♪ sonali: welcome to bloomberg markets. treasury yields are rising and stocks are falling as beneficial doubled down the message that they are not ready to go victory over inflation yet and it puts rates on hold for longer. you have the s&p 500 0.3% down, trying to snap the to date winning streak it had on the heels of record earnings we've seen, results that have been expectations on all of wall street. the nasdaq 100 still down about

0.2% on the day. evenmeta and amazon are down on the day. treasuries are still under pressure after that jerome powell 60 minutes interview. the two year yield now is up about eight basis points on the day, trying to snap the 400 45 level in the 10 year yield is up to a stunning degree, 12 basis points higher on the day. that came after some short moves friday as well. we will talk about mid-day movers on the equity side, cal are better -- caterpillar, tyson foods. caterpillar is up about 1.9% on the day in tyson up another 0.8 percent, beating expectations on results but donald we will talk about later with concerns about their presence in the middle east and some slowness on the back of the geopolitical tensions. we will also take a look at

novartis, up more than 3.6%. it agreed to buy three manufacturing plants 411 billion dollars to meet the manufacturing needs. estee lauder is up on most 12% on the day, the biggest surge since 2011 after it says it will cut as many as 3000 physicians as part of a restructuring -- 3000 positions as part of a restructuring plan. we have to talk about the divergence particularly in the magnificent seven stocks. meta is a clear outlier particularly after the gains you've seen more recently while tesla has diverged even more. this is a trend we've slowly seen through 2023 but we are really seeing that become more pronounced. some investors and analyst are saying maybe there should be new members of that magnificent seven. we will talk to ellenhayson at fln putnam.

if you think about just how much you see tesla falling away from the back with meta rising in other names getting more love this year, how do you think about the tech giants going into 2024? >> as we look into 2024, we think it will be very much company specific and not the magnificent seven as it was last year. as tolstoy said so long ago, happy families are all along but each unhappy family is unhappy in its own way and i think that applied to the magnificent seven. everything was great last year and they all did great and they moved in lockstep in this year, you are seeing things diverge. meta had a norma's mood last week after strong earnings. on top of that, the institution of a dividend acting like a so-called grown-up company now. tesla with mr. musk continuing to be somewhat unpredictable and the volumes and pricing for this

year for cars looking more problematic. i think it's a stock pickers market amongst the magnificent seven. some are certainly doing better like not only meta but also amazon and microsoft. in some are little softer like tesla and apple as well. sonali: how do you think about the earnings story as it compares to the interest rate story? use of massive gains of the end of last year when rates started to cool. only recently after a hot economic data reports and federal reserve speakers one after another really wiping away those near-term expectations for air cuts. what does this mean for valuations in the stock market of rates are going to stay a little higher than the market expected. >> higher rates are negative or stocks because you are discounting the dividends and cash flows at a higher rate. i think fed officials had tried

pretty hard but maybe not hard enough throughout the month of january to put a damper on the market because after the mid-december press conference, it was off to the races. people were pricing in significant cuts like five or six last year. fed officials tried to tamp that down but they were ineffective until the press conference last week and even more so with recent speakers and chair powell on 60 minutes last night saying not so fast. i think with rates higher for longer here, doesn't look like we will get a cut to the second half if even then do that to the fed's desire to remain a political. that puts the brakes on valuations especially those that got extended last year. i think what you will see this year is rotation under the surface. the averages may not be that exciting this year, high single digit returns but you will see that broaden into some smaller cap areas and some value areas

because the largest companies just got very expensive and the rise in interest rates is going to be part of what enables the market to broaden out. sonali: the small-cap story, you think about the russell 2000 relatively unloved, this has been the story that investors have been banking on for many months now. we just haven't seen it at scale. when does it start to pay off? >> i think and small-cap, you need to pay attention to quality. rather than look at the russell 2000 which has some unprofitable companies that have negative earnings, it makes more sense to look at the s&p 600 and stewing a little better. it's a higher small-cap measure. generally, small caps do best early in an economic cycle. the key to this is whether or not the fed can stick the so-called soft landing such that it becomes clear that we are about to re-accelerate into a new accelerating economic cycle.

we will see that in the gdp forecast for 2025. when it goes up, that's when you will see smoke about perform because everyone knows it's cheap at how to you know when to get in and it tends to be an early cycle space to have to look for breadth and overall economic acceleration for small caps to do well. sonali: top picks for the rest of this year? >> we really like semiconductors, not only nvidia but others as well. the inventory cycle has corrected and that's over area a lot of those stocks look very interesting whether it's broadcom or lamb as well as semiconductor stocks. we also like a few unloved industrials v likeeralto that has water and process quality. that you do really well. we think it's undercover but we think it is opportunity to go double digits over the next couple of years. sonali: chief market strategist at fl putnam.

austin goolsby reiterated he like to see more of the favorable inflation data publishing last couple of months but he didn't rule out the potential for an interest rate cut in march. he spoke exclusively on bloomberg markets. >> it feels like the economy has been quite strong on the growth front, you've got big jobs numbers and big gdp numbers better than expected. at the same time, we've had inflation better than expected as well. if you look over the last seven months, we got seven months of really quite good inflation reports right around or even below the fed's target. if we just keep getting more data like what we have got, we are, i believe we are will be on the path to normalization. >> mike: i understand you don't want to tell yourself down but is there much of a chance of a march move? some are thinking the markets

will go 18% and something gets high. >> all we need to do is keep getting information like what we've been getting for the last seven months where inflation on a flow basis is absolutely under control and this is in the range of our fed target. if we keep getting strong quantity numbers, that is to say jobs numbers, gdp numbers, growth numbers while inflation goes down, in the conventional view, that's not really supposed to happen. we would have to be entertaining the possibility that we are entering a period like the mid to late 90's where you had productivity growth faster than expected, faster than trend and opens up new possibilities. mike: powell suggested that rate cuts would likely be a quarter

or maybe a half of a percentage point at a time. was i have a percentage point cut discussed at the meeting? -- was a half percentage point cut discussed at the meeting? >> we don't report in the meeting until the transcript comes out. our standard way to think of it from the fomc is somewhat like what's in the summary of economic projections, the sep was comes out every quarter the last time that came out in december, you saw the median member of the fomc felt there would be three rate cuts ie, 75 basis points for 2024. mike: is there a situation other than a recession where you would consider a 50 basis point cut? >> i just think if you get the data and you respond to the

data, in its totality, i don't think it makes sense to speculate about hypotheticals of what would happen to make the rate cuts be different than what they have been in the past. sonali: that was chicago fed president austin goolsby and michael mckee. coming up next, we will talk about the companies announcing cost-cutting efforts and a plan to please investors on wall street. stick with us, this is bloomberg. ♪ an ever-changing landscape comes with challenges. from our vantage point, we see opportunities. as a top-ten real estate manager, we harness the power of a 360° perspective, delivering local insights and global expertise

across public and private equity and debt. our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. principal asset management. actively invested.

chances of a plane crash -- 1 in 11 million. you're not gonna finish those salted nuts, right? never waking up from anesthesia -- 1 in 185,000. validate your parking or just see how it goes? what? why stress about the unlikely? does a killer clown worry about being struck by lightning -while winning the lottery? -sure don't. but your odds of falling victim to online crime are 1 in 4. you need aura. you, your family, all protected from scary online stuff. [ laughs ] protect everything your family does online with aura. it's easy to get lost in investment research. 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.

♪ sonali: this is bloomberg markets. it's time for the stock of the hour. mcdonald's sales missed investor

expectations in the fourth quarter heard in part by the conflict a middle east in which nations had boycotted the brand, muslim nations over the perceived stance on gaza. comparable sales were the slowest since the fourth quarter of 2020. explain how mcdonald's is caught in the crosshairs here and whether some of the impacts in the middle east have been surprising in terms of the revenue they been able to take in. >> mcdonald's got caught in the crossfire here because of boycotts pretty early in the war after some franchisees in israel posted photos of them giving meals to the country's army. that elicited a pretty strong response from muslim countries. when this first came out, there were a lot of questions about how significant the impact would be. mcdonald's is diversified geographically. the segment of the middle east

as part of his only 10% of revenue. we saw this quarter that this was big enough to drag growth down. sales for that segment including the middle east only rose 0.7% and it was a big miss compared to what analysts were expecting. sonali: it's not just in the middle east that mcdonald's was impacted by the conflict in the backlash. france for example felt an impact as well according to headlines coming out of the results. where else are you seeing the pain? >> that was really interesting. france is part of a different market segment altogether that mostly comprised developed countries and the rest of the countries did pretty well as far as mcdonald's but they pointed out france is one of the countries that suffered from these boycotts and they cited the country's large muslim population. that's about what mcdonald's had today but other companies like starbucks appointed to the impact beyond the middle east.

starbucks said stores in the u.s. actually suffered from the boycotts. sonali: what about china? how much of an impact are they seeing their into what extent will things turn around for mcdonald's? >> companies are still citing a slow environment in china. this quarter, the focus was more on the middle east, the trends in the u.s. and other international markets. if you look overall at mcdonald's same-store sales, they have accelerated quite a bit over the past two quarters. mcdonald's had been benefiting from outside growth because of the past few years because of their rebound from covid. they raise prices meaningfully to offset inflation and they are taking share from full-service restaurants. they are actually saying the trends are normalizing a little bit area that was more of the conversation we were's -- we are seeing today on the call. sonali: you are certainly seeing it in the stock, thank you for

your time. a number of firms announced cost-cutting measures including snap, estee lauder and socgen. these amount to job cuts. abigail doolittle has more. abigail: we take a look at the shares of stockton and snapped, you will see declines with socgen down 2%, they are cutting 5% of their workforce at their headquarters in europe and summoned the -- analysts are cheering this ahead of earnings this week. snap is down 3.2%. earlier this morning, they announced they are cutting 10% of the work force having to do with a slump in ad sales. there have been more than 10,000 cuts to technology companies so far this year which is amazing given how well stocks have performed but perhaps taking it off of the bottom line. in contrast, estee lauder at the highs of 19%. it's best day ever since the company ipo's back in 1995. it's the best day since 2019 and

they are cutting about 5% of the workforce and one analyst said the quarter that was reported beat but they also have cut the guidance for the a time in a row but this stands out as investors want to change. we look at the shares of stock in an estee lauder and snap over the past couple of years, these companies are in bear markets particular he estee lauder and snap. they are down more than 50%, big declines. sonali: we thank you. coming up, we will talk up -- talking about m.i.t. requiring standardized testing for applicants reversing a recent trend. that's a big story on the wall street beat up next. this is bloomberg. ♪

[busy hospital background sounds] this healthcare network uses crowdstrike to defend against cyber attacks and protect patient information. but what if they didn't? [ominous background sounds] this is what it feels like when cyber criminals breach your network. don't risk the health of your business. crowdstrike. we stop breaches. when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

personalized financial advice from ameriprise can do more than help you reach your goals. -you can make this work. -we can make this work. it can help you reach them with confidence. no wonder more than 9 out of 10 of our clients are likely to recommend us. ameriprise financial. advice worth talking about.

sonali: this is bloomberg markets. we are going to talk a little about a big story in media, byron allen said he's begun talks with paramount global on his $14.3 billion offer to acquire the film and tv giants. we know he has been very active in the deal and media space. he is in talks with the banks frequently for a lot of the financing efforts. this is a key asset in the paramount world. we will keep an eye on that deal for you. it's time now for the wall street beat, the ivy league universities are now changing their tune on standardized testing. dartmouth is following m.i.t. in requiring standardized testing for applicants and it's reigniting a debate over whether testing helps or hurts low income students.

dartmouth says the move will attract more diverse candidates and janetlorin covers education and joins me now. how do people generally feel about this move? >> if you are a high school student, you're probably not happy and if you are the parent of a high school student, you're probably equally upset. if you talk to students who are attending top suburban high schools and private high schools, they probably already been taking the test more than once and submitting their scores they have the option not to submit them before but i think the advice has always been if you have a really good test score, always submitted. it can't hurt you if you've done well but what if you are not a great test-taker? when tests were optional as they had been during the pandemic, people would submit test scores and even as they started moving toward post-pandemic a life, those who submitted test scores were likely very high. so the average score of those

with a test is really high. it looks like it's impossible to get into these schools with high test scores because only the top scores are getting through. sonali: it does help broad -- is it the truth that it helps broaden the talent pool? >> for a long time, we've heard the test scores really favor wealthy kids because they have the time and can take more testing, test prep and at the same time, you hear from m.i.t. and dartmouth that it will help a lower income students especially if they can view it in the context of your high school. let's say the average score is not so terrific at your high school but you score extremely high even though it may be lower than the median score at dartmouth or m.i.t.. it gives the colleges a little more information that this student is performing well at the high school level. sonali: what does it mean for other schools?

will other universities follow suit and what about harvard? there is a lot else going on there. are they expected to follow suit? >> it's not clear what other schools will do. everybody wants to do their own evaluation and make a decision. harvard said in 2021 that they would not requiring tests through just test scores for three years. we can say is safe to listen to what they said several years ago. they had a big affirmative action case where they were not allowed to use race in admissions which came down in june. they will not have test scores, they will not have data to look at how race is having a factor in admissions. they are likely to stick where they are but it's not clear for the other schools. sonali: talking about harvard, talk about the new top governing board with the addition of executives formally of kkr. does this change the scout -- the calculus for the school?

>> they announced two new members last night. harvard as we know has been embroiled in tons of controversy for the last few months. they are facing inquiries into congressional committees. we heard about the state of massachusetts looking to tax its endowment. it's clear that they are having some governance issues and having two people who have run big public companies and that will help. sonali: we thank you for your time and there is a lot going on in education. let's take a quick check on the markets. we are still watching the s&p 500 still in the red on the day and all that red on the screen within s&p down about 0.3% and the nasdaq 100 down about 0.2%. some big tech names are still on the decline on the day after some massive rises we saw on friday with yields the real story -- the 10 year is up 12 basis points on the day in the

two-year is up about eight basis points on the day after that stunning surgery so late friday. that does it for bloomberg markets. this is bloomberg. ♪ old school hard work meets bold new thinking. to help you see untapped possibilities and relentlessly work with you to make them real.

you can make money the hard way as a bullfighter and relentlessly or a human cannonball... or save money the easy way, with xfinity mobile. existing customers can get a free line of our most popular unlimited plan for a year! not only will you save hundreds but you'll also be joining millions who have connected to america's most reliable 5g network. sure is a lot safer than becoming a stuntman for money. get a free line of unlimited intro for a year when you buy one unlimited line. plus, get the new samsung galaxy s24 on us.

>> from the world of politics, to the world of business. this is "balance of power."