Futures selling off a bit.
Bloomberg Open Interest starts right now.
Continues right now. John Gray remains bullish.
Predicting Blackstone's best deal ever for IPO.
And beyond Blackstone we are digging through a wave of earnings with Tesla's AI push with Americans rising fuel costs.
That is all that mattered.
That is all that matters, not that oil is again above $100 a barrel.
That is what is driving the market to new highs.
Not all earnings are coming in great even though a lot of the market. Let me show you Tesla.
Initially you have a rally in share prices post market.
Then it raised AI and robotics CapEx spending to $25 billion, that is triple last year's CapEx and there you get the shares fall like.
American Airlines says full-year earnings will be at the midpoint of its previous guidance as the war creates an additional $4 billion in expenses due to higher jet fuel prices but they will be able to raise prices on consumers and keep a lot of that price increase even if fuel reverts back to its prewar costs.
Let's get back to Tesla. Joining us as Bloomberg Tech co-host Ed Ludlow. Is this just about CapEx?
This is a monster number by Tesla's historical standards and it was interesting because Elon Musk opened the call by framing it as you are all familiar with CapEx. I guess it is not just a commitment to $25 billion of CapEx, it is the admission it will immediately put them into negative free cash flow for the rest of this year. That worries the market even though the cash pile is pretty good. The market can be a fickle thing. It was evidence they will get going on spending on the future business lines. Humanoid robotics.
That is Tesla's main valuation driver. It is not the car business. I want to ask you about the car business. We have all had friends that drive EVs that have been bragging about how much money they are saving on fuel costs. You are one of those people. I would have expected a massive jump in EV sales. Yesterday I was down with Sebastian of BMW looking at their new seven series. He showed me a cross industry snapshot of Q1 EV sales and none of these carmakers are doing as well as they did in the first quarter of last year. They are all facing massive drops for the most part. How is Tesla doing?
That would be logical with Tesla and that is what happened. High gas prices drove demand in the quarter. They are seeing a rebound in demand in North America, they even saw a rebound in demand.
Is it to the same level they had in sales last year when they had the tax credit?
It cannot be because remember that the sales data that comes before earnings tells us no. They are still seeing overall weaker sales data than historically. It is a double edged sword for them because right now they are facing the lasting and longer-term impacts of tariffs. That raises their costs. They also talk about higher interest rates raising their costs. 24 hours ago we said we will ignore and everyone who said this will now eat their hat because you noted on the top and bottom line they outperformed because they had some short-term positive impact from the war in Iran and energy prices and also something we are not quite understanding. They got a one time relief from tariffs. That is just old school earnings stuff.
Ed Ludlow, co-hosting Bloomberg Tech as usual. He will probably be on the close.
If I'm invited I will be honored to be on the close. Today is my last day in New York and we will have Intel after the bell.
Is Elon Musk going to buy Intel eventually?
The thesis on the street is we are moving closer to a world where SpaceX combines with Tesla.
And he gets his nice pay package. He reaches the market value he wants.
A lot of the hedges I talked to think Elon Musk will eventually buy Intel.
What he did not say is whether they would license the tech or use Intel's foundry as a customer. You get more of...
You get more of Ed Ludlow but he has to go prepare for his show that starts at 11:00. More Ed Ludlow then.
Speaking of the war driving earnings, American Airlines says it will create $4 billion in extra expenses related to higher jet fuel prices but they will be able to raise prices for consumers and keep at least some of those price increases, even if fuel reverts back to its prewar level. It is a key observation. Bloomberg Chief Global Aviation Correspondent Philip joins us now. We heard from the CEO. Clearly shareholders are happy about that as the shares are up 2% in the premarket.
Every airline has indicated -- American Airlines has reduced the debt below $35 billion. That is something that is positive. The second is the fact demand -- airlines talking about demand continues to be robust and they are also talking about how they will cut capacity where it is not profitable. There is some element of the fuel prices reflecting in the earnings that at the same time there measures airlines are taking to deflect from that. United Airlines yesterday talked about how they will be able to pass on 100% of the fuel costs by the end of the year. Airlines are looking to take those measures and recover those costs.
It was the United Airlines CEO who said about higher prices sticking around. Scott Kirby said that. We are looking at American Air talking on their earnings call saying they will be on the forefront of M&A, something you and I had talked about yesterday on the Deal Show every Wednesday. It is stressed enough that this is what causes more M&A or was this inevitable at this point that we would see more consolidation?
It is a question of what would have come first. This is something that is an immediate pressing event for some of the weaker carriers that they need to look at M&A because that is the only way to survive, especially as costs start skyrocketing. Fuel is the biggest chunk of expense for an airline. When the bills keep rising, airlines have to fend off that and a lot of the airlines with weaker balance sheets will not be able to get through that. Yesterday we have been reporting on Spirit Airlines and Spirit Airlines is looking at a government bailout. It looks like the government will give them a bailout. The government may take as much as 90% of Spirit Airlines. Spirit is in its second bankruptcy at the moment. They are looking to get out of second bankruptcy but given the higher fuel prices the math does not math anymore.
Given what we saw happen during the Obama administration with General Motors and the bailouts of Detroit, why would the Trump administration want to do that again?
Spirit Airlines is the largest employer in Florida and a massive influence on the East Coast of America. For Trump the optics of losing 14,000 jobs was something -- Spirit Airlines gets a lot of people across the country. A low-cost carrier would somehow maybe...
We talked about more stimulus heading into the midterms, maybe this is part of the form it takes. Back to the war in the Middle East. President Trump posting on Truth Social moments ago that he is ordering the U.S. Navy to shoot and kill any vessels laying mines in the Strait of Hormuz. The U.S. also intercepting Iranian oil tankers as it awaits response on restarting talks. Joining us is Bloomberg Washington correspondent Tyler Kendall. It kind of has a feeling of escalation, something the markets were worried about. Not this morning. It does not seem like the rhetoric is cooling down at all.
At this point it appears the standoff over the Strait of Hormuz is worsening, threatening the potential prospects for a deal. We got this post moments ago from President Trump when it comes to mines in the Strait of Hormuz and he went on to add the U.S. would double its efforts to clear the strait which comes on the heels of the Washington Post reported yesterday that a military assessment shared with Congress is estimating any efforts could take nearly six months to complete, just underscoring how dangerous conditions remain. We should say that a Pentagon spokesperson did tell the Post that investigation was inaccurate but it is raising the stakes for when we could see a safe strait because Iran has repeatedly said they do not want to resume negotiations until the U.S. lifts its naval blockade. The U.S. military confirming it intercepted two Iranian supertankers trying to evade the blockade. It marks the latest in this week's efforts by Iran who appeared to test the U.S. limits when it comes to the waterway. We heard the IRGC say yesterday that had seized two vessels it says were trying to make its way through. When asked about this the White House maintains none of this is a violation of the cease-fire, particularly in the case of those vessels, they say because neither were American or Israeli flag.
Tyler Kendall in Washington. We will come back to her in the next hour. S&P futures down about .25%, Nasdaq futures off as well though only .2%. We were up yesterday 1% on the major benchmark yesterday. In terms of Brent crude we see it continue to climb. Right now $102.49 and that $100 level has been one that seems to make the administration uncomfortable so we will see what we get as a reaction.
At the same time the White House putting out on Truth Social, thank you Mr. President, stocks at all-time highs.
That is not wrong. This market is on fire. Although oil has repriced we've not seen much of that in stocks. We saw the valuations demo 20 times forward earnings now we are back to 21.
I spoke with John Gray this morning. Will play out more of the earnings conversation. He talked about that. Let's look at what Blackstone is doing. The earnings topped estimates as the company expects 2026 to be the best year for IPO ever. Initially shares were higher but then they announced a dividend cut so maybe that is why shares were off. I spoke with the company's president John Gray about his outlook for the economy in his portfolio companies following the results.
In aggregate the picture is pretty good and the big driver goes back to what we talked about at the beginning, this huge AI infrastructure boom. Five companies spending $700 billion in capital, even as we have a shock like we are seeing with the war. We can continue to power through. Our expectation is we will see a healthy economy despite the headwinds.
You will hear more from their interview with John Gray throughout the show. IBM software sales in line with estimates. Those shares down nearly 7.5%.
ServiceNow reported results that disappointed investors and said some sales deals have been delayed by the war in the Middle East. The CEO joins us at 10:45 a.m. with Caroline Hyde.
We will talk more about Tesla's robotics progress and how the Iran war is impacting the auto industry.
This is Bloomberg: Open Interest.
Let's get to High Interest to look at what's making headlines around the world. The Navy Secretary has been fired after clashes with a Pentagon leader over the push to revive U.S. shipbuilding as military tensions tied to the Iran war are rising. The Navy Undersecretary will step in as operations continue in the Strait of Hormuz. Canada stocks are higher after the DOJ moved medical marijuana to Schedule Three, signaling looser federal controls. Major names like Tilray, Aurora, and Canopy Growth, all surging in the premarket. A broader federal review of the rescheduling is set to begin in June. Netflix is betting on itself, launching a $25 billion stock buyback program after shares slipped 13% in a week forecast and leadership turmoil and they are stepping back from a major media deal fight, collecting a $2.8 billion breakup fee while signaling long-term confidence.
Tesla is tripling funding plans for AI this year to $25 billion as investors look for signs of progress in the robotics push. The TD Cowen senior analyst has a buy rating and joins us now. I know that in your take of the earnings you said more positives than negatives but at the moment, it feels like this is a market concentrated on numbers. Shares are down 3.5 percent.
You are right, the number has been in focus. The stock has been in a recovery grounds as they make a little bit of news here. It did go up again this quarter, but we don't think that the CapEx is likely to linger for too long. Just given the momentum we are seeing on the AI side but on the FSD side with robotaxi and on the EV side as well with a company that we thought made some pretty positive comments.
Isn't it good that they are going to spend $25 billion? A 1.5 trillion dollar company and that's a bigger market cap than every single automaker on the planet combined.
Great point. They are at the center of several global megatrends and are rolling out significant products and services that require investment. Look, we will get proof points later in the year from the Cybercab ramp for the robotaxi expansions and the potential for FSD on consumer vehicles to go eyes-off at the end of the year or early next year with a launch of AI five. It's a big CapEx number but your point there's a number of fundamental catalysts that can serve as proof points that the company is heading in the right direction and unlocking significant opportunities, which is why we don't think the number is likely to linger as an overhang with the EV business coming back. We published a report a month and a half ago calling for the bottom of the U.S. EV sentiment with the company talking about an order uptick, including a record Q1 backlog.
When it comes to the timelines for things like robotaxis, it tends to get squishy. When do you have these included in your earnings models?
There's a lot of upside to our model in the one area we think could be the biggest catalyst could be the eyes-off on consumer vehicles. It doesn't just accrue more subs and revenue on the existing install base, it could be a significant driver of vehicle demand going forward given the significant amount of services you could launch, even in easier markets and easier conditions. You don't need to deploy major urban areas to unlock major use services and revenue streams with vehicle demand. We think that eyes-off could be a significant catalyst into next year for both revenue and vehicle demand to kind of get that virtuous cycle going.
I think it's fair to say that you are one of the most respected autos analysts on the street, having spent two decades covering carmakers around the world. I was pretty stunned yesterday when I got a look at the sales in Q1 compared to Q1 of last year across automakers. Almost all of them have declined really significantly. I would have thought that in March, you know, we would have a huge rebound EV sales. I guess higher fuel prices, four dollars per gallon on average, is not enough to make up for the $7,500 tax credit that we lost last September?
There are two data points that might paint a different picture. If you look at the companies reporting monthly sales, the mix of those overall vehicle sales was the highest in March since the tax credits expired, so we have seen some sequentially. The European comparison is still difficult, as you point out, but even year-over-year on the sales relative to inventory basis, because of course EV inventory has come down a lot year-over-year, sales relative to inventory in March of this year was that year-over-year many consumers pulling down roughly the same percentage of inventory as last year in terms of demand. Those are encouraging signs. Of course it takes time for the impact of higher gas prices to move through. We are arguing that significant new product is coming in the next 12 to 18 months that could catalyze significant demand in the U.S. given certain structural advantages we have in the U.S. to drive immediate adoption.
Great to get some time with you there from TD Cowen. Tomorrow we are going to talk more about the auto history with the ChargePoint CEO. And you should always, if you care about cars, check out my podcast, Hot Pursuit with Hannah Elliott. I am currently driving the i24 BMW electric vehicle. Last week I drove the Lucid. A few weeks before that I drove an N9. I'm immersing myself in these EVs.
I know you liked the Lucid a lot.
I did, but the i24 is so big, comfortable, and fast. Also, expensive. But it did do a fantastic job. I will give you more on Hot Pursuit. This is Bloomberg Open Interest.
Five minutes until the start of trading, we are watching American Express, shares falling 1.3% spending on the premium credit cards climbed as a player to revamp their business lineup, but something went wrong.
I mean, the price went way up. $1000 is crazy. You can reap a lot of benefits if you are studious and courteous. Dr Pepper meeting earnings estimates after completing its takeover in international sales of JD. Hasbro out with earnings that has revenue growth in double digits as the Magic: The Gathering sales continue to climb. So many nerds out there. We begin the trading day with BlackRock. Stay with us.
Moments away from the start of trading. This is Bloomberg: Open Interest. A quick check on what is got -- this is Bloomberg: Open Interest. Futures lower after 1% gain yesterday. We headed all-time high at yesterday's close.
We continue to make new highs. We still show the small caps, I thought since Katie and Sonali left we should show the Dow.
It is not a 50,000, just blow it.
Pam Bondi cannot come back yet. In terms of the bell. Very happy people. Their stock is up. About 75% of the last five years. They make defense tech so they are obviously doing well if we are in a war. Radio comms is their strong point. Roku ringing the bell at the Nasdaq and they are in a good mood because they just passed 100 million subscribers and because maybe they have not been looking at the stock chart. I always look at the five year, I default to five years because the Bloomberg terminal does and that is a horrible default for Roku because it goes back to the heart of the pandemic when no one had anything else to do but watch Roku. The stock is down 66% in five years.
I have a Roku and I do not watch anything on it.
I have a couple of them. Apple TV --
I have an Amazon and there is a lot of choice out there. Tesla down about 3.5%. On the top and bottom line things didn't look good. Earnings blew past estimates. The issue is they raised their AI and robotics. $25 billion for the year and that is triple last year's capital expenditures.
Yes. Still only $25 billion. Those numbers seem small since I've heard all of the hyperscalers CapEx numbers. They are at one point -- they are a $1.4 trillion company, that is a tiny percentage of their market cap. American Airlines full year earnings will be at the midpoint of its previous guidance as the Iran war creates an additional $4 billion in expenses due to higher jet fuel prices. As we have been talking, airlines are able to raise prices. Consumers will pay it and it is a great excuse. As you corrected me earlier, it was Scott Kirby with United who said even if we go back to the prewar price of jet fuel we are still going to keep a sizable chunk of these price increases, and they have to clog money away from consumers because over the long term airline ticket prices have actually gone down inflation-adjusted.
It still has that post-COVID feel where companies who rose prices said people keep paying it and we will keep prices there. Doesn't that portend that any inflation hit we get from the war maybe sticks around longer than we thought?
It tends to be sticky. Joining me is BlackRock Chief Portfolio Strategist for the Americas. We get stuck on inflation and the war because these are interesting or important issues. If you take those things away and just look at the market it is doing incredibly well. Corporate earnings are strong. I guess like $100 Brent is something we can easily deal with.
Good morning. Great to be here. We were in the process of writing our spring investment directions which we just released yesterday through these headline driven volatility. One of the questions the team and I asked ourselves was what are we still going to be talking about, not in March and April but perhaps June and May. To your point from before, I think slightly higher inflation, the impact of this 100 or over 100 or over $100 oil prices and what that means for your portfolio will stay with us. Does that mean a little bit more inflation protection in the form of TIPS or commodities? Does that mean some allocation to durable growers like energy security, and keeping the core of your portfolio in diversified assets we think makes sense.
$300 plus earnings on the S&P for 2026, right?
In the middle of earnings season right now and one of the things we have seen in the few that have reported so far is not a tremendous amount of concern around much higher oil prices. And strong beats. Coming into this earnings season, one of the things that was different from others is we did not revise lower, we revised higher. And focusing on AI as a result of that is what investors have been doing, especially over the time we saw that volatility. We definitely saw investors pouring back into names like semiconductors, into tickers like BlackRock AI fund.
The team did this really good study basically saying it was due to her point, one company also within that, Micron that basically had a five times bigger uptick in earnings contribution than it did NVIDIA which is 10 times Micron sized. And then you get into later in the year, we are expecting more big tech AI related companies to come into the market between OpenAI, Anthropic, SpaceX. Is this a market do to get that concentration problem again that the tech leadership acts as the pillar for a bull market?
It almost does feel like this is a market where investors want to go towards where there is earnings growth. As we can see an outcome of the 35.7% earnings growth is in tech sectors. Perhaps that means we have a little bit more concentration at the top. What I would also point out, especially in this earnings season as opposed to 12 months ago, you are seeing more sectors in the S&P with positive earnings growth than we saw this time 12 months ago. There is the broadening out theme that is also happening. While that is happening you are certainly seeing tech and AI specifically retained its power.
Does it surprise you we continue to see rates holding in this range? I know a lot of people at the beginning of the war were worried and watching the 10 year, thinking if it gets to 4.50 above, if it gets below that we can look through the war.
It does not surprise me because I think the theme of the last 12 to 24 months has not been about interest rate sensitivity, it has been about income. If you think about the 55% or so higher in oil prices we got, the 10 year Treasuries have been remarkably resilient. It has moved between 10 and 15 basis points through this inflationary backdrop. What I think that means for investors is earn some income in your portfolio with allocations to asset classes like securitized markets, we do that via an income bank and then add some inflation protection to your portfolio with TIPS, with an area of the market we think will continue to gather inflows.
Why outside the U.S. is your call emerging-market over developed market?
The reason is emerging markets are becoming another way to diversify outside the U.S. but stay in the AI theme. If you look at how it is composed, about 45% of that is today comprised of AI related themes as opposed to a decade ago tech was only 20%. More and more clients are telling us we love this AI theme, we like the earnings growth, EM has earnings growth revised as opposed to many parts of the market outside the U.S.
Thank you so much for joining us. That is BlackRock's Chief Investment Strategist for the Americas. About eight minutes in your trading day. We are falling but we had a record high yesterday for the Nasdaq and for the S&P 500. I just want to point out as to what is leading us, it is semis. Semis have been on this insane run, a 17 consecutive days, the longest winning streak in history since that index was created in 1994. Texas Instruments is the best performer. Also a semi had a strong performer. We learned about Tesla investment into Intel or a cooperation between some of their production at a lot of devices doing really well. Semis are rolling all. On the downside, IBM, some earnings that failed to capture the imagination of investors. Microsoft is down. Meta and NVIDIA. ServiceNow down a whopping 14%. In about an hour we will hear from Bill McDermott. Because of the big cap names that are down, information technology is down despite the fact that semis are on a huge monster run. You have utilities, industrials, and real estate.
Semis are crushing it over the longer term. I.T. down. Intel gets a boost from Tesla ahead of the earnings after the bell. Intel earnings after the bell. We will talk to Mandeep Singh because he runs Bloomberg Intelligence as tech coverage globally. This is Bloomberg: Open Interest.
15 minutes in your trading day. Let's get you the top calls. J.P. Morgan have cut Avis to a sell saying the stock is driven by a short squeeze and its push valuations passed what the business supports, no duh. The stock is increased nearly 200% since beginning of this year. J.P. Morgan expects the rally will soon fade. We expect at the open Avis was halted. Hockey stick up and all the way down. I believe it has declined. Those shorts are probably sigh a breath of relief.
[Laughter]
Rothchild and Redbird are upgrading McDonald's saying the chain has pulled off its biggest value reset and saying weight loss drugs are still a risk but remain too expensive to impact the core low income consumers. Tesla announcing a spending surge on its AI push. Morgan Stanley says long-term vision is aggressive but near-term upside looks limited. Barclays also says Tesla is entering a key investment phase but noted the update offered little new information.
I love the Avis story. Yesterday the stock traded at $847 a share. Today it is trading at $343.88. What a story. Let's talk tech. We are joined by Bloomberg Intelligence global head of tech coverage Mandeep Singh. There are so many places we can go today. I think to get it out of the way quickly because we've been talking about Intel's increase doesn't sound like a lot to me especially since all of their valuation, a huge part of their valuation is based on them doing well in AI, in robotics, and autonomy. So they have to be investing in this stuff.
You are right, Tesla's $25 billion contrasts with Google's spending, probably 180 billion dollars in CapEx spending this year. All of the other Mag 7 players building these data centers have north of $100 billion in CapEx. From that standpoint, Tesla is incorporating FSD LLM, and their latest release uses LLM, so I'm not surprised they are raising their CapEx. Not a one or two year thing in terms of mass adoption but everyone is investing in physical AI. I think Tesla is definitely a head in that race. It is the right time to keep investing.
Intel, I want to bring up, is up 83%. It still has a relatively small market cap. $330 billion compared to other chipmakers like NVIDIA, tiny. Does Elon Musk somehow eventually buy Intel? He is so into putting up this tera fab.
Elon Musk is the first to want to call out that we have a real problem in terms of dependency on TSMC for everything. If you are making GPU, NVIDIA has all of their allocation with TSMC. Same thing with Apple to make their chips. Companies like AMD, Google, you cannot ramp up faster because there is no capacity. Musk is saying we will set up a tera fab here, I will work with Intel and we will make sure we have enough leading edge capacity here. Conceptually it sounds like a good idea. Whether he puts a lot of money and possible acquisition, I don't know. To my mind, he is highlighting that real constraint given the geopolitical situation we have in terms of TSMC dependency. It makes a ton of sense that you want Intel to succeed especially on the fab side.
I keep hearing it lately. Do you?
It wouldn't surprise me. Send me messages, too. That is Mandeep Singh of the Bloomberg Intelligence team. Let's look at some of the other movers on our radar. Semis are on a tear. Texas Instruments to that. The company spending big on data centers and industrial equipment.
Honeywell said war in the Middle East is hurting revenue and the process automation unit it serves customers in the energy industry, as a result, shares are down 2%.
Lululemon has struggled to dominate the athleisure category that it itself created.
Still 20 years later, I cannot get over the term athleisure.
I think you have to get used to it.
I am not going to embrace it but I will accept it. Coming up, Blackstone's president says that this is the year of the IPO. Coming up, more of the conversation with Jon Gray. This is Bloomberg Open Interest.
Blackstone reporting a larger than expected jump in distributable earnings boosted by a robust start to the year for dealmaking. I spoke with the firm's president and COO Jon Gray following those results.
