Good morning. I'm Brian Curtiz.
And I'm Doug Prisner. Here are the stories we're following today.
Breaking news here on the Bloomberg terminal. Let's get right to Ed Baxter in San Francisco.
Ed, all right, Brian, Yeah, this is the US Supreme Court ruling that Alabama can go forward with the country's first execution by nitrogen gas. It will be the first time using this method and the first execution by a new method since nineteen eighty two. The execution is scheduled for tonight. They plan to put a face mask on fifty eight year old Kenneth Eugene Smith and replace the air he is breathing with nitrogen to cause oxygen deprivation.
Smith's attorneys have argued that the state is trying to make him a test subject for an untried execution method. He is one of two men convicted in nineteen eighty eight murder for hire slaying of a preacher's wife. The other was executed in twenty ten. Center Republican leaders are working to try and save and emerging Ukraine and migration deal. Today. It looked earlier in the day like they were coming together, and then Donald Trump entered the fray telling senators and
House members not to vote for any compromise. Does this blow the deal for Ukraine and the border, Well, Bloomberg's Jonathan Tamary says, not yet.
I think what we've heard from Republican senators today is say that, yes, McConnell was acknowledging the political reality that there's a real challenge to any deal here, but he wasn't saying this deal is off. This deal is dead. And there are a number of Republicans who came out today and said they want to get something done. They see this as a once in a generation chance to actually get some of their tougher border policies enacted.
Now, mcconnoll had reportedly gone so far as to suggest that possibly Ukraine aid could be separated from the border policy. So we'll see where that goes. But how does this play going forward? With Trump inserting himself here? While Senator Mitt Romney is not a fan.
Former President Trump is indicated to senators that he does not want us to sell the pumbit the border. He wants to lay the blame of the border at Biden and the idea that someone running for president would say please hurt the country so I can blame my opponent and help my politics is a shocking development.
So will Trump be jumping in on every bill going forward? Then he is being played by many in Congress now as the GOP nominee. Nicky Haley does not think so.
We have raised a million dollars since I gave that speech last night online in small dollars.
And her super pack has raised fifty point one million in the last six months, which is more than Trump has. She says New Hampshire was actually invigorating, that it was closer than my many thought it would be. South Carolina is how shall we say, extraordinarily important. February twenty fourth, Donald Trump was a witness today in the civil suit
involving Egene Carroll's defamation and rape. He was on the stand for less than five minutes, a reflection of strict limits imposed by the judge about what he could say. He said he stands by his deposition that he did not rape her and left the courtroom with a scowl. Reporter say, he said, this is not America. And Vladimir Putin is testing the waters on whether the US is ready to engage in talks for ending Russia's invasion of Ukraine.
Bloomberg reporting he has gone through indirect channels global news twenty four hours a day and whenever you want it with Bloomberg News Now in San Francisco. I'm at Baxter and this is Bloomberg. All right, guys, Yeah, thanks very much. Six minutes past the hour.
Now it's time to take a look at some of the top stories of the day. Well, we mentioned that Intel disappointed with its earnings and the stunt got slam. But then GDP did exactly the opposite, encouraging investors. But Doug, you know, for a lot of people, taxes is probably number one. And we had US Treasury Secretary Jenny Yellen weighing in on the Biden administration's tax policies today. She said, the White House is keen on making sure that the
middle class gets a break keeps that break. They'll do that by retaining some of the tax reductions that were enacted by former President Donald Trump. Here's Yellen.
President Biden made an ironclad commitment to not raise taxes on those making less than four hundred thousand dollars a year. There are some proposals to including you know, there was a corporate Alternative minimum tax that was passed to ask corporations and the wealthy to pay their fair share.
Jennie Yellen has said that new revenue sources will have to be found in order to pay for tax cuts that are being extended.
It's very interesting, Brian, because just yesterday we heard from former US treasure Secretary Bob Rubin, and he was saying, Hey, the US is in a terrible place with regard to that federal deficit, and the way to solve it would be higher taxes. Well, keeping a close eye on that story to be sure, as we get more deeply into this presidential election year. Let's get to Amazon, Alphabet and Microsoft,
three companies subpoena today by the Federal Trade Commission. The FTC is gathering information on the company's investments in partnerships with AI startups and Thropic and Open AI. Here is Bloomberg's Jenniferree on where this investigation may have originated.
Investigation is open when the FTC may have some concern or some suspicion that laws have been broken. A study is just meant to learn about a business, to learn about an industry, to understand these investments. You know, they have concern about the dominance of these big tech companies. They have concern about AI, which is rapidly becoming a part of our economy, and I think they just want to make sure they're ahead of this and understand what's going on.
Bloombergs Jenniferree. There now the probe is focusing on investments by Microsoft, Amazon, and Alphabet worth a combined nineteen billion dollars. It was on Thursday the FTC warned the AI companies cannot use claims of innovation as cover for breaking the law.
Brian, So we talked about stocks getting up to all time highs again, and part of that story was the strong GDP report, but also the earnings have been pretty good. However, we've seen quite a few weak forecasts, Doug. The beat rate is still up around eighty percent or so, and so that might justify some of these gains in stocks. But we're hearing from more and more companies, Tesla being won and Intel another where they have actually given pretty
weak forecasts. Listen to these numbers. Intel said that sales in the first quarter will be twelve point two to thirteen point two billion dollars. Analysts were estimating fourteen and a quarter billion. Now, the outlook suggests that CEO Pat Gelsinger still has a long way to go in restoring Intel's former prowess. Here's Dan Morgan at Sinova's Trust.
I was really looking for a little bit of a rebound here in regards to PC chips. We know that Intel is behind both AMD and in regards to AI. They had a pretty strong quarter last quarter in terms of that client computing group, So I was expecting that momentum to kind of carry over and maybe you get a beat. But they came in line, which was fine, but obviously the guidance for the first quarter was very disappointing. We're hopeful a little bit better than that.
So that guidance had the stock down nine percent in after hours. And by the way, that was Dan Morgan there at Snov's Trust commenting, it's worth noting that the chip maker's PC business is recovering, but the company has been losing ground in the lucrative market for data center chips. All right, let's get to really our top story I suppose today is the GDP report, because it did spruce up the markets. By the way, I'm Brian Curtis, along with Doug Christner, and we're joined on the line now
by Estelle Oh who's US economist for Bloomberg Economics. To take it close to look here. What's interesting is that people took a lot of heart in this is stell because that number three point three percent was sharply higher than expected in the firth quarter, in the fourth quarter. But I note that Bloomberg Economics still sees a recession coming, and the team says there's a possibility that these GDP numbers will be revised lower. Spell that out for us.
That's right, Brian. It is a surprising print that we got earlier this morning, and it on the surface of it, it does look like it's a very strong print that is just screaming soft landing, and that's definitely a little not to say a little, but contrasts with our current view that we still expect US economic growth to slow
down in twenty twenty four. And the reason for that is because if you look under the hood of today's four Q GDP print, you'll see that most of the bulk of the growth was actually driven by consumer spending, but also upside surprises from more volatile categories within the GDP, such as trade and government spending, and it's purely because of the fact that more volatile categories drove the upside. Figured this morning that we don't think this strength will continue.
And that's why, even though today's TV print was a good indicator of how the US economy is faring, we are not convinced that strength will continue going forward.
Okay, so still I'm going to push back. I'm going to push back a little bit because that the PCE, the core PCE was only up two percent for a second straight quarter, So clearly underlying inflation is coming down. And I think it gives the FED a lot of wiggle room here, particularly if they would be concerned at all.
And when I say they am referring to policymakers about some of the the potential stress in the credit market as we see some of these older loans roll off and the pressure for companies banks are included in this to rea to roll over some loans at a rate that, if the FED is not aggressive in lowering rates, would be at a rate that's higher than those original loans were priced at. Is that a fair statement?
Uh that the risks you know are completely uh legitimate concerns, But I'll just say that we don't think the FED. We think the FED will take uh or view this gdprint along the lines of how we're viewing it, and that it shows that we make good progress on inflation. The US economy is still strong, but we don't think the FED will take this as to mean that strength
will continue forward. In that sense, there strength, the FED still has incentives or has justifications to lower rates before these companies need to refinance their loans in the next couple of months or years. Does that make sense, Doug, Yeah.
Yeah, Well, we mentioned that GDP was three point three percent and personal spending rose at a two point eight percent rate, so that's almost in sync. But as you say, it suggests that, you know, there was a little bit of the slack made up by business investment and housing help there. But I don't see anything in that spending by individuals of two point eight percent that suggests that it's going to fall apart, And even two point eight percent would have been a pretty solid number for GDP.
Yeah, definitely. So if you look underneath the hood of the consumer spending category, you get a really broad mix of strength and spending in different categories, but with the one category we're really paying attention to is to slow down and spending in food services and restaurants. Now, Brian, if you recall all throughout the whole pandemic reopening phase, one of the pillars of UH, the US strength and the US economy was consumer spending on you know, restaurants,
dining out, travel, accommodations. And we're finally seeing spending in that category pull back, and that to us is an indication that you know, consumer spending on discretionary services, you know, food services and accommodation is one of the among the most discretionary services UH spending consumers can choose to spend on. That pullback is UH an indication to us that consumer spending will unlikely be continue to be a strength going forward.
Estelle, do you have a sense as to when the labor market is going to begin to to crack or to show signs of cracking.
So yeah, we definitely started seeing signs that the labor market is continuing to is showing signs of cracking. In the December known Firm DRABS report particular, we're seeing a rise in the duration of people staying in unemployment and
that too. That to us is a good sign that we're at a tipping point where either the labor market could completely accelerate and it's the curiation trend, or if that figure comes back down, then it may mean that we only saw a blip, a small downturn in the labor market and we may be seeing it recovery already. So we're really looking at the non farm paeris print next week closely for more signs of further deterioration in the unemployment duration rate.
To answer your question, yeah, we had initial joblest claims going up, so that's a little bit to worry some. They did rise twenty five thousand to two hundred and fourteen thousand. What would a number be that would be, you know, would further emphasize your point and would be let's say, scary for those people worried about jobs.
So usually right now unemployment rates are definitely lower than prior to previous downturns, and we would need to see a fast acceleration in the rate of change. So we're not really that concerned with the level we're considered concerned about the rate of change. I'll just know that we don't really take as much signal in the unemployment claims
figures right now. But because we've noticed that the series is actually artificially it maybe are artificially lower than it should be because of the amount of people who are uneligible for unemployment place and don't even apply for unemployment claims because they already used up their eligibility throughout the past few months.
Estill very quickly before we let you go. In about twenty seconds. Right now, the swaps market is indicating the Fed will cut in May. Let's assume twenty five basis points total rate cuts this year round one hundred and forty basis points. Are you okay with that or or do you push back on it? Very quickly?
So we actually think there's a chance for March Raycouk because we believe that CORPC inforation is on a fast track and likely to undershoot the FEDS target, giving the FED justification to cut raise earlier.
This is Bloomberg Daybreak Asia, your morning brief on this story is making news from Hong Kong to Singapore and Wall Street.
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