welcome to bloomberg markets i'm sonali basak let's get a quick check on the market. s&p 500 on sixth day of gains. the nasdaq 100 also climbing higher .6% in the two year yield on a steady climb lower, six basis points lower on the day you are looking closer to 440. is trying to hit that up 30 level.

crude, at $76 up 1.8% with levels we haven't seed -- seen since november. tesla is down 25% on the year, 11% on the day after being warned about its growth outlook. on the flipside, ibm having its best days since 2001 on his outlook. i want to flip up the board and look at more movers, airline industry. american airlines of nine point 16%. alaskan air of more than 3%. boeing still seeing a drag, down nearly 6% at 5.8%.

the airline's drawing pressure on boeing. helping to drive these markets on as investors are betting on the next bad move. abigail: i was a little surprised when we had gdp for the fourth quarter coming and at 3.3% versus the estimate of 2%. i would've thought yield spike higher but that is not what happened. jobless claims at 214,000. we had some other data come in. a little bit cooler than expected, durable goods at 0% the estimate was to come up 1.5%. also down from 5.4%. jobless claims take up higher

than the week prior. home sales did rise at 664,000 versus 649,000. nonetheless strength there in the month over month basis. let's take a look at the biggest number which is gdp. one recent stocks may not have tanked is when you put that number in the context of the last several years excluding the pandemic trough and peak it's right in line with where gdp has been. not hot enough that the fed will not be able to cut in the way that the fed is saying, three times with the market saying six. you do have some divergence

between stocks and bonds over the last week. the s&p up 2.3% in the two year yield down three basis points. to have been higher earlier. the gain for the s&p 500 is not matched by the gain for bond suggesting there is a little bit of a disconnect between stocks and bonds in terms of what the economy is a what might happen next. sonali: mike lusardi reacted to the data with the positive tone. >> we have been having a baseline review but there are increasing prospects for a soft landing. you have tightening conditions but at the same time, you have virtuous dynamics.

mortgages will come down, financial conditions of ease. i am not as worried about this going to outside inflation risks . we still have to get inflation to decelerate and this goldilocks scenario of growth being stronger and more resilient with inflation coming down, that prospect has improved materially in my view. sonali: let's get the reaction from laura rehm. when you look at the gdp data coming out, how does that much the case for rate because. we have talked about how the market may be too optimistic at this point? >> this will be one of the defining features of the first half of the year and one of the

primary sources of volatility. when i look at when markets are expecting six rate cuts, closer to 5.5. it's an aggressive rate cut scenario. with the backdrop of an economy making a lot of momentum. when i look at the inflation picture i am not so sanguine inflation can come down. i see it is a little stickier closer to 3% which does not give the fed room to maneuver. markets have to digest that. sonali: you have volatile energy prices and concerns over the supply chain. what are the biggest risk to inflation at this point? how much can i throw a wrench into expectations for cooling rates? lara: we see inflation coming

from several directions. to get inflation at 2% you need everything to behave really well. you need all the kids to say calmly in the backseat for the duration of the ride. the shipping cost creeping higher, no disinflation from energy, shelter inflation has not materialized like folks of expected which means services prices remain much higher than they were before the pandemic and the goods piece is a big question mark. we have seen a goods price deflation and that could be over. to the extent that we are seeing significant appetite for goods, you are starting to get kids misbehaving in the backseat. sonali: just this morning they put out a report saying that default rates were at a high

last year and once more, they expect default rates to keep rising in 2024. if you believe that on one hand you see the strong data but also weakening of fundamentals. where do you look for those places that investors can get burned in this euphoria? lara: we need to juxtapose around the backdrop that some default so would've come come along were avoided. when i look at more historic credit backdrop i think corporate fundamentals are strong. we have to recognize the fact that if the economy is going to stay solid and a soft landing is your base case that you are probably not going to see a significant credit cycle. we may see some movement and

credit spreads and i think part of that is going to be refinancing that needs to occur. there's a big difference in credit markets that are not like public equity markets. i think the equity pieces looking so expensive at this point. sonali: one more data point to look forward to a super taste of the fed. pca deflator, what are you looking for? lara: i think we will see a downside surprise given what we saw in the q4 data. that headline was weak but the core was on expectation. i will be watching the real income number to see the trajectory for consumers going forward. sonali: we thank you for your time. blackstone's great explains why

the feds easing cycle leads to our virtuous cycle for its business. this is bloomberg. ♪

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[ laughs ] protect everything your family does online with aura. sonali: this is bloomberg markets and i am sonali basak, blackstone shares are on the rise after reporting. the firm is worth more than morgan stanley by market value. here is john great on the virtuous cycle getting started. >> what is happening in our business, we are benefiting from this regime shift as we move

from the rising cost of capital under the fed for the last few years to an environment where as inflation comes down in the fed's easing, that leads to a virtuous cycle for our business. equity markets open up and cost of capital comes down, m&a activity picks up and that is very positive for our business in terms of re-acceleration. sonali: a lot of your influence came in the credit space but at the same time a lot of investors are worried about that private credit is reaching bubble territory. are there enough opportunities to prudently put that money to work? >> when you talk about things like a bubble in credit what i like to look at is how much risk is there? if you look at the loans we are originating in direct lending to

private equity sponsors, on average to date there are 40% loan-to-value, almost half of what they wear folks like us in the private credit space or in a great position to deliver for borrowers. if you think about what we do, we make loans to companies and hold them on behalf of our pension fund clients. it could be for individual investors or an investment grade for our insurance companies. what we are seeing structural

shift towards credit, it does not mean we are seeing excesses. what about the opportunity for m&a? how fast do you see yourself putting hundreds of billions of dry powder to work? >> our expectation is we will see a pickup. you see early signs of that. our lending area some more of a doubling in terms of new loans we were making. if you look in our private equity area, we have been working on these transactions for a long time we announced six deals across the u.s. and europe. digital marketplaces, enterprise software, energy transition and real estate. privatization, distress loan portfolios. we are seeing a pickup and it

does often take a bit of time. things are starting to loosen. it does feels for m&a, like an inflection point. sonali: rich thomas is down with the rise of activist investment. this is bloomberg markets. ♪

>> we are very hopeful we can increase our operations. the response was unfortunately from the company it was premature to even begin negotiating so we were surprised. sonali: this is bloomberg markets and i am sonali basak that was the cofounder talking

to me. it turns the are callous is turning to activism. lagarde came out with the paper that described the change in landscape and activism. you saw the global names on there. there are so many names that we were bus familiar with, oasis for example. how are you seeing start up hedge funds ride the activism wave? >> this past year we had 100 a d3 campaigns launch around the world. 77 of those were first-timers who had never gone public before. this is a broadening of the

activism landscape and diversifying. we are seeing different kinds of players. everyone is raising their voice in protest. sonali: you have say this closely, or any of the successful? >> these are not just hedge funds, sometimes the insider who used to be part of the company are management and they know the company really well. if you want someone to fix a company want them to know it in and out. it's hard to generalize and say first-timers are more or less likely to be successful for someone like a newcomer like our cows to target macy's.

arkhouse targets macys. rich: the conventional activist targets are being used for different purposes. we are seeing more of a connection between activists, the campaigns they are driving and how private equity of potential acquirers. of companies are prepared for that nuance and accepting that one, two punch they can be caught off guard. sonali: the idea that it is driving more acquisition. how many spinoffs are you seeing this cause? rich: there is a lot of dry

powder and if you need a place to invest or go, what is interesting is what happened in north america in the driving of activism underpin by m&a access schemes. you would not expect we would be talking about m&a activism but we are. almost 50% of all public company openings were last quarter positioning for those more supportive archetypes. sonali: macy's has fought back, disney. how successful is the firm?

crystal: last year they had an activist italian. they just wanted to be added to the board. disney had success by making a lot of changes in the boardroom and announcing a lot of measures. it has been one year and a lot of the success this year will hinge on how they deliver on last year's promises. it seems like they are taking an aggressive role here. sonali: were talking about nontraditional activist, you think about starbucks. you are seeing activism among stakeholders, employees. the role of labor in corporate america. how do you think of this dynamic

is a financial advisor? rich: it is all part of this application of tactics that have been well honed by hedge into different purposes and this is where the old playbook's don't really mean the purpose anymore. they need to think harder about the different ways we can find her ways under pressure. most importantly, you can be defensive, you have to be offensive. we are working with companies trying to find ways to be leaving rather -- leading rather than play whack-a-mole. crystal: not exactly employee activism but nontraditional activism. when it comes to animal rights

and how they are treated within mcdonald's, kroger. may be this universal proxy will urge all of these nontraditional campaigns. rich: the universal proxy has not changed the nature of the big campaigns. in the end, the value is there in the effort is worth it, people will invest. but we have seen change is not more or less campaigns but the time it takes for many of those campaigns to settle. companies and activist are a lot smarter on outcomes and how to avoid big fights and get to a better answer, sooner. sonali: before we let you go, the idea of more m&a, this was

at a report where not a lot of m&a was happening. how much could have fueled this year? rich: we ended the fourth quarter with record level many campaigns. and this is the way investors and activists are thinking and coordinating with potential buyers. they talked about improving markets ahead of what blackstone saw in the potential for the year ahead. a lot of activists chose in this for quarter is there moment to go public and stake their claim of this is what the company should do and 24 is teaching us a lot about what they think. sonali: we think you so much for your time. ftc is working to understand ai.

the companies have 45 days to respond to the inquiry and we will tell you more about that. this is bloomberg. ♪ rns. avalarahhh ahhh

sonali: this is "bloomberg markets." we are sitting at a session low for the s&p 500. applico doolittle is sure to look at the equity movers. abigail: let's start with the airlines. one thing these islands have in common, profit eats. they have beaten estimates. american airlines bent by 140 percent to put up $.29 per share. revenues were in line. the 2024 profit guide came in above estimates. delta set the tone with guidance that was below so this is quite strong.

southwest airlines also beaten a big way, but what is not loved his cost guidance. those shares are down. alaska airlines popping higher by more than 4%. revenues are in line analysts in contrast like the cost control measures. also the fact that they expect to be made whole for the january grounding. one stock going and in the opposite direction is relative to southwest airlines, humana, down 12% heading to its worst day since january 2022. their profit guidance is below the lowest estimates, some analysts saying it is the worst case scenario for 2024. they pulled the evidence for 2025. last year, there was a surge of people during procedures and other medical procedures. that is weighing on expenses. the government more strict with members many policies, not good news for humana.

sonali, we had breaking news the ftc has launched an inquiry into some of the big tech companies relative to generative ai. alphabet, amazon, microsoft, they are schlepping pass to request for information regarding investments and partnerships on generative ai. we have all-time highs here. sonali: fascinating. we will keep an eye on that. turning to the housing market, u.s. december sales, lower mortgage rates bringing buyers back to the market. i spoke with john gray on the current state of the real estate market. take a listen. >> we are benefiting from this regime shift. as we move from this rising cost of capital environment which we saw under the fed for the last couple of years into an environment where as inflation comes in, the fed's easing, that leads to a virtuous cycle for

our business. equity markets open up, debt costs to capital comes down, ipo's occur, m&a activity picks up. that is very positive for our business in terms of acceleration. sonali: a lot of influence came in the credit space. there are investors who are worried that perhaps private credit is approaching bubble territory. the question becomes are there enough opportunities to prudently push the money to work -- put the money to work? >> when you talk about a bubble in credit, what i like to look at is how much risk is there. when you look at the loans originating in direct lending, on average today there are about 40% loan to value. that is almost half of what they were back in 2006 to 2007 period when we had a bubble. default rates in credit, noninvestment grade borrowers

are less than 30 basis points. we see a very healthy market out there. what would you expect is transaction activity will pick up and folks like us in the private credit space are in a great position to deliver for borrowers. if you think about what we do, we make loans to companies and hold them, either on behalf of our pension climbed -- pension fund clients, individual investors, or investment grade for our insurance companies. we can deliver certainty to borrowers. that is taking more share. i think what we are seeing is a structural shift toward private credit. it does not mean we are seeing excesses buildup in the system. the fundamentals in terms of loan to value, credit quality, still remain strong. sonali: how do you feel about the opportunity for m&a? you mentioned deals coming back, but the reality is we have only

seen it in drips and dreads. how fast you see yourself putting dry powder to work? >> our expectation is we will see a pickup. early fourth quarter, you see signs of that. our lending area saw more than a doubling in terms of new loans we were making. if you look in our private equity area, we have been working on these transactions a long time. in the last six weeks we announced six deals across the u.s. and europe. many in sectors we like, digital marketplaces, enterprise software, energy transition. in real estate, we also saw a pickup in activity. privatization, a big distressed loan portfolio. we are seeing a pickup. it does often take a bit of time but things are starting to loosen. this feels for m&a, a bit of an inflection point. sonali: that was part of my conversation with jonathan gray,

blackstone president and coo. joining me to talk more is patrick clark who is out with a pretty incredible story. whether you are a private equity giant or not, squatters can be pretty frustrating if you are owning property. what are you saying and why is this trend going to such an extreme? patrick: squatters have become a bigger problem for single-family landlords broadly speaking, including large institutions and others. they have a couple of issues. over the last few years, particularly during the period the, they started letting people let themselves into homes to look at them. you can pop in a code and look around. that has created availability. there are also scammers that

come after you for anything. they figured out they can rip a listed listing of the web and put it on their own website and you come to them that give them money and then all of a sudden there is a family who think they rented this house. they are living at it and the red loner comes to the family and says this is my house. now what happens? sonali: let's talk about the bigger picture. cerberus and starbird are getting impacted, but you can boil it out to institutional homeownership in america. how is that playing out? patrick: i think this trend has increased in a period where we are at the tail end of the period where these firms were by comes really fast and in some cases faster than they can fix them up and read them out. at this point they barely buying homes. the thing people used to worry a lot about which was wall street coming in and looking at a for-sale sign and being able to

bid more or faster than a regular homebuyer, that is not happening. the interest rate they have to pay to buy those homes are too high to make the rental revenue they get make a lot of sense. it has slowed down. there was an interesting deal last week. blackstone came in and bought a toronto-based landlord which owns 30,000 homes, mostly across the sun belt. may be the first indication things will pick up. sonali: the other thing jong-un mentioned was the real estate values, maybe starting to bottom. it begs the question of what does the trend upward start to look like? >> -- patrick: you have to divide real estate into different food groups. in residential, there certainly could be companies that own a lot of houses or apartments that have reasons why they are forced sellers.

they are barred at cheap rates, their loans were coming due, they were going to have to refinance at higher rates. even though it is cheaper in may than last may, it is still hard for them to hold on. that could be any opportunity for the blackstone's of the world who have all of this dry powder to come in and by. everybody has all of this dry powder. how big of a dip is there going to be. everyone is ready to pay a lot. sonali: world awash with capital. next, we will talk about tesla. the shares continue to drop after a lower growth rate for the company. stick with us. this is bloomberg. [indiscernible] -- this is bloomberg. ♪ ch. introducing j.p. morgan personal advisors. hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals

okay, great. j.p. morgan wealth management.

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sonali: this is "bloomberg markets." it is time for this top of the hour, tesla. shares are continuing their decline after the 2024 guidance failed to soothe investors concerns. they are talking about slowing demand and caroline hyde joints me with the details. >> slowing volumes as well. sonali: bringing destocked out to the lowest level since july. what are investors holding on to hear? caroline: not much. adam at morgan stanley said this is the least detailed forward-looking guidance you have ever gotten from tesla. they are not giving you how much they're going to ramp in terms of volume. they always said 50% when they didn't live up to it. they are signaling they cannot

keep cutting the prices and terms of soothing volume concerns. it is not going to satiate, we are not going to stimulate demand. that is coming to an end. this is signaling you have to get used to lower for a little longer when it comes to tesla which is important because this is an important stock when it looks -- when you look at the magnificent seven. people are worried about volumes, worried about ram, and worried about when they will see a catalyst for change. elon musk is trying to signal it for the moment. sonali: he is signaling he wants more of a stake in the company. explain what is happening relative to elon musk's control relative to other investors. caroline: he tried to say this is good to be a lale, i am about to give you a next-generation car. we are going to have the rent that up. so for now we are going to curtail it on volumes, put up with less profitability.

think of arc, their big bet on why this stock could be worth $2000 in 2027 is robotaxis. they need a i, robotics as well -- ai, robotics as well. he has to share a lot of his shares to afford x which missy has 30% in the overall company. he wants 25% in terms of voting shares. he says if he doesn't get it, he is going to take the know-how and go elsewhere. what does that mean of the of tesla going forward? at the moment, investors are not taking this seriously. they think he is talking more than actual reality. this is something that is a real concern, particularly for some of those more active investors. sonali: a ton of uncertainty. thank you so much for your time. we are going to discuss ev competition overall with jessica

caldwell, director of industry analysis at edmonds. when you saw the guidance today, how does that fair for the industry? jessica: it wasn't too surprising because we know what is going on. they hit a low. . they have dropped prices all of 2023. you don't have anything new people can buy. the vehicle, late 2025 production. sort of is like, where does this leave us for the next few years? it is hard to get excited about vehicles that have been up for years and tv market is desperate to have that excitement. it had a lot of momentum a few years ago, but it feels like it is dulling, especially with negative headlines. it is getting consumers pause and they are wondering what is going on. sonali: i want to play some sound from dan leavy of barclays

who started to talk about pressures in the industry. >> what has happened in the u.s. is legacy automakers have old back on your term ev operations because they don't have the cost structure tesla has. in regard to the u.s., they are pretty well-positioned, albeit if you look in the u.s. at tesla comparing to combustion vehicles, there are some -- how to navigate through. sonali: talk about who is best positioned to make it through that pressure? jessica: that is a tough one. you have the traditional legacy companies balancing the books with these traditional combustion vehicles and planning for the future. in terms of what is going to happen in the future, it is pretty much up for grabs. there is not a sisterly one company doing so well, they are all hitting roadblocks. general orders had to -- general

motors had to stop selling the laser. they had delays for equinox and silverado. they are working to the kinks of a new technology which is expected. we are interested to see what is going on, so interested in moving the needle that we don't recognize that making that leap is challenging for these automakers. i don't think anybody's out of the game and no one is necessarily running so far ahead of the rest that no one has time to catch up. it is balancing the books. sonali: how do you feel about the information you are getting and what you might want to know about tesla? there has been talk about the lack of specifics on certain aspects. there was lack of clarity around the relationship to hertz, freezing temperatures. what do you want to know? jessica: sometimes you sit on the tesla call and you wonder what is happening here.

that was not the case because it felt like everything was definitely vague. they cannot give us the specifics we need. long-term they're moving into robotics, ai, robotaxis. there is not a lot of clarity around that. we do know a next-generation vehicle that is cheaper that could hit the mass market is important to tesla. the fact that he is giving us some information but not a lot is probably not great. we have to live the next few years with delivering the majority of the volume, profitability. how do you navigate through that ? they have been in growth mode and it is going to look different. those were a lot of the questions and concerns that will,. sonali: how do you think about the tesla path forward in terms of market share? their reduction in share in

perspective and how elon musk is supposed to navigate that. jessica: in 2019 they had the majority of share. in 2023, they were about 50%. in a way it is good because you are seeing more diversity which is going to help the ev sector overall. the more brands get into the game, the more consumers have access which is going to grow the sector -- grow the sector. tesla, they still want a big piece of that pie. it really is about the nexgen vehicle because we know cyber truck is more of a niche vehicle. how do they keep the three and the why attractive? they mentioned a model three refresh. for most consumers, they will not take a note of it. even though the vehicle may be better, it is not necessarily going to stimulate demand. it is navigating those few years before we get to this holy grail of the next gen vehicle. sonali: thank you for your time and perspective.

that is the executive director at edmunds. next, more details on the ftc inquiry and to generate ai investments. that is next. this is bloomberg. ♪

sonali: this is "bloomberg markets and i am --"bloomberg markets" and i'm sonali basak.

the ftc is looking to understand the impact of generative ai investments. is sent orders to alphabet, amazon, microsoft, and more. they have 45 days to respond to the inquiry. joining us is jackie duval us. when you look at the companies being asked to respond, you have big and small. technology giants and new upstarts, how are the impacted by this? jackie: you have the tech giants that have a big stake in this ai race. microsoft's relationship with openai, amazon and alphabet who backed a smaller startup. the ftc is asking for two things, they want to understand how these companies are intertwined. they might not have had a merger or acquisition deal, but the

stakes are large in the billions of dollars and the ftc was to understand how decisions are made and what is the extent of your influence. they are asking for documents that outline this relationship and what that means for when these companies are making decisions on products that have a big income -- big impact on consumers. you have the u.s. coming into this in a delayed way. you have the u.k. competition market authority who launched their own inquiry in december. he had eu regulators saying these partnerships specifically microsoft and openai coming under potentially eu merger rules and investigating that. the ftc is a little bit late to this. nonetheless, this was sparked by the openai turmoil that saw the elster and rehiring of sam allman. sonali: if investors have to

gauge what the impact would be for them, how damaging can some of these closer looks be ultimately? jackie: one of the potential outcomes is these relationships have to be broken up in a way. what form that it takes is yet to be seen but these are freighted large stakes and for companies -- these are fairly large stakes and for companies that have a leading vision in ai , that may have outcomes for the products they already have their technology embedded in them, namely microsoft which uses chatgpt in a number of its tools. sonali: thank you for giving context to large headlines. s&p still up on the day, not as high as it was flying yesterday. tighter earnings and we are watching the reaction from them all. we are keeping an eye on these markets from you. a lot of volatility in recent commodities. stick with us. i'm sonali basak.

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