Inflation hot and futures lower. I am Matt Miller.
And I am Dani Burger. Bloomberg Open Interest starts right now.
Inflation accelerated in April with gas, rent, and food prices climbing.
The tech rally loses steam. South Korea stocks swing on a proposal to distribute A.I. profits to citizens.
J.P. Morgan's markets business is booming. Jamie Dimon joins us for a Bloomberg exclusive.
They are all getting paid big bonuses. Private credit is not a problem. Pretty sweet at J.P. Morgan.
He has backed off on the most barest of assumptions. I wonder if he sticks with that. I am watching the A.I. stocks we mentioned, what happened in South Korea.
It is pretty incredible to watch a post by one advisor that they basically walked it back. It brought down the entire cost beat.
Filtering through to Intel, Micron, and all of the chip stocks that have had a hot run. Intel down 4%. It shows how frothy this trade and how fragile it is that you can have this walk back in.
It has tripled in 12 months. It has grown longer than the U.K. stock market.
Isn't that an A.I. dividend? Do we really need something separate?
eBay has rejected GameStop's $56 billion takeover offer, calling it neither credible nor attractive. The board of eBay turned down the offer due to uncertainty around the financing plan and operational risks and GameStop governance. Plus they watched that CNBC interview where they said they would not do it. Did you see that?
I don't think there is anyone who did not see that. Read the website. Let's start with the economic story, inflation accelerating in April. Let's break down the data with Michael McKee. What were the details?
Inflation coming in hot as expected with the headline CPI month-over-month coming in up 0.6%. That pushed the headline year-over-year to 3.8% which is the most since 2023. The core rate up 0.4% which pushes the core year-over-year to 2.8%. Definitely going up.
If you want to look at what pushed it higher, gasoline prices were up 4.4%. Electricity up 2.1%. It might not help you to buy that electric vehicle. Owners' equivalent rent was up 0.5% because of the government shutdown last October. There was no data so it takes six months to turn the housing market data around. That is what resulted.
Goods and services. Goods prices were flat. Services prices were up half a percent. That is the opposite of what the government economists want to see because they are expecting because of tariffs and the overall board to see goods prices go up but services prices are not affected by those. The fact that they are up that much matters.
Airfare is up 2.8% on the month. Hotel fares, hotel charges up to 0.8%. Travel is more expensive because of the war. Tomatoes were up 15.1%. One of the biggest food pricing prices we have seen. Those of you looking for your salads today, you are going to be paying more.
I should mention it is not good news for consumers because not only are prices up, but with the CPI out they have recalculated what your average hourly earnings are absent inflation. Negative on the month, down by 0.3%. You lost money at both ends this month. In April.
You are so European, Michael. You are doing month-over-month. Airfare is up 21% over the last year. The moves are even bigger than just a month-over-month move would suggest.
I don't think the airfare up 2.8% is piddly. That tells you the impact of the war because it is the one month move over the last half of the war so far.
Mike McKee breaking down the inflation picture. The A.I. trade taking a breather this morning. Some stocks are moving with extreme sensitivity. A Facebook post by a South Korean policymaker said stocks diving after saying the nation should base it is in using taxes on A.I. profits. The Korean government later said this position was the advisor's personal opinion. Bloomberg macro strategist Cameron Crise joins us.
The interesting thing, not only the suggestion that we should take windfall taxes and hand them back to citizens but also the fact that this market has flown so high so fast. It has tripled in the last 12 months, bigger than the U.K. market. It lost $120 billion in the time it would take to watch a soccer game. It is incredible.
The moves in the stocks have been incredible but the moves in corporate earnings have also been astonishing. I would say it is not quite like the dot-com bubble when prices moved at light speed ahead of realistic earnings expectations. The fact is that these chip companies in Korea and the United States are incredibly profitable.
Even the lower value add memory space is vitally important to A.I. All of these companies have seen their expected orderings, earnings moving forward, I have not seen anything like it. It goes up by order of magnitude. Prices have been expectation and it is a really interesting public policy question as to how or if, how the benefits of that should accrue to society at large rather than the narrative, relatively narrow cohort.
We have seen data center projects in Northern Virginia get the brakes put on them because of citizens saying do not build these things here. Presumably that is not anywhere priced in policy risk but should it be?
Whether it should be or not is perhaps a philosophical question. I think more generally, NIMBYism is not new. Obviously if you under facilitate the price of those, then consumption is going to go up and that will radiate across the entirety of society. It is a really tough question.
What I will say in terms of specifics of the South Korean thing is it was only last year we were hearing things like Doge dividends and tariffs dividends and those went nowhere. At the end of the day money talks and right now it is the A.I. industry that has the money. Whether it should work this way is a different question. Those with money have the ability to buy influence and have economic policy tailored to what they like. I suspect this will work out quite similarly.
It is a good point. Cameron, thank you for joining us. Elsewhere in the world of tech, eBay has rejected GameStop's $56 billion offer calling it neither credible nor attractive. Caroline Hyde joins us. This cannot be the most surprising thing they have rejected.
Hostile, whether they are selling things to raise funds or buying things, bits of carpet or his own stocks, it is all a joke. What is very serious is why it is lacking credibility. They are pushing back mainly on the source of funding. They had said we had $20 billion in a letter. They were going to write a letter saying we can offer you $20 billion. Apparently you have to maintain investment grade. That is highly unlikely according to Bloomberg reporting.
To do such a buyout that is a quarter of the company of the value of eBay bringing in a quarter of the revenue to afford that amount of $56 billion offer, no wonder they were worried about the leverage. They are pushing back and we know this has already gone hostile in many ways.
Let's not forget Ryan Cohen saying we will just pay $26 billion using our shares. The company is only worth $10 billion. How does that work?
Many are of the belief that there is much being made by the people behind the short fame, whether it is Steve Eisman or Mr. Barry himself talking that they have been offloading their shares so they did not get mixed up between creativity and debt. At the end of the day this is an awful lot of debt being taken on. It is a good news story for us to get our teeth into but how realistic is this? The market has not been taking it seriously.
We have seen eBay not near the $56 billion so the market does not think it is going to be purchased for that amount. It is a distraction for the executives who are trying to turn this company around to show that they have to refocus on the collectibles and they should be building the market cap over the revenue of this company and now this means they have to go to board meetings to fight off Ryan Cohen.
It makes for exciting social media. I imagine you are going to be focused more on chip makers and the A.I. trade when you host Bloomberg Tech at 11:00 a.m. weekdays. Check out what is going on in markets right now. We are looking at red arrows but this after all-time record highs. Again yesterday at the closing, you can see the S&P futures down one quarter of a percent. Nasdaq futures off 0.7% with a retreat in tech stocks. Yields around the world higher especially in the U.K. But we do see yields here higher after that hot inflation number. Brent crude is higher again.
Some of the individual stories we are looking at this morning. Under Armour forecast for sales and profit this year trailed Wall Street projections also citing a financial hit from the conference in the Middle East for about $35 million.
Sneaker maker On is raising its profit margin as it targets younger customers.
Also Wendy's is surging this morning as Nelson Peltz is looking into a bid for the fast food chain to take it private. They are reportedly looking at investors that include those in the Middle East with shares of 15%.
It is delicious. I went to Wendy's yesterday and it was so packed that I had to bail and go to Five Guys.
The reason that chicken nuggets exist is because Ray Dalio in the 1980s helped create a synthetic chicken future that they could hedge on.
It is true. We just got news that the CME is going to launch futures for some of these. With every new industry you have to create some sort of futures for these companies to hedge. That is how chicken McNuggets were born.
Thank you to Ray Dalio. That's not Wendy's.
I guess they all do this. It was pioneered with Ray Dalio and McDonald's.
Interesting tidbit. Hims pivots to branded weight-loss drugs which has weighed heavily on the company's profit outlook. We will talk about that next. This is Bloomberg Open Interest.
Let's look at what is making headlines around the world. Shipping traffic in the Strait of Hormuz remains at a standstill with oil rising after President Trump rejected Iran's latest offer. Trump called Iran's response to his peace proposal a piece of garbage and said that the cease-fire is on life support. At the comments as Trump prepares to meet President Xi Jinping in Beijing. U.K. Prime Minister Keir Starmer told his cabinet he will not resign despite calls to do so within his own party. He appears to get himself a reprieve from efforts to oust him following a high-stakes meeting this morning that resulted in a public show of support from a handful of key allies. Still more than 70 members of parliament from his own party are calling for him to step down.
Hims and Hers reported a first-quarter loss due to higher costs from the pivot to branded drugs. That loss was twice as big as the loss reported in the same quarter last year. The company is moving away from the copycat versions of weight loss medications and instead are prioritizing partnerships with brand-name products including those from Novo Nordisk and Eli Lilly.
Let's get more with Bloomberg's Gerry Smith. It seems like initially a coup. At first they were selling nonbranded ones and then they get sued by Novo Nordisk. Novo Nordisk drops the lawsuit because it turns out that they need Hims and Hers. But is it bad for business that they are selling to branded products?
What we are seeing right now with Hims are the first results as part of this strategic pivot. A lot of the growth was fueled on selling these copycat versions of weight loss drugs. Now they have to take a write-down this quarter because they had excess inventory from copycat drugs that they are no longer selling and they are trying to make this pivot where they will sell branded versions of the weight-loss drugs sold by Novo Nordisk and Eli Lilly.
There is a scenario where this is short term pain for Hims for a longer term gain. We have seen recently the approval of weight-loss pills which a lot of analysts think is the next frontier for weight-loss drugs and is going to be a huge market. Hims is a huge part of that. A telehealth company selling these could be a huge area of growth for them going forward. In the short term they have a lot of excess inventory from these copycat versions of the drugs that they can no longer sell and that showed up in their results.
$0.40 per share loss compared to $0.20 per share in the same quarter one year ago. Revenue was also weaker than estimated. $608 million was the number when we were looking closer to $618 million. Why are analysts so optimistic about this sector?
We are going through a transition period right now these weight loss drugs where we are going from people who just have the option of an injectable version to now both Novo and Lilly have a pill version. It is very early days for both of those companies. Novo got off to a very fast start but Eli Lilly is close behind. It is a challenging area for Wall Street because we are seeing this transition from one form of weight-loss drug to another.
In terms of Hims and Hers other business, I feel like there is all this excitement and genuine fear around peptides and selling them. Was it them or someone else who bought a factory or something like that getting ready for all of it to be deregulated?
Hims actually bought a peptide manufacturing facility in California. This is an area where you see a lot of wellness enthusiasts who are very excited about peptides and these short amino acid, strings of amino acids that you are seeing even RFK Jr. promoting, peptides for various benefits, wellness. People think that it can help with reducing aging, healing wounds and various other things. Right now it is not approved. The FDA is looking into potentially regulating this space. If it becomes an FDA approved treatment, that could be a benefit to Hims. They are placing bets that this could be another market for them going forward.
Thank you very much for joining us. That is Gerry Smith on the latest earnings from Hims and Hers. Coming up, Kristen Bitterly discusses the consumer as inflation climbs faster than expected for core. This is Bloomberg Open Interest.
I don't really buy the idea that the economy is being propped up by the capital spending by a few companies. I think consumers are definitely there and the weakness of the consumer in the fourth quarter and first quarter was weather related so we are about to test that. We will see what retail sales look like and put it all together and the economy remains resilient as it has been since the beginning of the roaring 2020s.
Ed Yardeni on surf aliens. Kristen Bitterly joins us now. It is a resilient economy and we will get more evidence of that this weekend. First we had the CPI. 2.8%, the biggest since September. Energy up 3.8%. Airlines were up a lot. Apparel was up. Are we still resilient even in the face of stickier inflation?
A lot of this was anticipated. Plane tickets are going to be up significantly. You will see the increase in energy. You have to look through to core and everyone is looking at shelter prices which year-over-year there is a little bit of a base case scenario where we expected that rise. I don't think it is too far outside of expectations but what it does raise is this stickier and is inflation what to be around longer than anticipated which is one of the reasons why we have been cautious in terms of duration and going out too far in the curve.
We will continue to talk about that because I have questions about tax refunds. They were stronger. That has to help the consumer. Also the A.I. spend seems to be supportive. Kristen Bitterly is sticking around. We have to take a break to pay our bills. When we come back, we will bring you the market open on the New York Stock Exchange and the Nasdaq markets. Futures down after another all-time high on stocks yesterday at the close. This is Bloomberg Open Interest.
We are moments away from the start of trading on this Tuesday. This is Bloomberg Open Interest. I'm Matt Miller, looking at stocks that are down with tech stocks leading the way. After we saw the KOSPI evaporate $300 billion in value in the span of 90 minutes yesterday on concern about an A.I. windfall. Down at the New York Stock Exchange, that is not the New York Stock Exchange, somewhere else ringing the NYSE bell is the new CEO of the Walt Disney Company. He has many amici within there, as well as all of their products, which, he has Minnie and Mickey there, as well as all of their products. Really, I think the focus today is going to be on the inflation numbers we got. Higher than expected, and that has come through obviously from the war, from jet fuel, from beef. Beef was 3.4% higher.
Trump is carrying back some of the tariffs on beef, so maybe that will be better.
It is always a good idea to subsidize demand when there is supply shock.
But I counter you with that being the most important thing to do these markets care at all? A.I. continues to be the most important thing. Today, it was something that happened in Korea, so stocks are selling off. There was a post from a policymaker suggesting paying citizens in dividend on taxes with A.I. profits. And then he's like, my god. Made a bunch of qualifications. People says he doesn't speak for the government. Even so, the damage was done. A fragile trade. All of these stocks down in this morning straight.
eBay rejected GameStop's $56 billion takeover offer. They called the offer neither credible nor attractive, turning down the offer due to uncertainty around the financing plan. Still incredibly difficult to understand how they would've come up with the money. But I have knowledge of the website, so I will do that. GameStop down 2.5%. eBay down 0.80%.
Even after he told you so many times, the American public to look at the website?
I will go check it out, I honestly will. If you are a $10 billion company, it is hard to issue shares to cover $26 billion bill.
It would be incredibly diluted, even if you could do it.
It is like negatively dilutive. It doesn't make any sense at all. Let's get off that topic and get back to, eBay was a good save because consumer spending a ton of money on places like that. Let's bring in Kristen Bitterly. I got a better tax refund like many people, and I may spend it on eBay, more likely on gas. At some point, that money will run out. How does that consumer look after the next couple of months?
It goes back to the K-shaped economy when you look at who is driving, it is the top 20% are driving 40% of consumption, and if you think are they exposed in the same way, many of them are homeowners, many have cheap mortgages they locked in years ago. The actual math around that wealth effect that you have seen in that top 20% is significant, and you don't see volatility in that spending. That combined with what we have to see is a spectacular Q1 earnings, the growth that we saw, and not just Q1, but the rest of the year, you have estimates that started about 15% year-over-year earnings growth and now they are close from 22 to 26%, so continuing to see that investment at this pace is going to drive fundamentals higher.
Even so, the bulk of where that came from and the earnings upgrade has been 70, so two thirds. The index itself has hit a new high. This was from the SPOKE, it is over its 50 day moving average, but this is only the fourth time that the S&P 500 has hit a record high while 5% of members fall to 52 week lows.
There is dispersion near the surface.
Does that make you nervous that so many of the, so much of this is pinned on semis, etc.?
You have to do the basic calculus as we look at contribution to earnings and representation around the index. If you look at the top eight companies, they now represent anywhere from 35% to 38% and contributing around one third of earnings, so it is a little balance but not that much. I think the other thing is when we look at now you are starting to see the productivity gains from A.I., you are saying that semis were a big beneficiary as far as where this cap is going, but now you see electricity, and the upstream and downstream is to get into things for what it means for physical A.I., which is the next generation, as well. So this is a multi-decade to build out if you are thinking for what is required, and you heard in certain earnings calls the demand is so robust, do we have enough compute to be able to meet it? Compute is the new oil.
We are also adding jobs. I was out on Friday, but I still saw the numbers, and they are impressive. If you look at that three-month moving average, this economy is starting to add jobs rather than going the other direction, which is the view that maybe still could happen, but you need obviously more than chips, you need real estate, people laying cement.
Electricians, exactly. It is a whole ecosystem.
I just wonder, does this move the needle in terms of long-run growth estimate? Could we be moving to a higher plane in that sense, or is this a demand shock that will continue driving inflation?
A lot of those jobs are temporary. In the long term, they need 50 people in the data centers.
But it is a lot of years of build outs.
It is a fair point. At one moment, are you going to see that that continued increase in pace as funding is not going to be at that rate? Probably not but it is not a bubble, but an arms race in terms of who will be winners and losers. Do we need to see an R.O.I.? Absolutely, but we are still in the early innings in terms of how the beneficiary short, medium, and long-term.
We are going to hear from Jamie Dimon in moments about private credit. I was having conversation with someone at Milken who said there was a smaller family office and they were sold by one of their wealth advisors, it was not Citi Wealth, it was a competitor. It basically said, add on this cash management tool. These things are not because they are illiquid, that would have conversations been around private credit? Are they noticing headlines, are they getting more nervous, do they still want to buy it? What does the appetite look like?
Private credit was one of the top topics Q1, and obviously with the rising oil prices, it was something that went on the back burner, but you have to almost take a look at the total size of the market. You are talking a market around $2 trillion in size compared to if we are talking about the equities market, you are talking $70 trillion, so even the global fixed income market, you are talking about the same type of magnitude, so it is a relatively small part of the overall investing market, and I would say from a retail investor or an individual investor standpoint, it has tended to be a tax inefficient investment, so when you look at the exposure, it is largely institutional. There has been some retail participation recently. You hit the nail on the head in terms of understanding liquidity.
So are there good investments, good underwritings within that portfolio? Absolutely. Are there some where probably there are some poorly underwritten credits within the broader portfolio? Absolutely, but it is not illiquid investment. That is something that in some of the branding that came out about semi-liquids evergreen funds making sure that people truly understood that this is illiquid.
There is a place for that. This morning it was asked, how much more can I get over something like a CD, which is also an illiquid investment if you are a member, if you remember CDs.
And I think if you have 50 basis points, 100, if...
You are looking at cash, many investors are now have what we call outside cash holdings, including bank deposits, T-bills, a variety. That is a very different investment in private credit. Within our own portfolios, we have a preference for equity over credit risk for this exact reason. Are you getting compensated for the risk? Whether that is traditional fixed income or in the good parts of the market, when you look at that full spectrum of yields, if you can get an attractive yield to stay relatively light and duration and time quality on a relative basis, you are going to stay in that part of the market as opposed to an area where spreads are tight and you are sacrificing liquidity.
Who is it for beyond institutions? Where does it make sense in a portfolio or does it not?
The big question was when SOFR took a hit. When SOFR took a hit and all of a sudden, people are like, wait, software seems to be 20% the overall credit market and then the argument there is, well, these companies would have to go to zero before they would be a default event within the credit market, so are there wonderful opportunities to get above market yields where you are compensated for the risk? Yes, but you have to be selective in terms of the sectors you are exposed to and making sure you get paid for illiquidity and the risk premium.
Smart conversation. Really appreciate you coming in. Kristen Bitterly from Citi Wealth. Let's check the stock market right now. 10 minutes into this action and the S&P 500 off about 0.40%. 7384 is your level, so coming off the all-time high we closed out at yesterday, stocks taking an even bigger hit. Who are the winners and losers?
Nvidia is having a good day but not enough to lift as higher. Health care doing well, to the downside though with big tech names and a lot of big chipmakers and that is why the market is off. The other column, Amazon, Micron is down, Qualcomm, Alphabet. Nothing in particular moving that. It is just what happened in South Korea. I should note, J.P. Morgan is down, just in have very good numbers or projections coming ahead.
Despite our exclusive interview with J.P. Morgan CEO Jamie Dimon, coming out. Take a look at the sectors here that are moving today, health care, consumer staples and energy, so pretty defensive look there. Industrials and consumer discretionary on the downside. Let's go to Francine Lacqua, standing by with the J.P. Morgan CEO, Jamie Dimon. Francine?
I could not be more happy to be here in Paris with J.P. Morgan CEO Jamie Dimon. Thank you for being our host here in Paris. There is a lot of writing, the markets are optimistic. They are optimistic there is some kind of resolution in the Middle East. Are they overlooking the worries about inflation?
Welcome. Happy to be here. There's a little too much exuberance. Not just the Middle East, Ukraine, Russia, America, China. A lot of these complex issues which may affect the market but then there are issues like inflation that were not doing so good. The market is kind of exuberant.
If they are exuberant, are you expecting a correction and is it because they are looking at A.I.?
I don't think it is A.I. Corporate profit is doing well. This year it is a lot more spending, which may be inflationary, too, but if you look at quarter profits, we are doing a little more Q.E. The one big beautiful bill is studying a lot of, the gas increase, $100 million. The one big beautiful bill, 300 billion. Deregulation is real. It is a pretty good market right now.
When you talk about exuberance, it means there is a market dislocation. Where do you see that?
The stock market is in the top 10%, 50%, rates are low. These things are all going to resolve. I hope they do, but I don't know that they will.
What do chief executives worry about in private that they tell you that they want to last?
Trade, America, NATO, the wars, oil prices. The same stuff you hear all the time.
But there, we had a great earnings season. The next one going to be less good?
I don't know yet. Very hard to tell. I think deficit spending drives a lot of corporate earnings, too. It drives a lot of. Will create productivity before inflation? I don't know that.
How do you think of oil and how do you think about what is happening in the Middle East? If this lasts for weeks, two months, are we going to be in trouble?
It is a big deal and every day gets a little worse. I don't know. I hope it gets resolved. In the interest of the U.S., and the Iranian regime, not the Iranian people, but something very interesting, China reduced their demand by 5 million barrels a day. America increases exports by 3 million barrels a day. That 8 million is lost, and maybe why it has not been as severe. On the other hand, moving towards coming down, stuff like that, so it just gets a little more serious every day. The disaster has been pushed out quite further than it was in the beginning.
Do you worry about the U.S. consumer? Are you seeing signs of stress anywhere?
I think the top 50%, lots of money, jobs, home price going up, stock market, spending like they should. They are buying, traveling. The bottom 30% is struggling a little bit. And of course we like to help but more importantly they still have jobs. They don't have too much debt. They still have jobs. At the end of the day what's going to drive consumer spending and sentiment that part of corporate profits will be jobs.
There's the president meeting with President Xi Jinping tomorrow in Beijing. Does that have implications for the trajectory of America?
I don't know. I would suspect there be a friendly meeting from both sides. I don't think China will give any major demands. We both have a lot of common interest. Antiterrorism, China's feeling its oats and they have to deal with President Trump so we will see how it turns out.
Trading results, how is it going now?
I can't comment on that. But the last time they went publicly it was fine so far but I can't give that more information than that. But you guys can see every day volumes. When volumes are high.
You think it's going OK because it depends on the kind of trading. You benefit. Talk to me about A.I. You've played around with models. What did you see?
A.I. is going to cure cancer, is it going to reduce growth rates in kids who were longer. Or let's people die and have new drugs. It's good to be good. And we've been using it now for 13 years. It does an amazing job at a couple of different things. There are two attributes people worry about. One is models, this is so prevalent encouraging a lot of vulnerabilities. Not just for ourselves big banks, small banks. Telecom, a lot of the work they don't have the ability to do all of that so Scott Bessent's running for banks and I assume they've done it for others. It is risky. And we published two people should look at what you can do now because everyone's going get it at one point but if they can handle it it gets leaked out it could be there before we protect it and so we need to work to get it right. The other point is job disruption. That may be true. And that to me is how do you create skills and rescaling. There will be a lot of jobs and A.I., cyber, the trades and we make sure locally between government and collaboration that we're prepared. Have a plan.
Does it change the way banks have to defend themselves? Are you thinking about cybersecurity differently?
On top of search cybersecurity. Cyber is our biggest risk. And that was before models. So this does make it more dangerous. In all of us. Together. We're not like arguing.
What is that mean, what is it look like.
All going through our own applications. All going through open source code. A lot of open source code. If you fix one I can fix the other. Have a collaboration. Try to figure out utilities going to our critical vendors. Oh did you exchanges around the world making sure they're defended properly and there are other things posted publicly, fixing that patch now you have to fix it in hours and so it can be public. You make it public the bad guys will get it we reverse engineer. So we're doing all of that stuff. Doing full-time now.
Funding of hyperscalers is propping up the economy. Any worries about getting that money back. Over what's being constructed.
A.I. is real a lot of money will go into it. It doesn't mean everyone who does it will be a winner. Going back a lot of people lost a lot. The hyperscalers on data centers they probably will. It is a possible some do it badly designed it badly. Of course it's possible.
To say I change the way you recruit, the way you hire in the way you work.
I think it will change almost everything. I have a strategic intelligence reports. So I can say what it Francine say yesterday. People that might be significant and then you can keep them educated. This is important what's significant. So we'll use it in different ways. In the day today. Could there deploying it a thousand different use cases.
