Transcripts For BLOOMBERG Bloomberg 20240704

While. I think the fed can get down to their 2 target. They havent lost confidence or gained conference at just confidence. It will be interesting to see if they are successful getting inflation down to 2 . We are not through this inflationary challenge. This is bloomberg surveillance with jonathan ferro, Lisa Abramowicz and annmarie hordern. Jonathan the third era bloomberg surveillance begins right now. Because up before im cut off, lets get you to the weekend. Were almost there. Futures are positive bite. 1 . If the happiest ive seen lisa all week. Lets go to the calendar, tuesday bank of japan decision, wednesday the Federal Reserve. How does what weve learned this year inform what will happen next week . Should we start for japan looking at Wage Negotiations that are looking good . Lisa it might be a huge market catalyst because Wage Negotiations came in hotter than expected. You are seeing an open door for the bank of japan. It sets up the fed well because we are talking at high rates in japan, the potential for more inflation, do yields keep creeping higher on the heels of the whinny from both Central Banks . Jonathan they are calling it a momentous event. Weve seen it in the equity market with people finally retracing their steps into that market. When you talk about currency pressure, weve come so far from 1989. I want to talk about the data stateside, cpi tuesday, upside surprise and ppi yesterday, upside surprise and equities taking all of that in their stride yields have adjusted higher and equities have hardly moved and we are heading toward weaker gains on the s p 500. Another read on inflation a little bit later. Inflation expectations matter to the central bank and matter to washington, d. C. Annmarie you saw the preliminary different than the final, you saw sentiment deteriorate in which you see from consumers is they are thinking about 3 for the rest of the year. It was 2. 9 in january but last month, you saw the deterioration and you saw at the same time, they didnt specify why. In the oil market, we have hyo higher oil prices. The rest of the timeline, will we see that trickle down to higher gasoline prices which is difficult ahead of the november election . Lisa its such a model now and everybody can parse the news. Everyone says Something Different and the bottom line is people just dont know. Yes there is some exhaustion. You say theyve got record highs , all i can say is you just look at this and there is nothing to say conclusively annmarie its an Oprah Winfrey market, you get a car, you get a car, you get a car. Something for everyone. Jonathan it can get boring lisa lisa . Its not that its boring, like the french word ennui. Its this question of which is it, its a precipice, not just sit back and dont pay attention. This is a momentous pivot point. I can tell you look at gold or copper and point to anything. Jeff curry of goldman used to talk about this. There is a copper story that tells a different story about whats happening instead of iron or. And the divergence, you have to go to the place where this huge demand and we havent seen that at times and thats china and its about the changing economies and what we use these metals four. This gets us into the weekend for the next 55 minutes. Here is the lineup, sam stovall as inflation ways on equities. Mark gurman making a purchase and ai as he looks to catch up to rivals alphabet and microsoft. We begin with a string of hotter than expected inflation prints weighing on u. S. Stocks and bonds as we had toured a fed decision next week. Sam stovall writes this sam joins us now for more. A couple is all it takes to go from three to 2 on the medium. Next week, is that your base case . Good morning, that is the base case. Weve been saying for quite some time that the fed will be slower to lower interest rates. Our expectation had been that june would be the most likely starting point for rate cuts. Interestingly, that is 11 months after the last hike in july. But also historically is the time spread between a less rate hike, first rate cut going back over the last 30 some odd years. I think 75 basis points for all of 2024 with the first cut occurring in june but now possibly in july is what investors are factoring into their expectations. Lisa how much of a mood killer will it be if jay powell says we are concerned about stocks getting ahead of themselves . I think that would sound like irrational exuberance of 1996. There could be some pressure put on equity prices. Right now, the market is priced to perfection with the pe on the s p 500 trading at a 31 premium to its average over 12 month pe over the last 20 years. In a sense, some investors are looking for a catalyst for a minor correction to sort of reset the dials and that would do it. Lisa price to perfection but things are almost perfect. Everyone says we could be poised for a bit of a retrenchment at five or 6 and thats a buying opportunity. R8 do you agree that things are priced to perfection but of its price better we like it . Yes, i would say that but at the same time, it unnerves me that a lot of people are saying that in the market typically does not do what most people anticipate. Election years historically have always been positive when they have been front ended by a january gain in the s p 500 going back to world war ii. Because we have seen so many alltime highs, that indicates that maybe we are getting ahead of ourselves. Lets remember that the cnn fear and greed pull last week was reading excessive greed and theaaii Membership Survey of the bulls was unusually high using their terms. Jonathan everything just feels little bits dale, the consensus. We catch up with a lot of people every single week and hardly anyone has shifted their views. Thats whats intriguing to me. They were bullish and now they are more bullish and if they expect rate cuts, they still are by that push them back to june maybe the magnitude hasnt shifted much. Why havent we seen a change of views directionally when the Economic Data has pushed back against expect tatians . I agree and i think its because of the old saying that the trend is your friend. Right now, the trend continues to work higher despite those like myself who think we are due for some sort of digestion of gains. Every bear market since world war ii recovered everything that was lost. The market advanced another 5 or so but then fell into a decline, averaging 8 but no more than 14 . We are waiting for that resetting of the dials. Because the trend remains our friend, thats why i and others have not change their directional forecast. Jonathan lets talk about what to do. Do you stick with the winners or position elsewhere . If youre uncomfortable right now, where do you want to be . Right answer to most financial questions is, that depends meaning what is your time horizon . If its shortterm, i would tend to say weve seen a lot of rotation going into the underappreciated areas such as materials, industrials, health care. History basically tells us following it up year, you want to let your winners ride to out of every three times over the last 30 years. The sectors that did the best in the prior up year continued in the subsequent up year. That would imply that Communication Services come as Consumer Discretionary, tech and financials are those that you still want to favor for the year ahead. Lisa picking up on Consumer Discretionary, retail sales stood out as a weak spot yesterday is giving people comfort the fed can cut rates and the economy is not as strong as it seems. It might give a people some sense they can settle into their opinions. Does that give you pause about Consumer Discretionary, about the strength of the consumer . The consumer has been questioned i think over the last half year at least looking at debt levels, looking at Consumer Confidence levels but we continue to see very strong employment numbers, unemployment rates, etc. I guess the old saying continues that consumers stop spending only when the banks stop lending. We will need to see a curtailment of lending practices by the banks to slow down the consumer. Yes, i think the Consumer Discretionary sector is losing momentum but thats primarily because of tesla. When you look at the equal weight things are holding up relatively well. I would tend to say that the jury is out as of the near term but still positive for the longerterm. Jonathan a huge tesla distortion in the consumer part. Great to catch up with you. A year ago, it wasnt whether we would get a recession but how deep it would be. We were about to get a big contraction in lending and it did not happen. Lisa and we see Credit Card Debt outstanding and continuing to increase. How many people have come on to talk about consumer lending. Its a great time to lend and people are asking for it. Its still there. Jonathan i remember that conversation of mary daly of the conversation of the San Francisco fed. When the data was in conflict, it meant we are at turning points. Have we turn anywhere . Jobless yesterday were rocksolid and weve seen the conflict for a number of months. Lisa ive been focusing on the exhaustion feature. Its been a model for a long time. Everyones waiting for a turning point that hasnt happened. Do you embrace that this is the reality and there are different cycles in conflict with one another and moving beyond one another . Its a difficult moment to have conviction. Jonathan do you enjoy the weeks we have no fed speak . Lisa in quiet times, people say what will they say . Than we imagine what they will say and then we get the fed speak after that. Pick your battle. Jonathan you get fed speak this coming week with a jay powell News Conference wednesday afternoon. Lets get to an update on stories elsewhere. A mas proposing what its calling a comprehensive ceasefire deal as it tries to make progress on talks with israel. It was see the fraying of hostages including israeli women, children, the elderly and those who are ill. This is an exchange for the release of up to 1000 palestinian prisoners. The israeli Prime Minister says militant group is still making unrestricted unrealistic demands. The countrys war cabinet is expected to discuss the work proposal today. Shares of adobe or falling in the premarket after posting a weak sales outlet. The guidance is fueling concerns of new ai focus startups threatening its market share. The company has been integrating its proprietary ai model firefly into its top products like photoshop and illustrator. A recent demonstration by openai of its video Generation Model is fueling concerns about competition. Bitcoin is retreating from its latest record high. There is an intensifying debate about whether the bull running cryptocurrencies has reached a bubble. It reached an alltime high of almost 74,000 earlier this week. Bit coin and a gauge of the top 100 tokens surprising the likes of all these companies are up about 60 so far this year. Thats your bloomberg brief. Jonathan how many times that we heard people talk about the bubble . Lisa exactly. People are still doing it whether people buy it is another story. Its getting institutionalized at this point. Annmarie i think its a bubble when you have this theater. This has been ongoing. Jonathan it keeps going up. Up next, supply concerns driving up oil. Opec is still projecting we are likely to see 2 demand growth yearoveryear with a decent economy domestically and some improvement we are in seeing emerge globally but to me, that is the ingredient for why oil prices are being propped up and could continue to grind higher. 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When you go for Something Big like this, your kids see that. And they believe they can do the same. Earn unlimited 1. 5 cash back on every purchase with the chase ink business unlimited card. Make more of whats yours. Jonathan this has been quite a week. Equity futures right now on the s p 500 are positive by 0. 06 . I want to start on monday morning. Lets wake up monday morning, not together, that would be weird. I say this is the inflation data we will get for the week ahead. Tuesday cpi will come in hot and i will say thursday ppi come in hot and then i will say guess what the stock market does . I dont think he would have guessed on tuesday the s p 500 would be up by more than 1 . I dont think you wouldve guessed that on thursday we would be down one third of 1 after ppi reinforced what we saw in cpi. I think thats was difficult about conscious week but not just this week but difficult about this year. You come to this your and your market looking for for six or seven rate cuts and again, we started the year together and i said to you what would happen as we close that gap from six or seven down towards the fed three or maybe two at this point and with the stock market would do. Not many people lined up on this program turned around and told us that i think record high after record high on the s p 500 even if we reprice in that manner. Lisa we saw the underlying strength in u. S. Economic growth and earnings. People come to that would come to this good news is good news and bad news is good news moment which is interesting given the fact you have the fed as a relief valve is theres weakness and you have strengthened bowstring earnings on the others. To me, this is the sort of wedge that people are in. The only thing that could and that is true weakness with inflation. Jonathan a little bit later this morning, we will get Inflation Expectations and the university of Michigan Sentiment survey in one hour and 40 minutes. All of that going into the Federal Reserve. If you want to look at the bond market, these are the yields the two year yield yield is at 4. 70 and the 10 year yield is about 4. 20. Wti is 80 and about . 59, negative by 0. 8 . Supply concerns this morning driving up oil. We know that opecplus has been stringent with regard to their supply and we have not seen that kind of demand we otherwise might have coming into this year. There is a consequence of that. Opec to still projecting we are likely to see 2 demand growth yearoveryear. Net net with a decent economy domestically and some improvement we are seeing globally, to me that is the ingredient for why oil prices are being propped up and could continue to grind higher. Jonathan oil prices this morning are climbing with theiea forecast at a high demand. Copper is also rallying to its highest level in 11 months im better Global Manufacturing and construction could pick up. Will kennedy joins us now. It feels like this commodity market out of nowhere has woken up. What has woken it up in the last few weeks . I think is the strength of demand which is the strength in most parts of the Global Economy feeding through into final demand. If we take iron and copper one at a time, there is a supply story as well. On oil, the supply story is opecplus. The iea is saying that of opec and continues those cuts through this year, not necessarily give them but if we do, we will see a deficit which will put pressure on inventories and force prices higher. Demand for parental for final products looks strong. People are out there and they are driving. That is changing the narrative to something more bullish than we saw at the beginning of the year. There were supply problems with copper and a couple of minds like the one in panama is not producing but again, there is a Strong Demand story. Copper is critical to many economies. Demand is strong. Lisa what has changed . Why are people suddenly waking up to this . Are the Energy Agencies talking about it or is it the opecplus cuts or Something Else . They are climbing a wall of doubt especially in china. People are concerned about final demand there. As the data comes in, they show that in other parts of the world, demand is strong and more robust than they were expecting. They see on the whole, opec is complying with the cuts it promised. In russia for example, they made a tweak to the way it will interact with opecplus that means it has beefed up its pledges somewhat a couple of weeks ago. Put that together and people slowly are coming round to the ideas market may be more bullish than they thought at the start of the year when people were vague about the prospects of oil in 2024. Annmarie this potentially sets up a showdown between washington and riyadh. When with the saudis come in and add more supply . I think they would like to but they dont necessarily have a group mind on this. Its not ideal for them to keep this level of production of 9 Million Barrels all through the year. They may ever problem with the market this year. I think they will be closely looking at the economy. They will add the barrels when they can. The point about politics is important. If you look at copper and oil together and this and if this rally continues, commodities which have gone away as an story start to come back. Annmarie we all we are already seeing this. Can you take me into the geopolitics of this . Its an Election Year so it will be a big deal whether or not riyadh puts the pedal to the metal and puts more supply into the market where they decide to hold back. I think it will. If prices go much higher from here, clearly the pressure will be for saudis to put more oil into the market but the saudis may want to do that. They are benefiting from these prices of 85 and they get more than that into the 90s. They have cut production a long way back to 9 Million Barrels per day and thats curtailing their income. Ultimately, if the market continues to be strong, they will want to put more oil back into the market in the last half of the year but they will be cautious about doing it. Weve seen that the saudis are cautious. The prince wants to be preemptive in his words and i suspect we will see that cautionary attitude continue. It may get testy in the months of head. Jonathan we are telling a broader story putting together a bunch of issues and saying this is the big coherent theme now. Commodity prices are up and its inflationary. Do you see it the same way for from the same perspective . I think time will tell. There are parts of the market that does not fit that story pretty other big headline was iron ore going back to 100 with speaks to consistent weakness in parts of the chinese economy which takes away from that narrative a little bit. If the economy keeps doing well, supply will constrain for copper and oil and it could change this idea that commodities would be range bound this year but im not sure we are there yet. Jonathan what about the changes in last week . Thank you so much. You like the polluxs of this and you think maybe the saudis will squeeze this one . Annmarie the former president who is now the nominee made saudi arabia his first trip. Thats never happened before when he was president. This will get very political and you have to think of the midterms in 2022. Jonathan crude is close to 85 in Economic Data is up next. Life from new york, this is bloomberg. How am i going to find a doctor when im hallucinating . What about zocdoc . So many options. Yeah, and dr. Xichun even takes your sketchy insurance. Xichun, xichun, xichun youve got more options than you know. Book now. Jonathan in just a moment, you will get Empire Manufacturing Economic Data and import and export prices as well. Michael mckee will break down that Economic Data for you. Equity futures going into it are positive by 0. 1 percent on the s p 500. In the bond market, the two year yield so far this week higher every single day. We are back in the fourpoint 70s. Yields of single basis point to 4. 7085. Thats about to change. Mike im not sure this will change with empire because is not a heavily traded number but it is a negative number this time, negative 20. 9. This has been volatile lately. Its the new york area Manufacturing Index and it doesnt represent the whole country and has been one of the weakest that we have seen around the country. Prices paid is probably what people want to see. In that case, goes down from a prices paid full from 33 to 28. 7. Perhaps thats a good sign. We will see it carries over into the regional indexes. Import prices are up 0. 3 which is down from the 0. 8 a month ago. Ex petroleum is down so looks like we are seeing oil impacted. The rise in Petroleum Prices on a yearoveryear basis, import prices are down 0. 8 . Export prices are up 0. 8 so the terms of trade are oh improving lisa lisa for the united states. Improving but still coming in above expectations relative to where people had put their thresholds. We are looking at the import prices taking out gas, taking up oil products coming in 0. 2 up. Does this create a problem for the fed that all of the data points have been pointing to things not just heating up but hotter than people expected . Not cooling as quickly as many were hoping . Mike its less of a problem for the fed then for markets because the fed doesnt have to change its mind as often as the markets do. The markets are now getting worried about inflation the fed is talking about the possible the possibility this last portion would be bumpy. They are probably have already made a choice for what they want to do but they go into the meeting saying we can incorporate this late data into what we are thinking. We got the latest Bloomberg Survey in terms of what economists think the fed will do. They are saying three rate cuts are still on the table starting in june. By a 7320 margin or Something Like that, they said we have not reached a soft landing yet. Jonathan 4. 71 on the twoyear right now with yields climbing every single day this week. Lisa we are looking at the hotter inflation hotter than expected inflation reads. Our baseline assumptions of ongoing disinflation getting front and center . Mike at 10 00 this morning, we get the Michigan Sentiment numbers which will be interesting on peoples views of inflation and how things are going overall. Is this filtering out into the voting public, the angst we are seeing in wall street . Jonathan you remember when the survey came out and it shifted the Federal Reserve to make a move earlier that was going to, certainly earlier than they communicated. Whats the focal point now . It feels like the goalpost has shifted at the Federal Reserve. It doesnt feel like super cool is the big focal point. Doesnt feel Like University of michigan is enough to move the dial so whats the big issue for them . Mike they are focused on inflation at this point in keeping an eye on unemployment if it were to shoot up. At this point, all the inflation data is what they are looking at and they are looking at what is not going down. What is causing the problem going forward. I remember alan greenspan, we talk about his bathtub indicator where used to sit in the bathtub every morning and read through all kinds of obscure things and he would make a comment saying scrap steel looks interesting and then scrap steel indicator is the indicator that the entire world is following. Annmarie its all about inflation, we should expect a. Move . Mike i dont know if you would expect a. Move because it doesnt have to come now. There are some people who think they might not get there yet but you could do that in june when they get to the next dot thing if inflation can end continue to go that way. There is a signal get that gets sent through that. They may want to make that decision right now. Jonathan when a measure becomes a target, do you remember that . Thats what it feels like four inflation indicators. Mutual nationwide insurance points isnt just joins us now. Has your base case moved in last few months . Good morning. The cpi data that we saw for february was confirmation that inflation is not decelerating as quickly as we thought. We have pushed back the timing of the first rate cuts. We said [no audio] we still think thats on the table but clearly, just as you been discussing and lisa mentioned, inflation has been more stubborn than expected. The fed is not there is no reason for them to be in a hurry to cut interest rates. Labor market is still quite strong, consumers are doing well. We saw that with the retail sales data yesterday. I think they take their time and make sure they are fully confident that inflation is going back to 2 . Lisa there is a distinction between continual disinflation with some bumps and stubborn, sticky inflation that isnt going down further. How do you know which we are seeing now . Some people say it goes to the same destination and some say its Something Else. They say things of really shifted. Its difficult but we look at all the numbers from the bottom up and make projections as to where they are going and there is reason to be optimistic, cautiously optimistic. We are still in this longterm disinflationary channel. But there is bumpy notice and it seems the first months of the year, we know there is seasonal adjustment factor issues. They do their best to smooth out the first of the year increases. Its difficult but we think going forward, rental inflation is slowing in realtime time and that should be reflected in housing numbers. We think and the super core, there is some cooling. When category that chairman powell has highlighted is the court number. Thats been a really great deflationary reading but thats where it stalled a little bit and why thats important is that could be the shock absorber, the offset for Higher Service prices if we get some surprise. Lisa looking into next week and we understand the balance of risk is out and how the fed want technique a policy, the wildcard here is how much they acknowledge the fact that easier financial conditions are keeping this party going and keeping the inflation running a bit hotter. Do you expect them to address that . I think it will come up in the queue and day . Michael mckee or somebody will raise this. That is key because as they try to keep policy very restrictive and you see with bank lending and you see for Small Businesses , if you are locked into a Mortgage Rate around 3 , youre not feeling the pain very much economically. Companies turned out their debt they are coming to market now and refinancing. The fact that financial conditions or easing, that is a problem for the fed and maybe means they need to keep rates higher for longer here. Annmarie what about shelter costs . There is a big emphasis on that this week. What do you make of that . There is a lot of truth to that. Rental or housing costs constitute a large share of overall inflation. Its been very slow and very gradual and we are still elevated on that yearoveryear rate. I think it is coming, its just that we have to be patient and gradual. There is also not Housing Service costs. Airfares have jumped up the last few months because demand is outstripping supply. These are the things that are still a problem. Despite that the economy is still strong. Jonathan i want to talk about the theme of the morning and that might not be your base case been the last 24 hours, retail sales were weak and ppi was hot and lets throw in cpi for good measure. There is a stagflation sense that needs to be addressed. We heard this a little early this morning. What the Federal Reserve would do if the dual mandate when into conflict. How do you think about that as a thought exercise how they would handle that . What would they do . These are good questions because we are sort of seeing this. We are seeing Economic Growth moderating. Is been resilient but if you look at the underlying dynamics, there is some slowing and thats with the Federal Reserve wants. Theyve got a little bit of a stagflation like environment. I think they will focus securely on inflation for now. There indication of backing away from the 2 target. Thats probably something thats many years in the making. I think they stay with inflation and they risk a little bit of a hard landing if it happens. Jonathan good to hear from you as always. We will get the statement from the fed in the News Conference with chairman powell and the outlook is well with a summary of economic predictions. If there is a risk factor on wall street, its the prospect of getting to cuts on the medium dot instead of three. Lisa its going to be about the dots so get out your dot plots and everyone can get excited to see whether they shifted from 32 and if they dont, you can wonder why you spent so much time on it. People want to understand where we are at an next week will be amazing because not only do we get the fed but the jet but the bank of japan meeting and also the videoconference. Its really questioning the broader technological shift in how much that influences where we are at and what is the response . Jonathan making sure youre not beings sarcastic, youre genuinely excited about next week . Lisa i am. Jonathan Michael Mckee has to sit in the News Conference. Lisa i think you are lucky to do that. My issue is that everyone is exhausted. I keep going back to this. Its been a long time muddle. Everyone hasnt shifted their views and have stuck with them. Jonathan on a much more serious note, this headline just crossing the bloomberg terminal the israeli Prime Minister approving operation plants forrafa. Annmarie the president outlined this would be a redline if Benjamin Netanyahu when into rafa. When the israelis went into gaza, they told civilians to go south to rough up. Now they are trying to bring the civilians back to the north and what their words are is to defeat hamas and going to the final place of rafa. Jonathan how do you frame this politically speaking . That crosses a day after we heard some really strong words from the Senate Majority leader. How big could that moment be to reiterate what this headline actually says . This about the approval of operation plants forrafa but we dont know what the plans are but doesnt this early mean theyre about to go in there imminently but it looks like another step toward something that would put them on a collision. Course of this administration annmarie operation plans means they have to get the civilians out of harms way. All you see now is we had this discussion, is this for optics or is it real when you talk about how big that gap is from Benjamin Netanyahu and President Biden . That gap looks more real today. Lisa this is about more than optics. In israel, the idf is preparing for the evacuation of the civilian population according to the statement. This is not exactly all in the hypothetical. At a certain point, you wonder how much israel is going it alone and what the threshold will be for the u. S. To truly withdraw some of the money in the eight. Annmarie reuters was talking about hamas putting in their own ceasefire proposal to mediators. That happened this morning and now Benjamin Netanyahu wants to move in on rafa. Does that mean there will not be a ceasefire and hostages will remain in gaza . A lot of questions now in terms of the ending. Jonathan the headline crossed moments ago. The israeli Prime Minister approving operation plans for rafa. Lets get you an update on other stories. A legal setback for former president donald trump. A federal judge in florida denied his bid to dismiss charges that he mishandled classified documents at maralago. Trumps lawyers argued that charge is from special counsel from jack smith are too vague and the district judge and point and trump aplenty denied his appeal without prejudice. It could be raised again later. Chuck schumer is calling for new elections in israel saying current Prime Minister Benjamin Netanyahu has lost his way. He says netanyahu made a brave mistake when made a grave mistake when rejecting a two state solution. Republicans criticizing the comments and Minority Leader Mitch Mcconnell calling it hypocritical for an american to call for the removal of a democratically elected leader. Goldman sachs ceo David Solomon called 2023 a year of execution for the bank and said hes optimistic for whats ahead in 2024 as the bank stands to benefit from a rebound in capital markets. In a letter to shareholders, he weighed in on the economy saying inflation may prove to be stickier than initially expected and that Economic Conditions have gotten tougher particularly for low income groups. Thats your bloomberg brief. Jonathan coming up next, apple looking for a late invite to the ai party. We believe its a 1995 moment. This ai revolution, this party is getting the popcorn out and its 10 p. M. At a party that goes until 4 30 a. M. Jonathan im not sure who has popcorn at a party that goes from 10 30 p. M. To 4 30 a. M. We need high end popcorn ok. We will catch up with the brilliant mark gurman next on bloomberg in a moment. This is our future, ma. Godaddy airo. Creates a logo, website, even social posts. In minutes how . A. I. impressed ay i like it who wants to come see the future . get your Business Online in minutes with godaddy airo starting a business is never easy, but starting it eight months pregnant. Thats a different story. I couldnt slow down. We were starting a business from the ground up. People were showing up left and right. And so did our Business Needs the chase ink card made it easy. When you go for Something Big like this, your kids see that. And they believe they can do the same. Earn unlimited 1. 5 cash back on every purchase with the chase ink business unlimited card. Make more of whats yours. Jonathan live from new york city, stocks just about unchanged on the s p 500. Stocks are still positive on the week even if even with the repricing the bond market. We have a twoyear back through 4. 70. Lisa the winners keep winning and i think thats the conclusion from this week is that heads we win, tails you lose really is the magnificent the ones who eke out gains that looks like if there is not as many rate cuts, those will continue to deliver. Jonathan yields keep climbing. Apple is looking for a late invite to the ai party. We believe its a 1995 moment. The ai revolution, this party is getting the popcorn out, its 10 p. M. At a party that goes until 430 a. M. Its now starting with the software market. The tech market i believe goes higher because it will be soft where led. Jonathan apple buying Artificial Intelligence or darwin ai as the iphone maker looks to gain ground on alphabet and microsoft. Tim cook promising apple will break new ground in ai this year. Mark gurman joins us now for more. Talk to me about the kind of numbers involved in a deal like this and what this rings to the Apple Company . Thank you so much for having me this morning. Apple has made dozens if not more acquisitions related to Artificial Intelligence over the last decade. Lets not forget that apple was first to the modern ai voice market with syria in 2011. Back then, it felt like apple was four years ahead and today it feels like they are behind. In terms of this deal, this is another small ai acquisition. This is called darwin ai in their technology is based in very high tech, highly advanced research out of the university of waterloo and some of their top machine learning. A lot of this deal was about ringing those people in with lots of those with doctorates and phd into apple making them pretty senior in the Artificial Intelligence organization. The best estimate is probably in the tens of millions of dollars but whats important is the technology and the people they are bringing in. There is a lot of cool stuff that a that darwin ai developed being able to shrink down ai models to a smaller size so they can run more officially on the iphone itself versus entirely in the cloud. Jonathan its somewhat ironic that we often think of ai is something that will destroy jobs when it would comes to building out ai, its about buying the personnel, the people developing these goods. Is that what this acquisition is, tech an acquisition of people . I think its both that and technology. Alexander wong was a pretty big name and still is in the ai community in canada especially at the university of waterloo. Hes now a director at apple which is a senior position in their Ai Organization and they are building out an office in canada for Artificial Intelligence. They seemingly want ai people across the world. This is a big component of the company right now. Its probably the only group within apple thats growing at any significant pace. Also, they have whats called a generative synthesis to shrink down ai models to be able to run more efficiently on the phone. Apple wants these Ai Technologies to run on the device on the iphone and the apple watch in the imac. Its quicker to do it on the device using apples builtin ships versus trimming from the club it also it makes it more privacy conscious. Privacy has been a key selling point for apples devices so that fits the narrative quite well for the company. And they can do it at a fairly reasonable price. Lisa to veer off in a different direction, how much is this the example of the expansion a big tech . Its the little acquisitions where they can buy up any potential competitors at least intellectually with respect to ai. Is this the game plan . As we have talked about many times can apples Acquisition Strategy is not about buying Major Companies or major rivals. Apple has been allergic to buying those Big Companies for a couple of reasons. The ether said the companies is to buy smaller startups that they seek and help them produce a particular feature, by the company and turn it into a feature. Even beats, they sell those headphones but a big part about that acquisition is buying the music because they want to create a streaming Music Service and beats music is the very foundation of apple music. They bought a company a decade ago called prime sense that was a 3d Sensor Company and they were able to take that and turn it into three date. They bought another company to enable touch id. Is to enable individual features or help to develop new services, software and applications. Darwin ai, their model will help them develop on device ai. You will see them rollout generative ai programs this year and more next year as well. These acquisitions are to help with that. Im not sure they are trying to squash any competition here. They maybe dont want google or samsung or someone else to get their hands on darwin ai but this is a textbook apple deal, several hundred million dollars, not too many people and it helps them function. Jonathan just fantastic, youre one of the best, we appreciate it. If we get the iphone release later this year, that might be the cycle that people have been looking for. Let me leave you with next week. Next week is a fantastic lineup. We will catch up next week with our guests on all of these issues. We will catch up with brian moynihan, mark cabana and catch up with the good and the great. A bank of america next week. Lisa i cannot wait into bank ceos to tell us what their view is of lending as we face off with a model on what the fed has to deal with. Jonathan i think you can go for the weekend. Lisa has already left. From new york city this morning, thank you for being with us and have a wonderful weekend. This was bloomberg surveillance. 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