>> we are 30 minutes into the trading day. here are the top stories we are following. stocks under pressure as heavy hitters ike alphabet and microsoft failed to live up to the ai hype. we will break down what went wrong and look ahead to amazon and meta. first, the fed decides. hire for longer ends in march. we will see what jerome powell has to say. and the ipo outlook on the heels of fourth-quarter earnings. that is coming up.

i am katie garfield in new york. welcome to bloomberg markets. you take a look at these markets and a sea of red behind me. the s&p 500 is down by .7%. some of those big tech names took the stage last night and did not live up to the hype. you are seeing that in the nasdaq 100, off by 1.2%. it gets worse as you go down because we have the philadelphia semiconductor index off by about 1.4%. we heard from amd yesterday that had been the second-best performer in the index this year. not anymore. the two year yield currently down 12 basis points. we have the fed decision coming up in a few hours. it seems like people are recalibrating their bets right

now. it has been a disappointing earnings kickoff for big tech. google and microsoft are down following yesterday's results as both companies struggle to meet expectations when it comes to ai. it feels like for microsoft it is an interesting story because they did say that ai demand did help some of the revenue growth in the cloud but that does not seem like it is enough. jackie: one big factor here is they were reaching all-time highs coming into the report, so expectations were really high for microsoft. they did meet on revenue figures and an overall healthy report. the main driver of sales was azure, the cloud computing giant in the company, which sought revenue growth of 30% and six percentage points of this came from ai related services. the fact the company disclosed this figure for the second quarter in a row is giving

investors some confidence that evidence of these ai bets actually paying off are there. however, it was not exactly enough because expectations were high. we did not get much on those office 36 five copilot figures. it is too early to tell, but investors wanted more to see what ai could contribute. >> it was not good enough. let's take a look at alphabet because shares currently off by about 5.8%. this feels less about ai, more about concerns of what is going on. jackie: the core search business drew a lot of concern because it is the main financial engine. it is steady cash that comes in. to see some kind of weakness here -- it was a narrow miss. they reported revenue of about

48 billion. investors were expecting a little bit about that, but still any weakness in its core business is a cause for concern. capital expenditures were increased by $2.9 billion. cash on hand dropped by $9 billion, so you have a lot of outflows going into ai investments. to have that weakness drew a lot of concern. katie: great roundup. let's get to the broader markets now with the chief market strategist and portfolio manager . it feels like a little bit of a rude awakening. it seems like we are seeing the flipside of that narrow rally we have seen. >> i think that is right. as you look at january, you see the narrow market that we saw for most of last year up until november and december, that

narrow market had returned in january and we are seeing those large stocks had gotten ahead of themselves, whether it was google, who had a fine quarter but not as good as expected -- microsoft stocks only down a little bit but it tells you the narrow market may broaden again as we go toward the rest of earnings season through the rest of the first quarter. katie: how do you treat a day like this? i see you are fully invested in equities at the moment. when you see that developing now, is this something to lean into? ellen: yes. taking a big step back, our expectation is the economy is going to be fine this year and corporate earnings are going to be fine, probably high single-digit growth and probably something like a normal year at

which would be high single-digit growth. if we are down a percent or two, that is fine but we would be leaning into stocks that are weak if they have strong fundamental underlying cash flows and positioning at a stock like google or alphabet or microsoft we would put into that category. we do not think that every stock is worth buying. we think you need to be selective but weakness like this stocks that are overbought, that is the opportunity to add to those names and we are looking to go overweight equities selectively. katie: if it is a deterioration, that is a different story, but talk to us about earnings season. it is early. only about a fourth companies have reported thus far. we have seen some of the biggest names take the stage. how would you say it is going now relative to your expectations? ellen: earnings are a little bit

weaker than i was hoping for. if you look at it on a year-over-year basis, the earnings growth rate has been negative. we would like to see that turn positive. we think it will as the rest of earnings unfolds, but they have not been as large. responses to the surprises if you dig down, the responses have been mixed. a surprise is not necessarily leading to stock up performance the day. we think a lot of stocks were ahead of themselves and that is why you are seeing this muted response. the rest of earnings season, we are watching for guidance for the rest of the year and in q1 and q2, -- we think q1 and q2 could look strong. it is not going to be until

later in the year that it gets tough. katie: it feels like expectations were high. it helps put into perspective the broad rally we saw at the end of 2023. i want to talk about the composition of the rally. we talked about big tech and now the flipside of that. when it comes to the broadening out, where do you think that is going to come from? ellen: we think you need to be selective, but the broadening out is because those other areas of the market are inexpensive. if we look at small caps, they are six or eight points cheaper depending on what metric you are looking at. international stocks are cheaper and value stocks are cheaper. it is true the market is pulling back today. that is really a lot of the largest names. there are inexpensive companies out there that are going to do

fine and i think that valuation discrepancy is what we can see narrowing and driving this broadening of the market through the rest of earnings season. katie: talk to me about valuation because people have made the point to me, look at these undervalued companies. in the next breath, they will say valuation is a terrible timing tool, so how do you use that information? ellen: great question. if something is undervalued, that means it got undervalued in the first place, which meant if you are only looking at valuation you would have been wrong as it got cheaper. how do you determine that? valuation tells you what it is likely worth and where it can go to, but we also rely on technicals to look at the timing. we look at relative strength, a number of different metrics. we see that mid-cap stocks look better but small-cap stocks are

struggling, so as we brought in the portfolios we would go to mid-cap first because those look better set up at the moment than the small-cap stocks do. katie: we are going to talk about the fed in a couple minutes, but let's look at what is moving underneath the surface at the individual stock level. i really want to talk about elon musk. >> we have to start with elon musk and tesla. a 1% move is actually outperforming, but this is coming after news that the judge voided a $55 billion pay package. we saw this yesterday evening. stocks started down a couple percentage points. why is this down? if the news should be good for the balance sheet? tesla is an elon musk proxy, so anything perceived as negative for him could mean reallocating

exposure across the so-called magnificent seven. >> i feel like tesla stock has turned into a proxy pull for elon musk, sometimes with spacex. it feels like a catch all at this point. >> it catches everything. when you see any kind of update, we do see some across for what currently still is the richest's human being. how this plays into that will be interesting. >> let's talk about amd. >> earnings beat expectations. looking ahead, all about forecast, setting high bars. not meeting expectations, that is why you are seeing shares underperforming. that has been the big trend from these bigger technology companies. one of the best performers on

the last year and a half, high expectations can lead to some profit-taking. katie: you are seeing that enthusiasm drain out. what is going on with boeing? >> earnings beat expectations. the company talks about safety and expectations. the company says it is hard to forecast if you do not know what regulators want from you, so you see a 3.1% rally today, recouping some losses over the last few days. this crisis, the one headline that did stand out i do not want to misquote the ceo. if bolts are not in place, it is a miss. katie: i agree. thank you for that round up. coming up on this program, media mogul byron allen offering to buy outstanding shares of

paramount global. more on the potential media takeover next. we are looking at live images of big tech ceos on capitol hill testifying before the senate judiciary committee on protecting children online. >> we have a product that is killing people. when we had cigarettes killing people, we did something about it, maybe not enough. we have the atf. nothing here. there's not a thing anybody can do about it. ♪

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why not give your wealth a second look? book your free meeting today at creativeplanning.com. creative planning -- a richer way to wealth. katie: we are keeping an eye on shares of paramount global after it received a buyout offer from media mogul byron allen.

offering $28.58 each for voting shares of paramount, a 50% premium to recent trading levels. for more on the offer reported by bloomberg news, $14.3 billion bid. how would byron allen pay for this? >> that is the biggest question. it is good there is finally a formal offer on the table. we know numerous investors have been circling this asset for many months now but i think the biggest question for byron allen and that most investigators are grappling with is how are they going to pay for this? they are looking at an asset that has over $15 billion in debt and while byron allen is a wealthy individual financing this is going to be a challenge. katie: as you point out in your report this morning, you have

other entities. all expressing interest here. how viable is paramount with that as an m&a target? >> is going to be difficult for anybody, especially for a buyer that does not have deep pockets. we have seen these suitors go over -- after paramount. sky dance was not looking at buying paramount outright but acquiring a controlling stake in national amusements, the parent of paramount with about 80% of voting stock in paramount. they are trying to do different things. we only heard of interest from warner bros. discovery, nothing formal. i think this bid really forces serious suitors to come out and show their cards.

katie: what is so attractive about paramount? >> paramount has heavy exposure to the linear tv world, but some assets that are really coveted is the studio. this is one of the iconic studios in hollywood, some great franchises. has a great studio lots that could be worth upwards of $2 billion. it is some of the most beloved properties across the world and even the television studio has come up with so many heads. the studio and content are valuable. katie: it will be a fun story to watch here. thank you. let's get back to these markets and the fed decision with the chief market strategist and portfolio manager at f.l. putnam . we get the decision at 2:00 p.m.

and then jerome powell comes out and the market does another thing. what kind of jerome powell do you think we will hear from this afternoon? ellen: it almost does not matter because the market does seem to be determined to interpret whatever he says as dovish. my impression is, unless he is amazingly hawkish in his commentary, the market will take it wants to hear and it will increase the odds for cuts in march or june. i think the fed wants to rotate credibility. it wants to be a political, not perceived as making a splash in this election year. the fed will try to stay close to the center and leave options open, leave options on the table by being data-dependent. i think the market wants cuts, even after reducing expectations for cuts for this year down to five cuts, still two cuts ahead

of where the fed is, so the markets went to push him. unless you hold his ground firmly, the market is going to see what it wants to see and i do not think he wants to be political or strident so the market may get what it wants. katie: this is a market that wants rate cuts. why? i have asked this a few different times. why does it matter so much? you think about this aggressive tightening cycle. it does not seem to make too much of a difference when you look at the earnings. why are rate cut so important? do you think they will make that big of an impact? ellen: there is a big psychological impact, so we all know that long-term rates especially are what you discount your future cash flows at so all else equal higher rates means

lower valuations for bonds and stocks. the question becomes, is it an indication of what is going on in the market? if that were what it was, you would see the opposite reaction. you would see the fed is cutting rates. things must be bad. but that is not what we see. we see a market that once rates cut gradually. that adds up to two points and i think the reason is the market and investors have gotten accustomed to very low real interest rates since the great financial crisis. as someone who predates that, i think it makes sense if the fed holds its ground and rates stay higher, real rates stay higher and we sweep away these businesses built on easy money because those are not good for productivity.

katie: let's talk more about magnitude. you mentioned ideally it would be a gradual pace of these rate cuts and what still counts as normalization? if we had five to six rate cuts, would be called that normalization or is the thing that is going to cause that an economic downturn or other adverse event? ellen: that is the heart of the question the market is struggling with because that would be easy monetary policy. to a lot of market participants, that is normalization. the question is not only what the market believes but what the fed believes. there is a tug-of-war going on inside the fed where some see where we are now as restrictive. therefore, they want to get back to something more like what they would call normal but others think this is ok, maybe a little

high but not too restrictive. the press conference and speeches in the coming quarter or couple of quarters, the important thing to watch is how they are characterizing what normal is. that is the heart of the matter. i think rates are fine where they are now, but there are people who disagree and reasonable people disagree about this. katie: that is a good place to leave it. we will see today. thank you. before we had to break, here's a stop we are keeping an eye on, new york community bancorp plunging by as much as 45% after a surprise loss for the fourth quarter and cutting its dividend. this is the regional lender that purchases -- purchased deposits from signature bank last year. you can see rates plunging. still ahead, we will look at the

companies -- our social climber segment up next. this is bloomberg. ♪ there's more to business than the business you're in. if you use data, that's the privacy business. manufacturing on demand? you're talking cloud business. got a few million hyper-connected customers? digital experience business. that was fast. that's where deloitte comes in. with the right combination of talent and technology to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david.

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sure, after this. choose payroll without the pain. that's working with gusto. katie: time now for social climbers, the stocks making waves on social media. first, taylor swift's label accusing tiktok of not paying fair value for its music. the record label threatening to pull music from swift and other artists from the social media site unless you can agree to a new deal. starbucks lowering its full year sales outlook but still confident in the 2024 profit goal, saying the war between israel and hamas impacted sales in the middle east and u.s.. finally, we have h&m falling short of fourth-quarter profit expectations and the company

announced a new ceo as it tries to ward off competition from rivals. you can follow the latest company buzz on your bloomberg terminal. coming up, the second european company to pass 500 billion s market value. this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know.

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>> one hour into the day. >> we are looking at weakness today. big tech company reports have come in. the s&p and nasdaq down. up month ending on a down note.

search ad revenue for google disappointed. the stock had been priced to perfection. investors taking some off. disappointment relative to outlook for amd. some say the quarter was lackluster. we have the fed, fomc policy decision later today. jay powell's press as well. i headed today -- ahead of today, the cuts priced in our back at six. i continued divide between the fed and the street, one factor may be playing in, yields on the day, regional banks, new york community bank plunging 32%, at the lowest 40% on loan loss

provisions, weakening of credit quality. plus they cut their dividend to $.17. the worst day since october or may, depending how you look at it. the markets may be doing the fed's job. katie: a fun couple hours ahead of us. thank you. normal notice -- novo nordisk expects profits to soar, thanks to its obesity drug. >> excited about opportunity, as we see a demand for products, we will be ramping up capacity. '23, we announced 75 billion

danish krone expansion plans. we increase guidance for this year. we see more products coming in. we will produce more for the future. francine: can you give us an update on europe? you launched in six countries so far. supplies have been difficult. is this a year where europe gets more? >> the steep uptake is not just u.s. it happens in europe as well. in u.s., we have a restricted number of starter doses, in europe, to make sure patients have a good experience when they start on our products, this year, when we launch in european markets, it will be set with volume and ways to make sure

treatment can continue. we believe this is a responsible way to serve patients. that will be the model going forward. katie: the novo nordisk ceo earlier today. for more on the industry, rajesh, let's talk novo. the ceo said the company could grow 26%, operating profit up 29% at constant exchange. is that realistic? >> at the moment, if you think of the obesity market, the biggest bottleneck has been supply. novo nordisk have been scaling up supply, they've been adding

more lines. if you follow one number, on obesity -- the company controlled how much of that was put in the market. you need a starter dose to get on treatment. they are almost toppling supply of that. what does that tell you? tells me they are confident they can meet demand with supply. obviously, demand is far greater . what scaling up of the starter dose tells you is the company is confident the supply situation improved. katie: let's talk about eli lilly and the competitive

landscape. you heard novo warn of intensifying competition and usher on the price of obesity and diabetes drugs. price war? rajesh: it's easy to say, there are two players and there will be a war. reality is if you think of intensifying competition, bigger picture is almost every other pharma company owns a share. look at the market consensus. people think obesity market is between $85 billion to $100 billion potential. others are not going to sit and watch. it was launched at a price point lower because dosing is smaller. that's the lift. when you look at the real first

price, i imagine the differential is unlikely to be huge. that's not going to be the main driver. at the moment, think of the number of patients on anti-obesity drugs in the u.s., less than one million, and if you look at the prevalence of obesity, it is far greater. supply is far shorter than demand. even with pure demand and supply, you would have inflation. there is a framework of insurance in place. katie: talk about your price target. $850 currently, novo nordisk trading all-time high around $770. what's the catalyst to get to that level? rajesh: at the moment, by 2030, the market thinks, last year's

$33.7 billion revenue novo nordisk, gets to $35 billion. what we argued about novo, obesity is a multi-year upgrade cycle story. if we see more confidence in supply -- katie: up against the clock. got to leave it. coming up, the landscaper ipo's. ♪ [robot sounds] [car revs] [cars honking] hey, lexus show alternate routes. ♪♪ [drone sounds] ♪♪ [drone crashes] ♪♪

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david: i'm delighted to say we have a dena friedman -- idina

friedman with us. idina: good to be here. >> you exceeded expectations across the board but at the same time it is different because you are adding a new component. there are two aspects of nasdaq. one is traditional. the other is your solutions business. they seem like different growth patterns. idina: thank you. we are proud of the results. 7% overall growth for the quarter. essential businesses 9% growth. organic numbers. we added in the fourth quarter. the peak growth areas where the index business up 26%, the financial crime business up 25%. the overall business continues to show the power of that diversified portfolio.

our markets business, our solutions businesses. that includes data analytics, software products. when we thought about how do we grow? we are a great market operator. proud of that. markets provide liquidity, transparency and integrity. how do we partner more with clients to drive liquidity? it is not just our markets. we provide liquidity to 130 other markets. now we have a clipsos systems that gives banks the ability to put more liquidity in the system. david: let me pursue edenza for a moment. a lot of revenue coming in. how is the integration going? most deals fail not because they

are bad ideas but because integration doesn't get done. idina: it's been a great start. we closed in november. we brought the team in. we created a new model where we had both people leading the fintech division. it's now comprised of market tech, our anti-financial crime suite, which is the integrity pillar, it also includes calypso and acxiom sl. we now have a complete suite of solutions we can offer banks, brokers and exchanges around the world to manage risk, exposure and route criminals out. it's going really well. when we assess acquisitions today, we deep dive the culture. values alignment is critical to success. we've been bringing new

companies and capabilities in. we make sure we have cultural alignment. that speeds integration along. we are off to a strong start. david: when you announced the deal you emphasized the future growth opportunities. you didn't talk much about cost. now you are doing integration. are you looking at savings? adena: both. when we announced, we announced $80 million of net expense synergies. over medium to long-term, $50 million of revenue from expanding the business. we are on track on both fronts. with the expense synergies, we have a clear path. we expect to achieve that over the next two years. we have an upcoming investor day. we will provide details. it's off to the start we wanted. we have an understanding of

where we are going. david: you have a report on financial crimes for '23. $2.1 trillion globally on financial crimes. drugs and human trafficking, stunning how large that is. how much progress are you making? adena: our overall anti-financial crime business including surveillance for brokers and fraud and aml detection, 17%, fairfin grew 25%. this report exposes how big the problem is. three point trillion dollars in money laundering and another half trillion dollars in fraud. thanks cannot solve this -- banks cannot solve this along. what happens between banks? how can you use data consortia

to route the problem out and partner with the public sector. law enforcement. how do we make sure wheels are working as effectively as possible between banks and the public? varathan does specific work across fraud and aml. it's a big grower. david: nasdaq in terms of financial crime, compliance, what about cyberattacks? we had another one last week. the banks are struggling. adena: that's abroad challenge every industry has. you have to stay extra vigilant. we do a lot in our business to protect systems. this is not a problem for our i.t. team. this is a problem for every employee to solve.

culture, people, process, systems across the company protecting our markets and systems. in general, we focus on that. where we help within anti-financial crime, some portion of fraud is through cyberattacks. the criminals will get in by hacking in. we help the banks find that and make sure the victim is protected over time. that is our role. david: thank you. adena of nasdaq. ♪

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katie: breaking news from the

boeing analyst call, happening now. dave calhoun "we caused the problem behind the alaska air blowout," grappling with a string of quality issues with planes. boeing shares on the one day up 4.6%. shareholders taking comfort in what dave calhoun had to say. alphabet, shares slumping now after the giant reported softer add revenue than expected. evelyn mitchell wolf, let's talk more about that core search business. revenue was soft but it didn't feel that soft. is this overreaction? evelyn: it wasn't that soft. i don't know that it is an

overreaction. google's business model is advertising heavy so when there is perceived weakness or volatility, it is a big deal. all that said, total ad revenue didn't miss by much. it did grow slower than we expected but search grew faster. youtube grew faster. overall, this was a decent report. katie: on ad spending, is there anything to extrapolate to other social companies? other companies reliant on ad spending? interest, snap both down this morning. evelyn: google is different. it's dependent on search advertising specifically. social media sites these days do

a little of that but focus heavily on display advertising, video advertising, which google dabbles in, but it's a different advertising mix. google is well-positioned relative to those companies in '24 with the deprecation of third-party cookies on the horizon, because search advertising, which accounts for half of alphabet's total revenues this quarter is served in response to a user query as opposed to behavioral information gathered through the use of third-party cookies. katie: the core search business. comparisons to microsoft, the narrative with the head start in ai, maybe that would give them an edge. take back some market share. evelyn: google is the top dog in

search advertising. we saw a flood of adoption of microsoft when it launched copilot, used to be bing chat. it didn't convert a critical mass of google users to microsoft. google still accounts for a large share of search add market. search is declining slowly over time. we include retailers like amazon and our estimates. 2024, for the first time, google will dip below 50% share of the search ad market. however, google accounts for a larger share of the nonretail search market, about two thirds.

it is still the dominant player. a lot of that has to do with convenience of using google. it's the default engine across most devices and browsers in the u.s. and globally, which is at the center of the recent landmark antitrust trial, which we are still waiting for a verdict on. google has a high ground on search advertising. katie: even that might be understatement. let's talk about cloud. you saw upbeat on revenue. maybe microsoft is playing catch-up. his alphabet playing catch-up on the cloud? evelyn: absolutely. alphabet is comfortably behind aws and microsoft azure. in terms of google cloud this

quarter, it has positive momentum. they completed its first year of profitability, which is not easy. things are looking up, especially considering how central google cloud is to google's broader ai ambitions. katie: appreciate your time. quick look at stocks hitting highs and lows today. 52-week high here after reporting fourth-quarter earnings that beat. citi getting high on the bullish call by morgan stanley. gsk upgrading its long-term outlook after a successful launch of its new rsv vaccine, good for 2.2%. new york community bancorp falling to record lows after reporting a surprise loss in the

fourth quarter and a cut to the dividend. you can see that in the chart. what a day. we continue to follow the story. coming up, bloomberg technology. ♪

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>> from the heart of innovation, money, and power collide in silicon valley and beyond, this is "bloomberg technology" with caroline hyde and ed ludlow. ♪ caroline: i am carolyn -- caroline hyde. ed: this is "bloomberg technology." caroline: microsoft, alphabet, and amd struggling to meet

expe