Live from new york city this morning, good morning, good morning. Leaving behind a very messy month of april and kicking off may with the futures 0. 5 on the s p 500. Southside note to south side note, saying the same thing, its a hawkish chair powell. Hawkish relative to what, the last time that they met or what the market is priced for . Lisa its a reason that some people are saying sell the rumor, buy the news. Expecting bonds to sell off, they will be disappointed. Chair powell, basically hawkish means his coming out and saying we are not sure, we havent made us much progress, we are still monitoring it and will not say anything about something that rhymes with wike. Jonathan wike . Just say hike. Lisa he doesnt want to say the h word. [laughter] jonathan 5. 03 on the twoyear this morning. Alan ruskin at Deutsche Bank thinks this is the stat of the day, the 2year note has rallied on all of the last four fomc days, eight of the last 10 days of meetings since february, 2000 23. Chairman powell has one gear and struggles to get out of it. Lisa the gear being dovish. The gear being well we dont want to cut. This is the question. Is he going to go full pivot i cant even say it is that what hes going to do, or is he just going to stay on the margins because we are not making enough progress . Annmarie well, yesterday we heard from Saint Stephen stanley who started his thesis was being viewed as in the crazy camp because one cut this year. He talked about the fact that pal is dovish and he wants to bring the consensus of the committee when he answers those questions and i love this, in any case, in light of the Market Reaction to these pronouncements last year, pal has resorted to a bland set of responses. That is what everyone is expecting, very bland powell, unless of course he goes there and says the h word. Jonathan the big question that we need to hear in the News Conference is this one from julian, on the program yesterday, could you see the next move is a bigger rate hike any circumstances . How does he navigate that . We mentioned this program. It should be written down on a sheet in front of him. How is he going to address this . Lisa why not Say Something simply like Monetary Policy is that a good place in if we keep at this level, inflation will get under control. We are open to all possibilities arising should the information more and it, but the bar is high given the hiking get jonathan did you draft the answer for him . [laughter] lisa i just sake him saying that is what he should be saying. Jonathan that was very fedlike. Look out for more. [laughter] if you like that kind of thing, too 30, it will be that on repeat for 60 minutes. Tune in. S p five future s p 500 futures, negative by 0. 5 . Getting closer and closer again to 400 69. There was a stream of guests saying bill tune in, this will be a snooze. Boring. Freezing. Cold. Ice water over this one. Lisa yet if he says everything and if hes as boring that he says he will be, that will be news in itself, watch for the riproaring rally into bonds. I think even if it is boring, i think it will be important to watch. Jonathan spec special coverage at 1 30. Tk is dropping by. Coming up in this hour, max kantner. Mandeep singh, ai shares rising. David rosenberg counts us down to the fed. Top stock prepare for a more hawkish fed. Higher for longer rates with gradual rate cuts sounding scary at first, we remain maximum overweight on credit, equities, and death. Next joins us for more. Max, overweight. Talk to me about five. Max i think im more in the camp of what lisa was just saying. We are all pretty desperate on getting something exciting out of the fed, but be honest, looking at what they did five months ago, the dovish pivot pretty much out of nowhere, out of the blue, it would be strange if they boxed themselves in now to basically say that the next move might be a hike. I do think that we are probably going to get something that sounds hawkish relative to the last meeting. If they give us one or two cuts instead of three on the dot plot, it wont the needle a lot. With a tail risk off of that h word, it takes away the tail risk and it looks pretty goldilocksy. It should be leading to a bit of a relief in the duration on the yield side, feeding through the Asset Classes where risk assets in absolute terms can benefit even more from that in we will find out that yields have moved higher because growth is really good. Its nominal growth that is really good. Margins that are rocksolid. Earnings growth. Look at the earnings season. Beating surprise factors higher than prepandemic outrages. At the end of the day, yields have moved up because growth is good. Jonathan can we unpacked a reluctant word, goldilocksy. Earlier in the year you were talking about reverse goldilocks. What has changed and what does that word mean now . Max the starting point has changed. The starting point is tremendously different compared to the start of the year. Number one, the inflation swap was at one hundred 80, 190. Looking at rate volatility, despite increasing yields, its declined throughout most of q1. Its declined with the selloff in the duration. In the start off of the year, we had one month forwards, a few months out. We have been trading at or below 3 , and that has changed significantly now such that they are trading between four and 400 20 already. Even if inflation ends up being over the medium term not a two, but a three or above three, we are pricing the fed at high positive real rates are in the future and that has clearly changed. The starting point has changed significantly. Lisa goldilocksy, i like it. Is it just for big tech . Small caps will be slammed with higher rates. Talking about margins, they are not doing so hot at starbucks or even mcdonalds. At one point is this goldilocksy and then when do people have to watch with and be . Lisa more like me, you are drinking the double espresso or the marshmallow lattes . Jonathan how did you know . [laughter] lisa am i that obvious . Max im not going to go into that. [laughter] what i think we are seeing now globally, even outside of tech, we are seeing margins right now over the last couple of months settling at levels that are higher compared to the peak from before pandemic. Not talking about settling where we were before. Talking about the peak before the pandemic. 2018, 2019, settling outside of tech at higher levels before the peak. It goes to show the strength even outside of tech. You are absolutely right, u. S. Small caps are not something i would want to go for. I would much rather stay in quality and be in with consumer cyclicals and on the other hand more on the industrials Materials Energy side, overweight oil, because we are seeing more of an uptick in the Manufacturing Activity and leading indicators overall. So, that still makes sense, but particularly large caps, and to date, because we have a different starting point, its tech in particular that should be benefiting the most from it with emerging markets, looking for example typical positioning on u. S. Rates. It should give a tail stone for em. Lisa how much of a goldilocksy condition do we have . Months . Could it last years . Max i dont think years. What we will really talk about over the next six months to 12 months is jumping from one extreme to the other. From the start of the year, that notion of us jumping from goldilocks to reverse goldilocks still stands. If you said the fed wasnt going to cut at all because inflation is back, and you know, looking at threemonth annualized core below 2 , people made too much out of that. If you had said that four months ago, people would have called you crazy. Now if you say you know what . The next stage is probably goldilocks because the starting point is so different now, it equally sounds pretty crazy because of course now it sounds like when you look at the annualized inflation charts, surely we are on the brink of the next wave. But i think as much as we exaggerated four months ago, we are now on the hawkish side and that has been a three or four month change. I dont think it will be six to 12 months stable goldilocks. It will be flipping to one extreme and then once we have played that we flit from one extreme to the other. Annmarie you say you are not oblivious to risks and that one that keeps coming up in conversation is the sustainability of u. S. Government debt, but you are not concerned. Why question mark max not entirely concerned why . Max not entirely concerned. Look at the sheer size of the u. S. Treasury market. If people really are concerned about the sustainability of u. S. Debt, frankly where are they going to go . There is a lack of safe assets, right . They cant all go into old or bitcoin. Gold or bitcoin. The lack of assets outside the u. S. Calling into question the sustainability of u. S. Debt threat, when we look at government debt, that has yes spiral higher since 2020, but it needs to be put in context. Looking at u. S. Government debt compared to things like Household Debt, Household Debt since the financial crisis has gone down significantly. Looking at since 2010, for example, total Household Debt, government that, it has only gone up by 16 of gdp, not negligibly small, but nowhere near as shocking or as dramatic as if you were only focusing on government debt. Jonathan max, this was great. Brilliant to catch up. Secretary yelling secretary yellen getting a absolute grilling on this topic this morning. The story going on to ritas follows, janet yellen will use a speech to address the kane institute and deliver a clear warning about the dangers on american institutions with detail in the story referencing the trump plans to increase president ial powers, she will make a broad historical argument referencing easter germany on how autocratic regimes stifle Economic Growth and make a plea for the Federal Reserves independence as well. Quite a speech. Very political for the treasury secretary. Annmarie very political. We have seen that over the course of her tenure, moving from academic to trying to tow the company line with the Biden Administration and be more political. I think she will really hone in on the fact that she is a former fed chair and that independence is paramount. But hes not going to be able to rein it in. This lies with congress. Jonathan back to that story later. Equity futures down, updates on stories elsewhere with your bloomberg green, here is dani burger. Dani starbucks shares premarket, falling more than 12 . Falling for the First Time Since 2020. One analyst called it the worst set of results for a Large Company so far. Other Companies Like mcdonalds and nestle have pricesensitive borrowers coming from pricesensitive households it if the decline holds, it will be their biggest drop since march of 2020. Bad news for those hoping to sell a home in the u. K. , house prices falling at the fastest rate in eight months. Theres been a pullback in pricing for the bank of england and the average home price fell 4 in april. Economists had forecast an increase of. 1 percent. Nypd officers broke off and escalating propalestinian protest at columbia last night and that the nypd was called in just after 9 p. M. To restore order in the University President asked officers to stay on campus through may 17. Police made arrests for the uptown at the city college of new york. Jonathan honestly, what a waste of city resources. Ridiculous. Lisa i heard the choppers over me all night and it raises the question of how much the mayor is correct about this being something other than just hubris. Jonathan going to leave it there. Coming up next on the program, as amazons ai be, paying out. T they are the king of the cloud jungle over google and microsoft. You are seeing the flagship business builder. Jonathan live from new york city this morning, good morning. With the power of ai. With a perfect name, a great logo, and a beautiful website. Just start with a domain, a few clicks, and youre in business. Make now the future at godaddy. Com airo sandals jamaica sale is now on with rates from 199 per person per night. Visit sandals. Com or call 1800sandals jonathan closing out april with equities lower, kicking off may with the same thing. Check out this name, starbucks in the premarket, lisa brought it up. Lower, 13 on the week. Listen to this on the south side, the tide turning quickly. The stock is down hard. Lisa people expecting a turnaround didnt get it. Is this about consumer appetite . Is this because of geopolitics . These are traditionally american names and oversees some of the sales have come down, but what is the dynamic . Is there a broader read that is economic or is this just a starbucks mcdonalds problem . Annmarie the company is dealing with the challenge of selling six dollar lattes and customers, younger base, bulking at the fact of the perceived supporting of israel from starbucks. Jonathan, you could have moved starbucks to the Biden Administration and the struggles companies have, same as the struggles companies are having. Of the Biden Administration is having. We are seeing projects kicking off and the u. S. Is the king of the cloud jungle as the leader over microsoft and google sorts itself out. You are seeing the flagship is this really filling. At the end of the data are a Growth Company investing into innovation. Jonathan the latest this mornings amazon shares rising in the premarket, posting their strongest sales growth in the year as businesses resume spending on tech and ai with services on pace for multibilliondollar annual sales. Mandeep singh joins us for more. Can you compare and contrast the numbers from the last quarter outlook. Was one stronger and one of them weaker . Mandeep if you parse through the numbers, they clearly had sequential acceleration in the growth with marginal being quite prominent. My feeling over here is they did not give us enough specifics to kind of have a run rate on generative ai. Its multibillion, but how does it compare to the 7 contribution to growth from microsoft . With microsoft we can see it making up 5 on the over all revenue. Granted, amazon has 100 billion it its bigger, but we dont know the rate at which the generative workloads will grow. They are the incumbent employers in cloud and have to invest more in capex to drive the generative ai tricks chips in their sector. That is the risks with amazon needing more capex to refresh data centers. I think that we have probably seen heat aws markets and i would be surprised if they keep showing expansion on that side. Lisa which is the reason you are not seeing a pop in the shares given that we have seen the strongest growth in a year in the Cloud Service business. Amazon pit and misys the year so far. Things dealing with the consumer, not so much. What is the message that you take from that, that this is not an amazon problem but something that is economic on their Sales Platform for the average consumer . Mandeep i mean, look, that platform serves so many different types of consumers. Clearly, the prime bundle has a value proposition. I think again if there is one subscription you want to keep as a consumer, its amazon because of the number of services they deliver. But you are right, you can see it in the print. Its hard to see margins expanding on the ecommerce side. They have pulled all levers around costs optimization and doing whatever they can in terms of layoffs, etc. , so i think the margin side is where im most concerned. Aws was the, basically, the Margin Expansion story. Its not able to subsidize the businesses anymore, Going Forward, given its own, and that is the part that investors have to parse out. Lisa what happened to the dividend that didnt come . Mandeep they called it a multiyear capex cycle. Its similar to meta, where everyone didnt like the reality labs investment. In this case they are calling it a multiyear investment capex cycle in there werent any answers around dividends or buybacks. Amazon in their history has really done buybacks. This has been a topline growth story and it has been amazing. You could argue that they could be a 1 trillion Revenue Company , but it is a margins call that people are not sure about and right now the uncertainty has gone up given the investment required. Jonathan you could break the company down between corporate spending and Consumer Spending. Is one more resilient than the other at the moment . Mandeep amazon skews towards Small Businesses on the spending side in the consumer side is also focused on the kind of small consumers of all sizes, but on the enterprise side i would argue that they are not as resilient as microsoft, because they are skewed towards large enterprises. They are not going to dial back the spend as quickly as a Small Business. I do think that they are more of a risk to amazon cloud growth and microsoft. Jonathan interesting, fascinating cramming framing. What do you think of that, large versus small . Lisa perhaps the reason amazon isnt getting the same reception even though they had the strongest sales growth in a year, stronger on two prongs for the Customer BaseCloud Service question basic sales for the average consumer who doesnt want to buy clothes or toilet paper on amazon anymore, doesnt like big shipments. Jonathan this is personal . Lisa no. No. Just saying other things. Garbage bags. People are feeling the pinch. We have been talking about this extensively, this cumulative feeling of uncertainty, big versus small, will we keep seeing that in earnest . Jonathan just sick of buying the toilet paper from their. Personally. Lisa its a lot of packaging. You get these huge packages. Boxes are wasted. Jonathan totally agree. I hate wasting boxes. Cant stand it. Really frustrates me. Putting the boxes out. [laughter] aidyl hi, im aidyl, and i lost 90 pounds on golo. I struggled with weight loss and weight gain my entire life. With all the yoyo dieting i did in the past, i would lose 20, 30, 50 pounds just to gain them over and over again. Thanks to golo, ive been able to steadily