent. one reason is that the vast bulk of the two point $5 trillion and six savings built up through government income supports and lack of spending opportunities during the pandemic, the consumers have that that they would not normally have. there is a tremendous reserve consumers control. in addition, we have supply constraints everywhere. spending can't really get to levels people want to do. we have a record delay now in companies being able to order capital equipment that is greatly needed. if you take out some of what economists call excess demand,
that means demand is running way ahead of what the economy is capable of supplying stop we see it in the labor market. yes, at some point we will have a recession because it will need tight auditory policy to get inflation back down to target. i don't see it happening with more than 10% probability in the next year. next week we get gdp. we think gdp will come in at 1.1% for the quarter. it could come in negative on the inventory drawdown. then we have two back-to-back negative quarters, which is not a recession. there's a wrong view that back-to-back quarters is the definition of negative growth. kriti: let me jump in. from a fundamental economic definition, yes, that is not the correct definition. from the market's perspective, from those who have grown and bright in the market, two negative quarters is something they are expecting as a signal a recession is here.
i'm curious about the market impact. you're talking about the treasury. i retreat on the 10-year yield. a dollar that continues to strengthen. does any of that worry you? john: no. i've said it before on bloomberg. the mistake the fed made wasn't staying easy. continuing to ease with asset purchases. $120 billion a month with inflation rising to uncomfortable levels. misdiagnosing that inflation as transitory. that is in the past. now the fed has to correct that. long-term, the key to whether we have no recession, which i think is unlikely, a mild recession were deeper session is how inflation expectations adjust. people view for credibility high. the fed will have to do less. the recession may not be as deep. if inflation expectations build
-- we have seen a little bit of a head fake. the recession will be deeper. that is all they consequence of inflation. in cpi terms it is running at 9.1% year-over-year here in the u.s. it is running at 8.6% year-over-year in the ecb with some of the ecb's peripheral countries, latvia, lithuania, estonia seeing rates close to or above 20%. kriti: so much to digest here, john ryding. we will have to have you back soon. we thank you as always for your time. time for bloomberg's first word news with mark compton. mark: the house january 6 committee is planning where hearings in september. they want to see missing text from the secret service, as well as testimony from former trump advisor steve bannon.
additional criminal cases against rioters who stormed the capitol are possible. trump insiders told the committee the former president ignored pleas to call off the mob storming the capitol. during the primetime hearing thursday night members cast the former president's inaction is a desperate final ploy in the struggle to hold onto the presidency. congressman lee zelman of new york, republican candidate for governor was attacked at a campaign event outside rochester on thursday. a man with what is being described as a sharp object confronted congressman zelman and assaulted him. zelman was not injured. the suspect has been charged. german chancellor olaf scholz has opened the door for extending the life of the country's three remaining nuclear power plant. the units are said to be switched off at the end of the year, but germany is at the center of an energy crisis that
kriti: this is "bloomberg markets." snap's disappointing results had a ripple effect in the social media sector. $90 billion wiped out of stock market value after snap reported an increase in concerns about the outlook for online advertising. let's bring in mandeep singh. scott kessler. scott this is interesting. very macro issues when it comes to snapchat and twitter. the advertising sector really coming in and saying this is where all the heavens lie. is this a demand-side issue
anticipating low consumer spending ability, or a supply-side issue where they need to protect cost and not spend? scott: it is more of the former. advertisers and marketers are spending less. that has been revealed in the context of conversations we've had with industry experts over the last number of months. snap basically concluded their first quarter in march. in april, they reported results. in june they wrapped the quarter up. in july, the results were below what they preannounced to. i think investor confidence and sentiment have been shaken very notably. i think snap, because of their historical focus on large brand advertisers is feeling the brunt of cutbacks from those kinds of companies. kriti: mandeep, i want to
talk about stock market value. a 40% drop today. twitter seeing similar things you heard from snapchat, perhaps not to the same extent. it's only down -- not 40% is a better way to put it. what gives with the extra pain in snapchat? mandeep: we know advertising is going down and that's affecting everyone. is it worth $90 billion of market cap going down for a combined for these company? we don't have enough data points to show that. we will find out next week when alphabet and meta report. snap's miss was bad. they telegraphed it poorly. it was around $100 million in advertising revenue. the real kind of two companies that drive advertising market are meta and alphabet. they control over $200 billion
of revenue. i think that will determine whether we will see a prolonged slowdown or if it is just temporary. kriti: scott, you have been covering tech for ages. i want to ask about what snapchat, twitter, pinterest, meta even, it is kind of its own universe within the entire text fear. talk about the -- tech sphere. talk about microsoft or apple. where's the biggest upside? scott: one thing i wanted to make clear is you highlighted this very important discrepancy we are seeing in the stock performance today of snap versus twitter. i think it's important to highlight. snap has done a poor job of forecasting and communicating, whereas twitter missed their revenue guidance and actually showed a decline in year-over-year revenue in this quarter.
however, if you look at their dau metric, did not only accelerated from q1 to q2, but 17% was very close to what snap delivered in q2. in terms of answering your question directly, there is a lot going on in terms of tmt more broadly. those companies that have diverse and durable business models will probably fare best in this kind of environment when you are subject to big advertising budgets being modestly cut and having a 40% impact on your stock price and one day, that gets a lot of people's attention. to the point that was made earlier, we will see to what extent this is something that is clearly as impacting all the companies in digital and social
media space. you look at meta. most of the revenues come from small and midsized businesses. you will not be able to have the kind of impact across a handful of customers for example. kriti: mandeep, talk about the stock price. it is down quite a bit but let's talk about this in the long term here. when it comes to demographics it has become a major touching point for meta, pinterest. for snapchat, wasn't there major thing going for them was the extremely young demographic? what happened? mandeep: tiktok is a formative competitor in terms of both advertising revenue and time spent. when it comes to social media, consumers have a lot of choices now. it is no more instagram, facebook and snapchat. they have tiktok and ro blox.
it is driving advertisers. some of the smaller platforms really have a big problem here because they can't keep engagement. even though snapchat's user base is still holding up pretty well, the time spent is going down. that correlates directly with impression growth. i think there is more competition and that is probably why advertisers will ship their spend. kriti: mandeep singh, scott kessler, we thank you both. still ahead, a ton of conversations on the major movers of the day. also what is moving in the commodities space. we will dig into the at&t and verizon story. this is bloomberg. ♪
kriti: this is "bloomberg markets." time for what it's worth segment. turkiye says the agreement to a of ukrainian grain was signed today. ukraine's grain shipment have installed e-sports have been blocked since the russian invasion. that led to production to an increase in world hunger. in norma's things going on. wj -- enormous things going on. wheat futures down as we talk about if there is time for other major grain exporters to fill in and be able to make of some of the gap. united states very much falling into that. wheat futures retreating off the high. a look at some of the biggest business stories in the news right now. verizon has cut its revenue forecast, the largest u.s.
wireless carrier trying to keep both rivals who may have gained through heavy phone discounts. on thursday, at&t alarm industry watchers with a warning that some summers are starting to delay paying bills. american express posted second-quarter revenue to a record that the company to raise its forecast for full year revenue. amex customer spent on travel by mass cancellations and long lines at the airport. schlumberger is getting a boost in the search for oil and gas. the world's biggest oilfield service provider raised its sales forecast to at least $27 billion, beating estimates. their second quarter profits also were better than expected. that is your business flash update. a quick check as we had to the next show in the break. s&p 500 down 1.2%. the losses accelerating and concentrated in the nasdaq. the story of outperformance
mark: now keeping you up-to-date with news from around the world here's the first word. in italy and election will be held on september 25 in the wake of the resignation of prime minister margo draghi. the president dissolved parliament and officially called for the vote following mr. draghi's move. a center-right coalition is leading in the polls. in the u.k., new polls show foreign secretary liz trust extending her lead over former chancellor rishi sunak in the race to be the next prime minister. according to a survey of conservative party