Economic data this morning. 30 minutes until the start of trading. I'm Vonnie Quinn. Bloomberg Open Interest starts right now.
Coming up: U.S. inflation climbs on rising fuel costs and other inputs, with fresh Middle East tensions adding to the pressure. On Wall Street, big bank earnings reveal a divided picture across trading desks. AI demand showing no sign of slowing.
Let's take a look at individual stocks before we get to the broader macro environment. Bank of America and fixed income traders missing estimates, with bond revenue falling 17%. Morgan Stanley beat estimates.
And then there is BlackRock. It threw assets by more than $200 million, jumping 19%. The two-year yield is rising after a hot CPI report showed prices climbing the most since April, fueling bets that we might get more rate hikes sooner than we think. Joining us, Michael McKee.
All I can think of is, well, well, well, you can never tell, Michael. [Laughter]
John Williams said maybe we do one more and that is it, and then the two-year went down. We saw strength in the overall inflation picture, not just the headline, which was up 0.6%.
The car really bothered people, up 0.35%. A strong rise that pushes the core year-over-year to 2.6%, and that is something the Fed will not be happy about.
What moved? Gasoline. Fuel oil up 15.3%. Bad news for people who use fuel oil in the East. Toys — it is time to think about holiday toy buying — up 5.1%.
Wireless telephone services was up 5.9% in August; it was flat in September. That took away a major contributor to August inflation. I put together a voters' guide now that we are a couple of weeks away from the midterm election.
Gasoline, 9.1%. Groceries were down 0.1%. Ground beef was down 0.8%. That may be due to the ground beef imports the president brought in. The imports were all in the ground beef area. Rent up 0.2%.
Housing prices were up 0.3%, an increase from the month before. A broad-based increase overall. This is not what the Fed was looking for.
Another voters' guide: those trading the two-year, up 15 basis points.
What does the word patience mean in a market like this?
There is no patience with markets, but you can see that in every asset class. We are seeing big moves because people are trying to keep up with the chaos in the world. In terms of the Fed, it does not necessarily mean we will see an increase in October.
We will see what PPI looks like when it comes in and the PCE calculation. At this point it looks like they could. It puts it back on the table for October. It certainly keeps it on the table for December.
Do you think John Williams is surprised?
Everyone is surprised by the breadth of the core numbers that were up. The feeling was we would be status quo, and it did not turn out that way.
Mike McKee, thank you so much, as always. Bank of America shares down after revenue from fixed income and equity trading missed. Let's discuss. It is not the only bank underperforming after results, but it did seem to be particularly hard-hit.
Obviously we had a miss on equity trading and fixed income trading, but the fine is dragging it so much lower.
$1.2 billion fine. The bank changed their system. At some point they had a backlog of 200,000 transactions. As you can imagine, this is the main worry for investors and something currently addressed on the call. On the media call it was on top of mind of investors. It is in the past; they paid the fine.
I want to ask you about Morgan Stanley. When you see BlackRock doing so well, why can't Morgan Stanley do better, even though it was a pretty good quarter?
A pretty good quarter for their asset management. The record money, $232 billion. A similar path we have seen on Wall Street. Their equity trading was pretty strong.
$5.8 billion, it did beat estimates. Everyone on Wall Street is jittery about this.
No love for any of these stocks? Thank you so much.
In the AI trade, ASML is searching for new ways to produce equipment to meet demand. Let's bring in Ed Ludlow. That says it is investigating. Is this a clever way of suggesting it could spend more if investors wanted to, but it does not have to?
ASML is in the same position its customers are in: demand is running ahead of ability to supply. The dynamic ASML is trying to manage: its customers are placing orders further into the future. That is something we see in a lot of different corners of the semiconductor industry.
They have outlined plans to ramp capacity by 30%.
How much do you believe ASML that it can meet that capacity? How much is it that they are nervous?
The numbers are really good. The sales outlook for the rest of the year, 45 billion euros. Nothing has really changed for them. They are just doing the balancing act that the semiconductor industry has always done: investing in periods of high demand and not flooding the market with capacity, so if demand dropped off you are left with assets you do not need. ASML makes the leading-edge equipment that makes the chips, not the chips themselves.
What about the Anthropic investor day today?
The expectation is Anthropic will tell investors lucky enough to be in the room, and their representatives, maybe third-quarter real revenues for the period ending in September. The latest run rate for Anthropic is $65 billion. If they continued booking revenue at that pace over the next 12 months, that is how much revenue they would achieve.
A lot of people are focused on token economics. The input/output cost has come down. Anthropic's revenue is going up. An understanding of what it costs Anthropic to generate those tokens — that would be the holy grail.
I will be completely honest with you, you of all people: I will not make any prediction on that. Who knows what happens in the next 10 days? SpaceX in 23 days, who knows?
What will it tell capital market participants that it needs? A lot more fundraising before the IPO? Anything about IPO dates? Anything like that?
This kind of kicks off the countdown. In very serious terms, if Anthropic is to pull off a listing by Thanksgiving, as it is in the reporting, the S-1 will have to flip public by the end of October.
One thing that is astonishing about Anthropic — and OpenAI — remember the astonishing volume of funds they already raised this year. Anthropic, most of that sits on its balance sheet.
There is a lot of crazy emphasis on how much Anthropic needs to spend on compute. They have a different strategy with compute than OpenAI. Explaining how that capital gets deployed — the cadence, etc. — that is something investors want to understand better.
Thank you so much. That is Bloomberg Tech's Ed Ludlow. For a check on markets, let's go to yields. The 10-year yield at 5.31%.
Earlier we got hotter-than-expected month-over-month and headline CPI year-over-year. That has flattened the yield curve.
Also moved to front-end rates by 15 basis points. 30-year yield up 5 to 6 basis points. A fascinating move. A repricing with the yield curve. Futures took a dip after inflation data and we saw them turn negative. Very few companies positive today. The Mag 7 closed yesterday at records.
Let's get a look at some other movers with Norah Mulinda.
State Street plunging after revenue, earnings, and assets under management missed expectations. The biggest disappointment is money coming into the firm that fell well short of what Wall Street expected. Shares down 9%.
The longer-term growth plans: the company expects mid-single-digit revenue growth through 2028 while margins hold steady. Shares higher by 2.5%.
Computer giants HPE and Dell are both down after Barclays downgraded both companies. This is stocks have already had a strong run and is getting more cautious. Shares of both companies falling lower. Those are your morning movers.
Thank you so much. That is Norah Mulinda. We will dive deeper into earnings with Gerard Cassidy. This is Bloomberg Open Interest.
A look at what's making headlines around the world. Houthis launching drone attacks across Saudi Arabia, hitting the Saudi Aramco headquarters in the east of the kingdom. A small fire was contained with no casualties. The attacks have killed 18, disrupted flights in and out of Riyadh, and targeted oil infrastructure.
An OpenAI employee has been charged with planting a hidden recording device inside an executive office room. It was in the back of the TV and covered in toilet paper to conceal it. No sensitive customer data appears to have been compromised.
New York City moving to end a Central Park tradition dating back 150 years. The mayor and the City Council speaker reached a deal to ban horse-drawn carriages beginning June of 2028. The measure also includes protections for the horses and job transition assistance for carriage workers.
Bank of America plunging after a $1.2 billion laundering penalty and weaker trading revenues. Let's discuss results at all the banks with Gerard Cassidy at RBC Capital Markets. Was this a major surprise? Did they take their eye off the ball here?
They preannounced there was a settlement coming. I think it was maybe six to nine months ago, maybe 12 months ago. They updated that in the last three or four months that the penalty was coming. This is not a complete surprise, but it does tell you the severity of the issues they are confronting. That is weighing on the stock today along with the macro trends coming from the CPI print.
Let's get straight to that because the shape of the yield curve just changed. Are we that much closer to banks having to pay out for deposits?
Not yet. It's a good question. The reason being, when you go back the last five tightening cycles, the banks lagged the funding cost increases. They don't raise deposit rates right away.
When you think about all the commercial loans tied to the Fed funds rate, that reprices immediately. You will see better margins in the fourth quarter primarily due to the rates going up in September. If the rate increases continue into the second half of next year, that will weigh on the margins because they will be paying more for deposits.
Is there a risk to capital market activity for these big banks and the AI super buildout in the coming months? It feels like if it comes for one, it will come for all if they participate equally.
Rising interest rates impact capital expenditures and impacts the return on investment that companies calculate on the capital expenditure. There is a point where if rates are too high, there would be some scaling back of capital expenditures.
Right now there is no evidence the rising rates are slowing anything down with the buildout of AI. It is a real strong revolution we are all experiencing, and we are seeing the capital expenditures mimic this with the numbers coming out.
Isn't there always one bank or institution that manages to avoid the worst of the crisis because they saw it coming? We saw that with the last major crises. Any bank that may be doing that this time around, whether that be regarding AI funding or something else?
You are right. You go back and look at the credit cycles, there are always a few banks that stand out. M&T out of Buffalo, New York, and Northern Trust are the standouts in the last credit cycle.
When you look at the AI buildout, it is more outside the banking industry, the direct impact. We anticipate the AI buildout will slow down. We don't know when that will happen — two years from now or five years from now. Nobody knows, but that will slow down at some point and lenders will probably see a slowing.
We are keeping an eye on the economic cycle and credit. Right now credit across the industry is very strong.
Can I ask about State Street? The custodian bank taking a beating. What happened?
It is surprising how much the selloff is. I think it was a crowded long. The company had steady improvements in their guidance numbers. They actually are reiterating their guidance and improved this quarter for the update for the year.
There were some trends that came in. Moneys did not come in as much as investment dollars for them to manage as strong as people wanted. Some of the growth prospects may have slowed relative to expectations. The numbers are still good, but everything is a game of expectations, and the expectations were higher.
It was combined with being a crowded long, which caused it to sell off this morning.
Your current recommendation is Morgan Stanley and Goldman Sachs. The stock market has not loved these stocks. You don't anticipate there is some room to move higher?
Interesting. The reason we feel the comparisons, the year comparisons, will be more difficult for the capital market players and custody banks as we get into the end of the year and in the first half of 2027. When you think about how strong the first half of 2026 was, it will be tough for the companies in the first half of 2027.
That does not mean business won't be good. We're not suggesting a bear market, but it is tough times. Main Street lenders — KeyCorp, Fifth Third, PNC, Bank of America — the lending business is doing well, and we would rather see people own those names.
Always appreciate it. RBC's Gerard Cassidy. Bank of America CEO Brian Moynihan joins Businessweek at 2:00 p.m. New York time. This is Bloomberg Open Interest.
Let's check markets now ahead of the opening bell. We saw a turnaround after we got the inflation data. CPI data roiling the markets. The yield curve — we are off the highs for those yields.
Two-year yield up to almost 4.90%, close to recent highs. 10-year yields rising 5.5 basis points. We got a little hotter-than-expected core CPI month-over-month, hotter-than-expected CPI year-over-year. 30-year is higher but not as much.
Futures turned negative, as futures pointing lower. Nasdaq 100 futures after the Mag 7 and Apple hit records. We've had five difficult days for the semis. The dollar index higher and Brent. Let's look at movers.
Netflix reportedly laying off about 1,000, 6% of its workforce. Then we have a semiconductor name, GlobalFoundries, which is planning to build chip factories in New York State with the backing of Japan and the U.S. Japan will invest $21 billion.
Bending Spoons surging. Berkshire Hathaway has invested another $330 million in the conglomerate, that brings ownership to 4% of Bending Spoons.
Another check on State Street after that disappointing earnings print. Revenue below estimates and costs rising. The market not so appreciative. We will talk to Joanne Feeney of Advisors Capital next.
We are moments away from the start of trading as the market digests hotter inflation data. I'm Vonnie Quinn. Dani Burger is on assignment.
Whatever direction futures were heading in, it is not anymore after that hot inflation data. It puts into question what the Fed is going to do next. Will the tightening cycle be over? Futures pointed lower as we head into the opening bell.
Let's see who's ringing the bells. At the New York Stock Exchange we have a REIT company trading in Toronto making its debut at the New York Stock Exchange, primarily apartments in the Texas Triangle. We have another private credit platform going public today, Steward.
That's down at the Nasdaq. Let's look at stocks on the move as we approach the open. Bank of America down 8%. It is getting slammed. Fined more than $1.2 billion for some regulatory noncompliance.
Also on earnings, and we are seeing that with Morgan Stanley. The market is not prepared to take anything from these banks even though they are massively profitable this quarter. They had an amazing quarter in so many respects. A lot more money than people expected. That stock is up 1.1%.
Let's talk about all of this and the other stocks with Joanne Feeney, partner at Advisors Capital. I thought that the rotation meant the banks would see some love after the earnings. For the most part they have been good earnings reports. Why are investors still shunning those parts of the market that may be not fully valued?
I think there is a lot of concern about this CPI report coming in harder than expected. When you look under the headlines for the details, you see a fairly broad-based inflationary pressure across the economy, services, and goods. It is confirming real wages are falling. People are looking at the consumer.
You are right. The bank earnings and asset manager earnings were solid. Yet the stocks are not performing well despite those very attractive profit numbers.
What is this dichotomy? We are concerned about the consumer when it comes to the banks and what might lie ahead for the banks, even though they say consumers are extraordinarily strong this quarter. We are not concerned about the consumer when it comes to funding AI companies. We assume consumers will consume AI in a bunch of different ways.
We have a tale of two economies. We have the AI economy, and the buildout is continuing because demand is evidently very strong. We are seeing more adoption of AI applications. We are seeing it in the numbers of the hyperscalers.
Little reports of other companies, whether it is Japan or ASML or Applied Materials — stocks may not be performing well, but the demand they are talking about appears to be very real and sustainable. Folks have had concerns about that.
You have the AI economy which is providing tailwinds for the U.S. economy as a whole, but you look at the consumer. Since 2020, inflation has piled up to 30% higher prices. That is squeezing the budgets of some. When you are building a portfolio, you have to keep that in mind.
You want to be exposed to the big growth driver and have some income generation, which we do with the balanced strategy, or some stabilizers, whether it is a TJ Maxx or the oil pipeline companies, to protect against some geopolitical risks. It's a complicated space for investors because of the clear separation between the growth opportunity and the consumer and the rest of the economy.
We will move on and get a check on the stock market now. A lot of concern out there about the economic data we got at 8:30 Eastern. Headline measure year-over-year, we were also hotter. We are seeing a decline for U.S. stocks in the main, and we are seeing a rise for yields at the front end of the curve as investors reprice what they think the Federal Reserve is going to do, with that sensitive two-year up to 4.9%.
John Williams's comments to the effect we might be done in December with the next rate increase. Well, it's hard to know what to make of those now.
Let's look at some movers and sectors as well. We will look at the Big Board because we are seeing about half and half. 232 higher and a little more than that lower in the S&P 500. Plenty of stocks higher.
Apple setting records. It's up another 1.3% today. Alphabet as well. It's almost like the market has no new ideas at the moment. UnitedHealth really rewarding those companies that did well.
BlackRock is getting a nice boost. Some of the oil companies as well doing well on the back of higher oil prices.
If you look at the stocks that are falling, Nvidia down about 1.6%, a massive drag. We have chipmakers and some of the banks that did not perform as the market would have liked or maybe got dinged by regulators.
It is down even further now. You see some of the software companies and the chipmakers. Intel down with another day of declines. That would make six if we get another decline today for the Philly Stock Index, even as the Mag 7 hits records. These are your sectors.
UnitedHealth having something to do with that. Consumer staples and energy off the back of higher oil prices. Financials down 1% as a group.
Coming up, an interview with Stripe's vice chair Eileen O'Mara from the International AI Summit in Dublin. This is Bloomberg Open Interest.
OpenAI's chief financial officer says European businesses are trailing when it comes to AI adoption. Speaking in Dublin, she also discussed recent concerns around safety and security.
On what we are doing to make sure inside of OpenAI we are doing things that are more safe, more aligned, but also have transparency when things happen. In the Hugging Face case we wanted to get the information out into the world.
Internally we are doubling down on safety and alignment, putting more compute to bear. Astra is our most aligned model. We might hold back the next generation model, which we are doing at the moment, because we want to do a few more turns on safety and alignment.
As we think about your question, liability and so on, it's more of a car analogy. There are parts that go into the car, but if a screw fails or a part fails, there is liability with the supply chain. The car companies have put seat belts and airbags in to keep us safe inside cars, but if something goes wrong because of what they did, there is liability.
There is obviously user liability. If someone drives while perhaps having drank too many Guinnesses, that sits with the user. We need to think about where the ultimate liability originated and who should be making sure it does not happen again.
To be clear, are you shifting more spend and compute towards alignment and away from R&D? That could be one solution.
Think about when you're training a model. Safety and alignment is an inherent part of it. We have always done a lot of investment in that area. I would say it is vast amounts of more compute. There's probably more when you look at before and after. It is not a major shift.
Generally speaking, we are spending more on compute to keep driving frontier research. That could be across every type of model, not just an LLM, but voice models, image models, even specific models to areas like life science. A lot more to serve customers because demand is growing so quickly.
Sarah Friar speaking with Bloomberg's Tom Mackenzie at the International AI Summit in Dublin. Tom joins us now with another exclusive interview. Take it away.
Thank you very much. I'm now joined by the vice chair of Stripe, the company that straddles San Francisco, the U.S., and Ireland. Eileen O'Mara, thank you very much indeed. You have transacted on about $1.9 trillion in volume of transactions in 2025 alone, and now building out the infrastructure for businesses on payments, but thinking deeply about agentic AI.
Sarah Friar talking about the risk and safety. Where is the urgency?
This is a great event. It is bringing industry leaders together in Europe under the EU presidency. The thing that is top of mind for the conversations I'm having with business leaders across Europe is how to ensure Europeans stay competitive. How do you ensure startups and founders have the same advantage and opportunity as their U.S. counterparts?
What is the prescription?
It is a very pivotal time. There's a program under EU Inc. which is trying to support a European founder to start a company in Europe and be able to sell services and goods across the 27 member states. This is critically important.
Today in Europe, as you do that, you incorporate in one country and then you have got to go to the next country. Really trying to bring to life that the European Union is a single market. For founders and entrepreneurs, that they have access to the 450 million people in Europe as opposed to having to go maybe to the U.S., which is invariably what happens. That is top of mind.
Europe needs to be at the front of competition. Europe needs to be a market for anybody that can avail scale within the region before having to go abroad.
I want to tap into your role as chief revenue officer of Stripe. You drove incredible growth in that role and then as vice chair. What are revenues looking like for Stripe right now? Can you give us an update on what 2026 is shaping up to be for business?
We have shared our figures for 2025. We have seen incredible growth. What we are seeing specifically is the surge of new companies forming on the platform, AI companies, and that is really exciting. New company formation and AI company formation have been incredibly fast-moving.
We are seeing solo entrepreneurs on the platform, and this goes to the heart of AI. This is a technology that should be inclusive of everybody on their journey. We are seeing an absolute surge there.
What is interesting is you no longer have to be a technical founder to start a company. We are seeing that across the board in Europe and the U.S. We are seeing acceleration around big global firsts, and that is something that we have seen before.
First half, 40% year-over-year revenue growth. That continues in the second half?
We are optimistic about the growth numbers we are seeing. We are seeing the most ambitious founders and scale-ups and enterprises on Stripe. We are seeing lots of opportunity.
You are one of the most valuable privately held companies in the world. $159 billion market valuation on some readings. Why stay private?
We are focused on our core mission, which is supporting companies to grow and scale their business. That is our number one priority.
Does that mean an IPO is ruled out?
We are focused on our day job. There's a lot of friction for companies about how to build and grow and scale, obviously in diverse markets, and that is where we are putting energy. It's an important mission now as the economy is re-platforming with AI.
Do you think the stay-private model Stripe has executed on could be a model for other startups globally? This is a new model others could look at?
That is down to founders of any company. Certainly it has helped us position and grow the business on behalf of our users and innovating and driving technology for users.
You have been making acquisitions. OpenRouter was a big one. Do you remain inquisitive? What do you not have in the business mix right now that you would like to add?
We have obviously had an amazing acquisition with Bridge. We are really excited about that. There is a token economy. What we are hearing from businesses on Stripe is it is hard to know what models to use for what particular task.
OpenRouter is a phenomenal platform that makes it easier for companies to select the appropriate model at the appropriate economics, at the appropriate latency, etc., on a platform that would be hard for them to navigate. We have long invested and built the technologies ourselves.
PayPal was considered, potentially a $50 billion acquisition. What would lead you to revisit PayPal, or what would have to change?
There are plenty of rumors on that. I never comment on rumors and acquisitions.
Can you tell me what you saw that was attractive?
I can't because I don't know anything about it. I was not involved in any of those rumors or whatever was presented on that.
You will stay inquisitive?
Absolutely. It is the time for everyone to stay inquisitive and curious. There is so much opportunity to scale and build, and we want to be a strong platform.
And you have the balance sheet to do that. Let's talk about jobs and AI. You have said a few times recently that you think AI could be inquisitive in terms of jobs. You can see jobs added as companies adopt AI. How do you square that message with governments worried about job losses or those building frontier labs like Anthropic?
We are seeing this surge in new types of founders and entrepreneurs. It is bringing a cohort of new business leaders into this economy, and that is really positive. We have a lot of great positive data around that.
From a Stripe perspective, we made a jobs announcement in Ireland two weeks ago. We are continuing to grow and build. We think there's a lot of productivity gains to be had from AI, but there's a lot more opportunity for us to build — not only us, but the companies on us.
We are encouraged about what this technology will do for productivity, but also from a growth perspective and bringing new solutions to the market. That is where we are spending most of our time.
Are we at an inflection point as far as jobs? Are we seeing some job losses as efficiency gains are landing at the corporate level?
Probably not for me to forecast or predict that, but what we are hearing from the merchants on us —
You are close to the story.
How do you drive more growth and progress? How can you scale your company cross-border and in Europe?
How do you win in the world of agentic commerce?
There are new applications like Instinct and Muse and GrokBot. We are powering that agentic payment. This will be amazing for consumers to guide where the industry is going.
That is not a competitive threat? That does not rework and rewrite the business model on which you build? Do you see that as a challenge, how commerce is enacted?
From the market perspective, it is an opportunity. Potentially it will empower consumers to find you and your product and service in a way they would not have been able to discover before and go ahead and complete the transaction. It is early. We know it is early, but obviously we think it is a very exciting time.
What are the potential risks around agentic commerce and agents transacting on our behalf? How to mitigate some of that risk? If it's a fraudulent transaction executed by an agent, where does responsibility and liability land?
The current model is that you as a consumer obviously authorized the payment for that specific product. The current rails are fit for purpose. You still have a human in the loop on that. There is no concerns on that.
The evolution of agentic and where it evolves is something that we will continue the discussion on, with cases coming up at how the safeguards and standards support that.
Fraud has always been big business. We know that at Stripe. We have developed huge amounts of investment as a company around our fraud products, Radar. It was human fraud and now it's agentic fraud. Every company needs to think about the security of their environment, and that's a conversation we are having with many of the companies we are working with.
