Meta Soars and Fed Slows

billion dollar share sale. McCarthy says he feels he and the President can find common ground on the dead ceiling. Former US Defense secretary says plan for a real possibility of conflict with China. I'm at Baxter with Global News Manchester United moves one step closer to its first trophies since two thousand seventeen on Dan Schwartzman. I'll have that story.

More coming up in Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven and three on New York, Bloomberg, Washington, d C, bloom one six one, Boston, Bloomberg nine six, San Francisco, Sirius x M one nineteen and around the world on Bloomberg Radio dot Com and via the Bloomberg Business app. Good morning, I'm dead prisoner and I'm Brian Curtis. Here are the stories we're following today.

The FED slowed its drive to rein in inflation policymakers, lifting the Fed's target for the benchmark rate but twenty five basis points to a range of four and a half to four and three quarters per cent. The smaller move followed a half point increase back in December and four jumbo sized bases point hikes prior to that. The Fed noted that inflation has eased somewhat but remains elevated.

After the decision, chere J. Powell was asked whether he was worried about the recent market rally creating easier financial conditions that could hamper his fight against inflation. He chose not to push back hard. It is important that overall financial conditions continue to reflect the policier strength that we're putting in place in order to bring inflation at two percent, and of course financial conditions have it tightened very significantly

over the past year. I would say that our focus is not on short term moves, but on sustained changes the broader financial conditions, and it is our judgment that we're not yet in a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate. Peal added that it's gratifying to see the disinflationary process now getting underway, but he said that officials would need substantially more evidence that inflation was on a

sustained downward path before they could declare victory. Very interesting that he chose to use the word disinflation a number of times today, and I think Brian to be fair, if you take a broader view, you'll see that financial conditions are notably tighter than they were about a year ago. Now. The Chairman may have intended to emphasize the need to do a lot more when it comes to taming inflation,

but as we indicated earlier, markets today simply weren't buying it. Here, as black rocks Jeff Rosenberg, there's a real disconnect between you know, what he said, what the statement said, maybe what he wanted to say, and what the markets heard. But what the markets heard was this issue of the conflict between financial conditions easing and whether or not that would impact the FEDS policymaking. He dismissed it, so let's be polite. Then, I think it's fair to say that

markets are doubting the FEDS projections. FED funds. Now see the FED only getting to five percent in so far as a terminal rate. And then and then here's the interesting thing, cutting by fifty basis points between now and the end of the year. On the other hand, the FED things that can get to a rate of around five and a quarter percent and then hold it there through the remainder. Does some corporate news meta platforms reporting better than expected sales during the holiday quarter. We get

that story from Bloombridge Charlie Pillett. Met Us saw strong demand for advertising. Has it attracted more users to its Facebook social network, it said. Revel You for the fourth quarter was thirty two point two billion dollars. That compared with Wall Street estimates of thirty one point six billion. CEO Mark Zuckerberg said Matta is making progress with its investments in artificial intelligence, particularly for improving the videos that

shows users on Facebook and Instagram. The company is recovering from the worst year for its stock in history. In New York. Charlie Pellett Bloomberg Daybreak, Asian all right, Charlie. So it's all about earnings. We get that. Today Morgan Stanley chief US equity strategist Mike Wilson was saying investors could see several more quarters of disappointing results, and he told us the first quarter is where we could see

an acceleration. Earnings are disappointing everywhere. Okay, this is one of the worst streets and earnings we've seen in quite a while. And people are now saying, oh, it's better than feared in this end the other that's like saying a tornado ripped through your house and saying, oh, we only knocked out the bedroom. I mean you earns are bad and you need to be honest about at and you need to say, do I really want to own a company where the margins are degrading like this and

I don't really know where the bottom is yet. I'm just gonna trust it's going to get better. That's a that's not a great investment philosophy in our but you particularly give where evaluations are now. Alright, so what do earnings mean for the overall market? Well, think back s and P five hundred was up more than six percent of the month of January and Wilson is essentially saying that people were lured into believing reality is different than

what it is. He also compared last month's move to the beginning of two thousand one, when the market also saw a rerating of tech stocks. You know, Doug, I think that the FED chief was not really devish today, insomuch as I think he was less hawkish than what people had feared, and he did actually talk about a soft landing. He hasn't really talked that much about it.

He's only talked about conquering inflation. And yes, he did not scold markets because financial conditions have eased a little bit. And actually what you said is two. He did say that that financial conditions were tougher now than they were a year ago. He even said they're not much easier

than at the time of the last FED meeting. Now the consensus as will stocks have been running higher, but the SMP five D right now is almost where it was two months ago in December around So yes, we had a big fall in December and then we had a big rise in January, but net net were almost at the same level. And I think the other point of contention between what the FED is saying, and what the market is indicating is that rate cuts are on the table between let's say, before the end of the year.

Powell seemed to push back against that notion pretty aggressively today, Although if the economy were to somehow collapse or kind of move into a recession that was so deep, maybe the FED wouldn't have a choice but to do that. Yeah, he said, their data dependent, and I think everybody believes it. Now we've got a lot more ahead. We'll be talking about this with Chris Konstantino's coming up from Riverfront Investment and a little bit more time to flesh out exactly

where the Fed's head is at the moment. Time for Global News US House speaking, Kevin McCarthy says he feels his first budget meeting with President Joe Biden was very positive and Baxter has Global News in the nine News at San Francisco, ed. Yeah, exactly right. Brian McCarthy says he and the President found areas of agreement as well as disagreement, and their first meeting today regarding the dead ceiling and the budget, I can see where we can

find common ground. I think the American public would appreciate that, and we look. I've been very I've been very clear the current path way on we cannot sustain. We got to change the directory to put ourselves on a path to balance how we get there will be our discussions now. White House spokes and when Karine Jean Pierre says a position on raising the dead ceiling is very clear. We see this as a constitutional obligation that they that they have the Congress has to act. Yeah, so at least

they've had their first discussion. US Ambassador of the United Nations Linda Thomas Greenfield, is calling for an overhaul of the Security Council in the U n to blunt Moscow's impact. Exclusively here on Bloomberg. Greenfield said the body has been able to move power outside the Council to accomplish a number of things. One an overwhelming vote condemning their annexations are attempted annexations. UH In Ukraine, we kicked them off of the You and Human Rights Commission, and we're continuing

to put pressure on them and isolate them in New York. Meanwhile, the US as it will supply Ukraine with long Arrange artillery ammunition as part of a new two billion dollar package of military assistance, and Greenfield also commented briefly on China and human rights, saying that it is exerting inordinate pressure on human rights discussions among nations. Former US Defense Secretary Mark Esper says the US, along with Taiwan, need to prepare for the real possibility of war with China.

Asper on Bloomberg's balance of powers, as Taiwan has already started working on ground defenses. We want to avoid a fight with China for all kinds of reasons military, economic, political, and so on. But if it comes to that, then we we need to have folks on the ground. The Taiwan's need to stock powder goods because the West will not be able to resupply them like we we like we've been able to with with Ukraine. Asper says, China has been watching what is going on in Ukraine very carefully,

and the football goat the greatest of all time. Tom Brady has retired again, he says, for now for good, so monetarily, he doesn't need any pity parties if you're thinking about planning when Bloomberg. Scarlet Food says three hundred seventy five million dollars with Fox over ten years and even waiting for him because it was signed after his first retirement, and you know it's for whenever he decides to stop playing. But what's interesting about that deal is

it's more money than he's made playing football. So he's going to be the highest paid sports broadcaster, maybe the highest pain caster period. Scarlett says. Uh. Scarlett says that they have been constant focus on Fox all the way through the season, so next year, so we won't get tired of him. Right in San Francisco, I'm met by Extra Global newspower by more than twenty journalists and analysts

and over one hundred twenty countries. This is Bloomberg. This is Bloomberg Debra Kaja and Brian Curtis along with Rashad Salamat and our guest is Chris Constantino's chief investment strategist at Riverfront Investment Group. So Chris the FED chief talked about disinflation in goods, that it's it's real. He talked about seeing disinflation likely to be coming in housing services but none yet in core services ex housing, and what

he's talking about there is basically wages. But it was good because he's talking about a soft landing your general impression from what you got today from the Fed in the chief. Yeah. Sure, and by the way, thanks guys for having me today. Um yeah, I think my take on the FED today, the general read was a little bit of a dubbish surprise maybe. UM. I think for two reasons, and you mentioned earlier on the program quite rightfully.

The first one is, you know his quote around our focus is not on short term moves, but on sustained changes to financial conditions. You know, the markets ripped started to RiPP not long after that, because it sounded to listeners like Powell was kind of shrugging off the risks of of that financial conditions tightening we've talked about. The second thing, maybe more important, was you know, you're you're exactly uh your reference to his use the word disinflationary,

this disinflationary process. So you know, you could view that

as debbish. But I think there's also potentially a third read here, which is that you know, the markets may have misunderstood him a little bit because we've seen this happen uh to uh FED chairman's before, We've seen it happen to power before, where you know, he's tried to communicate a message and and and markets heard what they wanted to hear, and then usually over the next forty eight hours, markets kind of sort back through um the statements,

and then of course a bunch of other FED governors come out and kind of get trotted out to help massage the message of the markets get their head around it. Um. One thing I'm pretty sure of is that how doesn't want to be known as the FED share who allowed inflation to become ingrained. And so I still think he's he's trying to walk that tight rope, and I think he's gonna eventually air on the side of being you know,

maybe overtightening versus under Chris Chrise. I mean, it's there's also a situation where you know, the markets just don't want to believe him in some ways, and you know, the thing is probably not it's probably better to get your desired results by misleading them. I mean, could you argue that the FED is perhaps done raising rates and it wants to keep it just wants people out there

to believe otherwise. M that's an interesting theory. UM. It's certainly sort of a three dimensional chess match, if you will, UM, But I don't know. I mean, I think the modern FED has tried to be as transparent as possible. I think back in the Greenspan days and earlier, there was you know, three and four dimensional chess going on with what they said and didn't say. But I think the modern FED or this FED is trying to be as

transparent as they can. Um. But you can only be so transparent in a you know, a short presser, right. I think I think many of many investors would see him is still hawkish because even though we talked about the disinflation and goods and that disinflation was coming in housing services, he said that's less than fifty percent of the total. The other no disinflation, and so that means that they will stay vigilant. M I agree. I think that the bugaboo here is going to come down to wages.

Right for most small and medium sized businesses in America, that is their number one cost input and um, you know, and this is the place where I think businesses have struggled because wages, particularly on the lower end, you know, demand for workers is so dramatic still in those areas that um, you know, it's a big constraint for or businesses, so um, you know, the data I like to track.

You know, the n f I b M has a propensity to raise wages survey that they've been putting on for decades now, and that's data that here at Riverfront we like to track. You know, that has moderated a little bit recently, but it's still really really high relative to history. And that suggests to me that wage you know, wages are going to remain um, you know, pretty pretty sticky for the type being. So tells Chris, how you the moment trading to the market. Um, I think that

you have something called patty and it's not a woman. Correct. Yeah, that's thanks for bringing that up. That's the acronym that I've been using to try to communicate that. I think we're in a new era. UM. If the old era was of stock investing, was you know, own as much as much growth stocks as you can stand and then buy more. You know, Tina, there is a non alternative to growth stocks in a very very low uh nominal growth, low interest rate environment. I think the new era is patty,

which stands or pay attention to yield. I think for the next foreseeable future, and I think this could be with us for years to come. Um, a little bit like the nineteen seventies. I think that investors are going to get a fair amount of their total return in stocks and fixed income from the compounding of the yield

and not so much from betting that. You know that valuation multiples are going to go higher, and so I think in this era you want to focus on on business models that generate cash flow and tend to consistently return those two shareholders and Meta jump to almost after hours. Part of that was the stronger sales part of it to buy back which one is more important? Um? Great question. Um. You know, my my compliance department doesn't like me to talk about individual stocks, but I will talk about the

Internet sector of the whole. And I think my personal view on this is I think the market is laser focused on toplight growth here because you know, financial engineering tends to get a lower multiple, but if you can generate higher revenue, which has been an issue for any of these types of companies. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong

Kong to Singapore and Wall Street. Look for us on your podcast feed every day, on Apple, Spotify and anywhere else. You get your podcast. You can also listen live each day on Bloomberg eleven three oh in New York, Bloomberg in Washington, Bloomberg one oh six one in Boston, and Bloomberg nine sixty in San Francisco. Our flagship New York

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