fargo report earnings this morning after citi brought mixed results to the markets yesterday. congresshalls -- hauls tech in. and retail sales do this morning will give us the latest read on the consumer and whether they continue to drive economic growth. welcome to "bloomberg daybreak" on this tuesday, july 16. i'm david westin, right here with lisa abramovitz. consumer very much the strong actor here. he saw a decline in lower-than-expected revenues on both the end of men banking and equity trading side. itilar to citigroup when comes to the traditional bread-and-butter markets. the consumer doing great. david: not surprising they took their estimate down.

lisa: but interestingly, they also took down their loan loss estimate, so that basically speaks to the strong consumer. the question is if wall street revenues don't pick up and trading volumes don't pick up, will it be enough to have a strong consumer to drive bank earnings going forward? david: it is not just jp morgan. it is also johnson & johnson. we got earnings from them, and they beat on earnings-per-share and revenue. $2.58,s-per-share was revenue was $22 billion. it was driven by pharmaceuticals, but most of the queries will be about the legal complications from opioids and talchis asbestos in allegation. lisa: it will be interesting how they frame that. david: we will have more on j&j's earnings later this hour

with joseph wolk, johnson & johnson's cfo. climbing a little bit. the dollar getting a bid, and to year yields up just a basis point. david: at 7:30 this morning, goldman sachs reports second-quarter earnings, followed by wells fargo at 8:00. at 8:30, the u.s. releases retail sales numbers for june. at 9:15, we get u.s. industrial production data for june. ad willk's crypto he appear before the senate banking committee for plans on libra. testifych executives before a house subcommittee on whether more needs to be done to ensure competition in the sect -- in the tech sector. we are joined by marty schenker and luke kawa.

let's go right to bank earnings and take a look at what we are looking at, particularly when it comes to trade. these are estimates for jp morgan because the numbers just came out, but basically we are looking at downgrades across the board. luke: there hasn't been a good trading environment apparently ever for wall street banks. i tend to focus less on this because i don't know what the readthrough is for the broader economy. banks have not been a market leader for the last few period.cept for a brief i wonder if all the broader market needs from banks is a signal the u.s. economy is ok, not falling off a cliff, and any hint that a second-half recovery is expected. it doesn't necessarily speak to that, but that could be more of a margin view based on what we see in the bond market. lisa: from washington's perspective, isn't this exactly what they want to see?

in other words, banks putting their money into consumers and lending more to main street, and perhaps not getting as much from what's going on on wall street? marty: i think that's exactly right, and i think that the tax cuts donald trump put through congress are reflected in these bank earnings numbers. it is really good news for the economy, and it further questions whether or not cuts by the fed are really appropriate in this environment. that the banks are still earning record profits even if they are not growing tremendously fast is still good news. david: the question is what is going on with trading, really. how could it be affecting trading in terms of uncertainty, or maybe it is just like a volatility? marty: it could be both of those things. lisa: hold on a second, though. there have been studies that show that when the federal reserve lowers rates, that dampens volatility because they

are under pending a lot of the action as they are underpinning a lot of the action -- they are underpinning a lot of the action. just i don't think you can boil it down to the fed, but certainly it's been a long time of a lack of volatility across the markets that has not been good for banks. david: later today we speak with wells fargo's chief financial officer. let's go to our second story, all to do with tech on capitol hill. one issue is the scrutiny of libra, the script of currency being proposed by facebook. this is what -- this cryptocurrency being proposed by facebook. treasuryhat secretary steven mnuchin had to say. so marty, facebook has brought all of washington together. republicans, democrats, the administration, jay powell. everyone is against cryptocurrency from facebook,

and we haven't even seen it yet. marty: i do think libra is somewhat of a stalking horse for concerns in general about facebook and what happened in the 2016 election, and there are issues about security and safety. here it is, facebook coming up with a cryptocurrency idea that causes a lot of concern on wall the world.throughout germany today said they have concerns. i do think it is a reflection of the general suspicion about the power of facebook. lisa: my favorite part of this is that everybody is railing against facebook and uniting d.c.,ody on washington, and investors don't care at all. take a look at the reaction in the market. they really didn't move that much. you can see a blip, not even. what will it take to actually create some kind of downward momentum at facebook?

luke: a lot more, i think. there was a speech a little over a month ago from the assistant doj attorney in charge of antitrust, where he more laid out a roadmap, like if i were to go after companies or if there are things i see, things like mentioning that price is not the sole determinant of anticompetitive behavior. that is jeff bezos calling out search as something that needs to be more understood, and buying out early-stage companies by very entrenched people, very entrenched companies. facebook, instagram. it is a question of whether there is the will. prettyek we had some incredible questions from congress to the fed. it seemed like the think tankers across d.c. stepped up and educated staffers in congress. i'm wondering if it gets better

this time because the last questioning for mark zuckerberg was pathetic. i think that is what people remember most from those hearings. lisa: meanwhile, it brings us to our third story because when you talk about this dissonance on wall street and main street, you look at retail sales coming out later this morning, especially in light of that consumer picture that does look rosier from the bank earnings, u.s. disposable incomes are increasing by the most since 2015. you can see there has been this sort of steady improvement in the consumer balance sheet. oft does this say in terms heading into the 2020 elections, in terms of what policies should be that the consumer continues to show incredible strength? marty: donald trump continues to beat the drum that the stock market is at records, america's economy has never been better, and the economy is a winning issue for this president going into 2020.

with the numbers coming in of retail sales today, industrial production, they are still going to be positive. there are no signs of recession looming. i think it is going to be a very positive message for the president. david: which makes it more difficult for the fed. if the consumer keeps going in the united states, it is hard to have the economy stumble. luke: it makes it somewhat more difficult. you can talk about the fed, and i think james bullard has talked about, well, we were very preemptive in raising rates. what is going to say that we will be very preemptive to cut rates to avoid a global slowdown? a lot of people in financial markets are generally happy when he fed is cutting rates, so i doubt it will be a heart of a communication -- when the fed is cutting rates, so i doubt it will be as hard of a communication issue. the case not to cut rates

i think is incredibly high. david: he all but said it in front of congress, don't you think? marty: he basically all that said we are going to cut rates. it would be an extraordinary surprise to the markets if they did not. lisa: i know, but we get strong numbers. who cares? david: the data we are dependent upon is the market data. [laughter] lisa: that's true. david: there is that little thing. lisa: bloomberg's marty schenker and luke kawa, thank you for being with us. you can find all of the charts we used and more by running gtv on your terminal. you can browse recent features and even save our charts. gtv . coming up, a mixed bag of earnings for the banks. consumer strong, investment banking not so much. strategiesick, td global-- td securities

head of fx strategy, joins us next. this is bloomberg. ♪ . ♪

viviana: this is "bloomberg daybreak." planning an union is finale to the five-year crackdown on amazon. they've ended they want to see how amazon may be unfairly using sales data to undercut smaller shops on its marketplace platform. in california, a federal judge giving a partial victory to bayer in a case involving roundup weed killer. a jury awarded $80 million to a plaintiff who alleged exposure to roundup caused cancer. the judge cut that to $25

million, but says he still found the company's behavior reprehensible. bayer inherited hundreds of roundup lawsuits when it bought monsanto. the billionaire founder of el graham says he wishes he had never crossed paths with jeffrey epstein. leslie wexner saying he was never aware of any illegal activity -- of any illegal activity. the financier has been accused of sex trafficking of minors. that is your bloomberg business flash. david: jp morgan reported second-quarter earnings a half-hour ago, and beat on earnings-per-share and revenue. their stock is down slightly, perhaps in part because trading was a bit disappointing. we welcome now alison williams, bloomberg's senior bank analyst. -- howilar to this similar is this to citi? alison: pretty similar.

the net interest margin, which is our focus in this quarter, coming in light. jp morgan guiding down. citi kept their guidance. jp morgan versus all the other bigger banks that we follow had not yet taken that down, so taking that down a bit. i don't think that should be surprising. that the last quarter yield curve can shift, and they weren't going to just lower guidance at that point based on one quick move, but things have gotten worse since then. they are basically taking it down 4% versus a prior 5% consensus. it looks like it is going to move down because they are reiterating expenses in that charge-off. lisa: it is early yet, but we have jp morgan and citigroup. is it fair to say that the narrative right now is that banks are looking increasingly like utilities going back to once they once were --

utilities, going back to what they once were, catering to consumers but not necessarily making bank on it? alison: for the banks we have a few core businesses. jp morgan is a great bellwether across those businesses. we have the consumer bank, the .nvestment bank investment banking, trading has been weak, and we continue to see that. asset management has its own. but i think the consumer will continue to gain in the narrative. it is a little more insulated from that income pressure and charge-offs, which you generally see tick up. in card tick up charge-offs this quarter. overall credit looks solid, and

a release in the reserves versus a build. david: going forward for financials generally, is there perhaps an indication in the economy more broadly that the is doing well, commercial not so well? is this reflecting that the consumer is really strong, companies are not investing as much? alison: that is a great point. we look at banks broadly as a mirror of what is going on in the u.s. economy in the world, and the u.s. economy, still healthy. consumer business, still healthy. where there is a little more uncertainty, they serve a lot of global corporations. obviously what is happening in a global macro environment, a lot more risk. we are seeing that kind of , to theto the results extent it can't come in -- it can come in and affect the u.s. rate environment. that is the concern.

lisa: is the consumer a lagging indicator here? our companies the leaders? it is a really good point, and something we will continue watching. alison, thank you so much. one thing certainly weighing on banks this year is the prospect for even lower yields ahead. this has become the consensus view. -- whatagers widely see is the chance that the consensus is wrong? joining us from toronto is mark mccormick, td securities head of microstrategy -- of fx strategy. do you think consumers are overweight on bonds? don't think so. i think fixed income is a view that the global economy is teetering. we are not in a recession, but

we are muddling along slowly. we are seeing more downside than upside misses. especially with the overhang, big tail risks, whether it be brexit, geopolitical tensions, trade escalation, those are all big risks that can tip the global economy into recession. i think the fixed income market is playing with that narrative versus the equity market, which is playing with the narrative that there's a lot of liquidity, and the central banks are doing whatever they can to ease policy. thereso you don't think is incoherence with the rally we have seen in stocks? you think these paths can continue the way they are? mark: no, that is probably unlikely. the construction of two different narratives underlines that there's different drivers for each of these markets. what i think is most likely to happen is central banks are going to continue to pursue easy

policy, so rates are rallying in the short run. what is more likely is that we don't slip into a global recession. the global economy continues to muddle along, buffeted by really low levels of volatility across asset prices. in my view, we are still in this reach for yield environment or equities move a little bit sideways, but this is one where if central banks are going to continue to do what they want to do to achieve their narrow inflation targets, that is probably good for the reach for yield. but this is probably a very crowded trade, so it probably just keeps moving a little bit sideways. david: it is reaching for yield, not necessarily for growth. if you look at the bond market, that is indicating that we will not have a lot of growth. that is why central banks feel they have to be so accommodative. equities compared with is better, but not because you think there's going to be longer-term growth. mark: that's a great point.

there's a global economy that doesn't have that much divergence across growth numbers. this is why people are dipping their toes back into emerging markets. we have a massive capitulation in the emerging markets trade in may, but people have di pping back into emerging market currencies. it is not really a growth story. there's very little diversions across growth, which is why we are not seeing deflation. it really becomes a reach for yield, largely because if you thing about where the u.s. 10 year real rate is, it is at 30 basis points. anything in excess of that, whether it is growth in emerging markets or asia, all of those things look more attractive now. david: mark mccormick is going to stay with us. coming up, the hunt for yield. a sinkhole of negative yielding em debt doubles in a week. we will talk about that.

this is bloomberg. ♪

lisa: the global hunt for yield has investor looking in every corner of the market, and it is sending billions of dollars in outstanding debt into subzero territory and boosting demand for emerging-market assets. still with us, mark mccormick of td securities. you talked about how emerging markets may see some more upside. doesn't make sense to you that nearly $250 billion of emerging-market debt has currently negative yields? mark: i think it makes sense because if you thing about where , if you thinkare about the imbalances between savings and investment, there's definitely investors looking for any kind of yield. as we talked about earlier, if you look at the 10 year yield rate and the potential for the fed to continue to ease monetary

policy, essentially they are pushing investors out into the higher-yielding categories. i can see the elements where you have capital flows coming into the u.s., largely because you have maybe 150 to 200 basis points of real yield versus u.s. 10 year. you can probably see the same dynamics in high-yield credit. these are driven more by the push of capital flow outside of the developed world back into emerging markets. david: where does it all end? i don't understand quite how this plays out ultimately. a lot of people who need yield over the long term long-term investments. if they are investing in negative yield, sooner or later there's going to be a reckoning. david: it's the same thing --mark: it's the same thing with equity and credit. that's what we experienced last year. of the yieldeeping curve driven by a selloff in 10 wass, and the outcome

driven partly by geopolitics and trade wars that kind of spooked the central bankers, but we are back in a world where central banks are trying to engineer a global put. they are trying to push people out of the fixed income market, a little more back into risky assets. when you think about the pension funds and some of the government sovereigns that have to manage this exposure, essentially the only thing they had is to push themselves into equities. lisa: art mccormick of td securities, you are sticking with us -- mark mccormick of td securities, you are sticking with us. earnings crossing the bloomberg right now. david: it looks like earnings-per-share second quarter missed. lisa: we will get more. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. david: goldman sachs earnings are out, and i think it's fair to say it is a missed bag -- it's a mixed bag. a miss on earnings-per-share. at the same time, investment bank revenue was above

estimates. overall trading was down year-over-year. it seems to be a mixed bag. right now it looks like people are looking at the trading in the investment bank because you can see in the premarket, shares are up about 2/10 of 1%. lisa: goldman sachs has a different narrative than both jp morgan and citigroup, beating on equities trading and investment banking. this is just sort of showing traders are what homing in on. it is interesting to see how the narrative has shifted at this aint away from simply is it beat on eps or not and more to how they do on the investment bank side. and they increased their quarterly dividend. now for an expert. we will turn to alison williams.

mark mccormick is still with us. can you sort this out for us? alison: equities trading a beat. that is the positive. i'm looking at the fixed numbers now, which looked like. -- which look light. lisa: it must be. alison: i guess we are going to want to hear more about that. obviously the equities trading, we will want to hear more about what is going on there. is there some kind of a mixed impact? we heard from citi that a lot of their strengths came from corporate clients and derivatives. we wouldn't expect the same thing from goldman. lisa: mark, we saw this in other firms as well, the fixed income currency and commodities trading was lower. it talked about a certain volatility picture. from your perspective on the ground with trading, what led to the lower volumes that have led to lower revenues at the big banks?

i like to talk about is if you look at the geopolitical uncertainty indicator, there is a very sharp negative correlation with ethics volatility. i think it is counterintuitive, but we might be seeing anecdotally that more geopolitical uncertainty you have, the less volatility you are getting in markets. a lot of the things that are happening, whether it be brexit, escalation, aade lot of the things are binary. they are hard to price, up and down. your ability to manage risk on a lot of these events that continue to keep moving over and over, what it is doing is having a negative impact on volatility. i think that is probably feeding through on the macro side and making it more challenging for trading because it is leading to lower volumes. these have less volatility,

largely because people are just much less activity. david: i want to come back to earnings-per-share overall, $5.81 versus $5.98 last year. versus $4.93,tes which may the why we are seeing the shares now up almost 0.5%. equitiesme time, were up 6.3%. alison: i think we have a significant beat. whenever we get a significant beat at goldman, we look at their investing and lending segment. on themost doubled equities line. the overall number up 38% sequentially. is also where they are doing more on the lending side. to your point, we are going to want to hear more about where they missed, but on the

investment banking side, very strong m&a. the expectation across peers was to expect decline. that was a miss yesterday at citi. goldman doing much better there. if you look over time, it is always goldman, j.p. morgan, morgan stanley generally at the top. these tend to be bigger than the other companies, and that is from getting leading roles on deals. lisa: the other thing that is interesting is they are investing -- is the investing and lending unit was also a big driver of profitability this quarter. they talked about how investing and lending was up 16%. this is where they invest their own principal rather than just helping expedite deals into the market, but interesting to see how that unit is the second-biggest revenue earner among the divisions right now. have they been expending that? alison: yes, and i think that's where we got the big surprise this quarter.

investors tend to discount that a little more than other segments because it tends to be lumpy and volatile and not as much of a recurring revenue source. the other interesting thing is the extent to which people are really focused on the interest margins. that's less of a factor to goldman right now, but we will want to hear more about their digital effort. they've been doing hiring. we've been hearing about them cutting some guilds in some of the products in market -- some yields and some of the products in market. alison: mark, i thought it was really interesting -- lisa: mark, i thought it was really interesting what you said about seeing less volatility. do you expect that to remain repressed given that we don't have resolution in the near term to some of the trade tensions? mark: i do. i think if you overlay the political framework and think about a macro framework for volatility, one of the things

you need is inflation. you also need divergence around inflation or business cycles. there's an element here that the global economy is slowing, but everyone is slowing at the same time to various degrees. the u.s. economy is slowing faster than other parts of the world at this point. when it comes back to volatility , you have geopolitical uncertainty. one of the biggest complaints i get from clients is they say i don't know how to price these risks. it's a coin toss. en is it is a very challenging environment for markets. when you add the inflation and the business cycle, without inflation you are likely to see volatility in the fx market. i think that's one of the biggest things we see when we look at macro drivers into fx vol. we need less geopolitical uncertainty. we could have more stability

across the business cycle. what we need is an environment where we are seeing more divergence across inflation, which is what i think we need. we need a push away from monetary stimulus toward coordinated fiscal stimulus, particularly in germany and other parts of the euro zone. alisonark mccormick, williams, thank you so much. this is "bloomberg daybreak." let's take a look at where the market action is right now. not very significant, although the nasdaq and the dow both turning up ahead of the open. a bit of green in europe, particularly in the u.k.. cross asset yields slightly higher in the u.s.. you see the euro losing, copper gaining a little bit. really interesting to see the argentinian peso following the most since april after moody downgraded its outlook. david: viviana hurtado is here with first word news. viviana: a high-level u.s.

delegation may had to china for trade talks if phone discussions this week are productive. treasury secretary steve mnuchin says there's a good chance he and u.s. trade representative robert lighthizer will go to beijing. the white house expects china to announce large-scale purchases of american farm products soon. cortez and hersio allies in congress say they won't be baited by attacks by donald trump. the president has kept up verbal assault on the four minority lawmakers, accusing them of being communists and hating the u.s. and israel. the defense minister of german see -- of germany has made her femaleo become the first president of the european commission, saying she would pursue bolder policies on climate change and social justice.

european lawmakers will vote today. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. lisa: thank you so much. today's wall street beat. if you have a bloomberg terminal, check out tv . you can watch us online, check our dry fix -- check our graphics, and more. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, republican senator john kennedy of louisiana, member of the

senate banking committee. here's your bloomberg business flash. more problems for facebook in washington. u.s. treasury secretary steven mnuchin joining critics bashing proposedl network's cryptocurrency. managing saying he has concerns about the national security implications, with a high possibility for on a laundering. in the three months that ended in june, store sales rising 4%, ,wice what analysts expected for barberry. -- for bird very -- for burberry.

deutsche bank has said it will retain a focus in a capital markets operation for companies to issue shares. i'm viviana hurtado. that is your bloomberg business flash. lisa: thank you so much. i've got to say, it is not that surprising that deutsche bank is dealing with a german share offering. david: don't count them out. they are still in the game. lisa: if you talked to a lot of equity research departments, they are saying we are still here, guys. let's turn to the wall street beat. ackman makes $730 million betting on chipotle. then, standard chartered's pay criticizing opposing the bank's pay policy. and "the wall street journal" reporting that charles schwab is units.s to buy usaa

david: with us is sonali basak. ackman, you got to give him credit. he stuck this one out. sonali: and lucky for him, it is not the only bet for him doing well. year of his top bets this contributing. lisa: it is interesting to see this rough road of chipotle and the question of whether he cashes out now. he's been building his stake. what a rehearing on that? sonali: they reached a record yesterday, and he started selling a little bit last year. gain.'s at a $730 billion it definitely is a significant turnaround. we have a ceo who came in and built a loyalty program. how do you get people loyal to your brand after a crisis like that? he overhauled the board and made

a big changes. our those changes over? david: how much upside is left? he saw it. lisa: did he take an active role? sonali: he did make some changes at the top, which is interesting. people are saying he was going to stay out of the limelight a little bit, at least compared to the past, but we've definitely seen some big moves from him. lisa: compared to the past, that is not saying that much. [laughter] lisa: our second story is the standard chartered ceo talking to "the financial times," saying investors are picking on him, opposing his pension allowance of nearly $600,000. that is the most for any ceo of a large u.k. listed bank, and represents 20% of his total salary. he said it is "immature and unhelpful for shareholders to oppose this." is it immature and unhelpful?

sonali: phil winters is a jamie dimon protege. you can tell from that comment. he's not the only ceo to oppose these issues. what is at stake here is the u.k. is saying ceos are getting paid in cash for their pensions much more than the average worker. the thing is if you look at standard chartered stock price is anotherrs, lloyds company that also came out defending their paycheck. irs. lowered the david: calling your shareholders immature doesn't seem like a smart move to me. you shouldn't question my pay. [laughter] lisa: it is also interesting because there's a question of why they need a cash allowance and a pension type fund aside from their pie, which is all -- from their pay, which is already fairly ample. david: charles schwab, the third

story, reports that they are in talks to buy some units of usaa, specifically brokerages and wealth management. it is not the size of the deal, but the nature of it, to really diversify schwab. billionit is only $100 in assets, and when you think about the size of charles schwab, it is $300 trillion of assets. this is a business where there's a ton of competition. goldman sachs just paid $715 million for a business themselves. they are trying to double down at a time when net interest margins account for most of the revenue. lisa: you think of charles schwab as a brokerage that caters to mom-and-pop, and you think of usaa as being an association of financial advisors. the idea is that money is going to come from those advisory

fees. that seems to be this sort of play in the asset management and brokerage business. sonali: that's right. and fidelity shifting fees 20, it is a lot of pressure on wealth management. something looking forward is you see the rich getting richer, and middle america are not necessarily seeing that. betting on this part of the market is still a risk. david: bloomberg's sonali basak, thank you for being with us. coming up, j&j raises guidance on the year on sales for its former unit. the chief financial officer, will join us next. lisa: if you are heading out, listen to us on bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

david: johnson & johnson released second-quarter earnings about an hour ago, reporting results better than what analysts had expected, and the stock is up on the news.

welcome from the company's headquarters in new jersey joseph wolk, johnson & johnson's chief financial officer. give us your top line analysis of second-quarter earnings. joseph: yes, thanks for having me on today. it certainly is a pleasure to talk about our results, which i really think solidify the first half of the year in a strong way. pharmaceuticals did lead the way. we continue to to perform beyond the market in which we play. if using about how we entered the year with somewhat average expectations for that particular genericen some competition, most companies with 3 billion-dollar headwinds would be talking about contraction. we had growth just based on our strong portfolio. we've been able to bring new products to market, and we are seeing improving trends on our medical device and consumer units as well, so it was a very good start to the year.

david: you particularly specialize in oncology pharmaceuticals. that seems to be getting to be a crowded area right now. do you see the margins coming down in those areas? joseph: when we look at our performance in pharmaceuticals, it is really the result of transformational new medicine differentiated from the current standard of care. last year we had about 8% growth in the pharmaceutical unit. that was in the face of price declines of about 6%. we are seeing that same 6% price decline this year in our portfolio. as long as you are ringing new innovation different from the standard of care, i think you have a pastor success. david: what about -- have a path to success. where are you looking to buy and sell? joseph: it is part of the management's responsibility to continually reevaluate our

portfolio, making sure we are optimizing what our core and creating, value for shareholders when we find opportunities that aren't doing as well as they should. we continually are on the lookout for new supplements to our business. if you look at growth over the past decade, about 50% of it has come in organically. at the same time, we look to prune as we grow, so we've divested some this mrs. recently that are in the hands of others recently thatsses are in the hands of others and put those towards new opportunities for us. david: there's a lot of talk in washington about drug prices. a lot of different proposals from the administration and congress. did you regard that is something that might change the nature of your business? joseph: we applaud the administration and legislators'

costs for bring down people related to pharmaceuticals. we are very big in transparency, so having a fact-based dialogue is important. you may have taken notice that we were the only pharmaceutical company to buck a trend and have not just listed price, but what the co-pay would be for patients. we think there are avenues to bring down costs for patients. we were a little bit disappointed that the rebate rule was put aside last week. if using about the dynamics of drug spending, 42% of every drug dollar spent goes towards intermediaries. they play a valuable service, but i think the value equation is a little bit distorted when you look at that. you think about the discounts that are given to the intermediaries, $300 billion currently, about twice the amount it was five years ago,

and yet patients are going to their pharmacy on a monthly basis, paying five or six times what they use to pay. david: law figures in right now to johnson & johnson a bit. talk a bit about the talc litigation. are you reserving for the possibility of liability? joseph: we are going to validate what a number of agencies in addition to johnson & johnson have known for decades, that the product is safe. beyond that, it is big business eys toaintiffs' attorn seek large settlements. we've reserved a small amount related to litigation costs in that defense, but nothing related to liability or settling payments. if you look at any of the judgments that have gone against us, most have been reversed on appeal. david: of course there is a grand jury now at the to permit of justice.

-- at the department of justice. has that affected your judgment about what you need to reserve? alison: joseph: not at all -- joseph: not at all. when they look at the facts in a throwaway, we trust they will come to the same conclusion that we have, and that is that the company acted responsibly and that the product is safe. david: thank you so much for spending time with us today. that is joe wolk, johnson & johnson chief financial officer. coming up, we will speak with bill's mead -- with bill smead, ceo. capital management this is bloomberg. ♪

♪ david: big day for the big banks.

jp morgan cuts its lending outlook, while golden beets estimates. wells fargo on deck. tech on the dock. in fors hauls tech crypto plans and whether or not the government needs to get tougher. later, we get a read on the u.s. consumer and whether they can continue to drive economic growth. welcome to "bloomberg daybreak" on this tuesday, july 16. lisa: we are getting some wells fargo numbers just out. on earnings-per-share, they did beat on a year-over-year basis, $1.30 versus an estimate of $0 .98. also, their second quarter total average of loans did come down a little bit. we are going to be looking at that. the other issue is the net

interest margin. david: and that missed the estimates for the second quarter. lisa: interestingly, you are seeing an increase in shares, perhaps on the earnings-per-share beat. we will continue to dig into that. just to recap where we are, we did get jp morgan and goldman sachs out earlier today. investmentissing on and equities. predictablys is strong in the investing and lending cycle. shares are up. jp morgan were a little lower earlier, but interesting to see the divergences here. david: going us now is alison williams, and bill

management. capital aison, wells fargo has slightly different profile than goldman sachs. what do we know? alison: we knew that we are free for three on net interest margin misses. all three banks missing that interest margin. for wells fargo, we've already lowered the guidance a couple of times, expecting the lower end of a down 5% type range for the year. we will be looking to see how mortgage banking did. they havee reason why lowered their net interest margin and income target is due to lower long-term rates, and he should be getting some offset for mortgage banking. lisa: interestingly, the total average deposits for the second quarter was down to $1.3 trillion from $2.4 trillion,

according to reporters digging through this. also, their average loans were down $2.6 billion from the first quarter. what do you make of this given that wells fargo has faced a bunch of reputational issues over the years? do you think there are signs that perhaps clients are pulling back as a result? fargo is a classic value stock. there are such low expectations attached to it now. you are in that stage where negatives don't matter that much. what they can do with capital was capped. you have to take that into account. there's a certain amount of growth in certain categories that couldn't happen because their ability to use their capital to the full extent they

might have wanted to was limited by the fed. the second thing with wells fargo and all these banks is strong part of their business should get you very excited about the next 10 years, which is consumer because there's 89 million people, average age 29, that are going to be 35 in six years, and a 35-year-old married customer with a child is a way better consumer customer than a single person that buys apple burritos,ats chipotle and drinks craft beer. a person with a household buys and borrows by necessity rather whim, and thaty is where we are headed. these businesses are doing extremely well with only a 25 thes point spread between

two-year and the 10 year. spread dropped to only 12 or 13 basis points. i think everyone is overanalyzing this situation. housing has been the smallest pretended -- small with percentage of gdp in the last 40 or 50 years, and as it normalizes, these banks are going to gain a lot of liability action. david: what you are describing is a good business, basically. there's a lot of upside opportunity. management?he do you need good management to get out from under the shadow of the regulators? we don't even have a ceo at wells fargo. how important is that identity of the new ceo? bill: wells fargo went public in 1855. said you want to own a business that a two-year-old could run because at some point

in time, a two-year-old will run it. so go back about eight years and take a look at who was ceo, and realize they got arrogant about the fact they came through the worst of the financial crisis not needing part money. so we are invincible. we had way more capital than we needed in the worst financial crisis in history. let's push the buttons on all cylinders and disregard some of the things that matter. its is a lousy thing, but does not stick up to the great depression. it does not stuck up to all of the horrible things that have happened since 1855. these folks are going to do terrific because they are going to be humble, and that is when you do well in business. lisa: alison, i want to bring

you in. can you give us a sense of what the bright spots were? we are seeing shares climb higher by half a percentage point. alison: provisions looking better than expected. we expect that to be a support. we saw citigroup coming in a little bit better than expected. we saw a release at jp morgan. we are seeing a reserve release at wells. lisa: a release meaning that -- alison: so the loss provision oponents,ude two pr either building towards losses in the future -- david: like a reserve they don't need to use. alison: right. the other important driver across the banks is cost. at goldman, we saw cost coming down help them, but they had

increased investment in technology. at wells fargo, it looks on the surface that cost is coming in a little hotter than expected. this like a euphemism for we cut jobs? alison: a lot of it has to do with all of these legal expenses, all of the spending around some of those issues where you saw other banks sort of getting the issues behind them and bringing cost down. spendingave technology , butntinued investment are there areas they can cut? that's a big part of the story for wells. david: we try to get a sense of what the economy is doing overall. do you have numbers for wells fargo and other banks about how we are doing in loan regeneration? that may indicate where the economy is headed. bill: those capital restrictions have a big impact because each time you make a loan, there's a

certain amount of capital that you have to designate for that loan. i remember at the height of the financial crisis, i had an unsecured line of credit at wells fargo that i was rarely, if ever, using. they called me up and said we have to have a certain amount of capital behind that loan, even though you don't use it. like it was 10 years ago, they said do you mind if we drop an unsecured line. the answer is that wells fargo is doing all the things they need to do within the context of what they are being required to do right now, and she's absolutely right that the regulators reaching their hand into your life constantly is expensive. but those 89 million millennials are mobile banking customers. as we go forward the next 10 years, the sweet spot will be

those millennials, and they don't go to the physical branch. they do their banking on their phone. they use nothing but credit cards. they don't carry cash. the costs are going to go down in the consumer banking world over the next 10 years as they replace mom and dad that started out with aol email. david: bloomberg's alison williams, thank for being with us today. bill smead will stick with us. later we will speak with wells fargo's chief financial officer. viviana hurtado is here with first word news. viviana: a high level u.s. delegation may had to china for trade talks if phone discussions this week are productive. u.s. trade secretary stephen mnuchin says there's a good chance he and u.s. trade representative robert lighthizer will go to beijing. they are expected to announce arch scale purchases of american

farm products soon. ri --sentative alexand representative alexandria ocasio cortez and her cohorts have -- leyen telling the eu parliament she would pursue boulder lessees on climate change and european justice as president of the -- boulder climate -- pursue bolder policies on climate change and european justice as president of the european commission. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. on the v our tonto. this is bloomberg -- i'm viviana hurtado. this is bloomberg. lisa: a lot more coming.

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." tesla is cutting the price of its cars shipped to china. the electric car maker is trying to boost sales in its second largest market. prices of the model s and model x were cut about 4%. the european union antitrust chief is planning a summer finale to her five-year crackdown on u.s. technology giants. to open a formal investigation into amazon within days. she's hinted she wants to see how amazon may be unfairly using sales data to undercut smaller shops on its marketplace platform.

in california, a federal judge giving a partial victory to bayer in a case involving roundup weed killer. a jury awarded $80 million to a plaintiff who alleged exposure to round up caused cancer. the judge cut that to $25 million, but says he still found the company's behavior reprehensible. they inherited hundreds of roundup lawsuits when it bought monsanto. lisa: thank you so much. one thing weighing on banks this year is the prospect for even lower yields ahead. fund managers broadly see the most crowded trades as being long u.s. treasuries come along investment-grade corporate bonds, according to the recent bank of america merrill lynch fund manager survey. but what is the chance that the consensus is wrong? bill smead of smead capital, do you think this bullish trade has gone too far? bill: well, you know, there's an old joke about the banker whose

praying and says, i've got two questions for you. will interest rates ever go up? and if so, when? god parts the skies and says to him in a loud voice, the inter-to your first question is yes. the answer to your second question -- the answer to your first question is yes. the answer to your second question is not in my lifetime. [laughter] lisa: when you start quoting god, we are in trouble here. bill: just imagine. most people think we are in the same problem that the japanese were over the last 30 years. they had their real estate market crash and their stock market crash at the same time in the late 1980's and early 1990's, and then interest rates went microscopically low and have stayed there for the last 30 years, and they've never gotten out of it. but what pulls you out of this is demographics. people is the ultimate

elixir. 89 million millennials. when 35 to 40% more people go chugging their way through 30 to 40, everyone is worrying about the wrong things here. the fed is worrying about very that peopleoncerns have, and all they've got to do is just let time go by and these things will heal themselves. here's our conversation. an2012, bank of america was eight dollar stock at the start washe year and jp morgan $34.50 in july. ,f you add in the dividends you're pretty close to quadrupling your money. in bank of america, it's gone from eight to close to $30.

it has quadrupled in seven years, but they don't have anything to do with artificial intelligence and they don't have anything to do with data analytics. they aren't cool and hip, and therefore nobody wants them right now. david: so you don't need to be bank of america or jp morgan to be the yield on bonds at this point because the yield is so low. i will put up a chart that shows overall, the s&p 500 earnings yield is about three points better than the 10 year yield. as an investor, how concerned are you that the value in the stock market right now is just compared to what? bill: that's right. what that's done, almost more dangerous than the netflixes and the amazons, the high tech stocks, is that a lot of the more admired and mature tech times traded 30 to 40

earnings. , starbucks,card cosco are all trading at higher multiples than they have historically because that's work. , whichworked has worked really looks a lot like the nifty 50 back in the early 1970's that ended so poorly. these banks have loads of new attract customers coming down the pipeline. 35% more customers, and no one wants the stoxx at microscopic pe received -- once the stocks at microscopic pe ratios. this is hog heaven for an investor. lisa: and it looks like you are pretty bullish on retail, as well as the banks. i'm wondering about big tech. according to the fund managers survey, that was one of the most

crowded trades cited by fund managers. do you think this is something that could reverse? in the'm 39 years investment business. i started in 1980. energy was 28% of the s&p. it is about 4.7% now. tech was 30% of the s&p at the peak at the end of 1999. it dropped down to about 11%. there's only one guarantee in the investment business. things will change. if you are heavily committed to something that has worked really well for four or five consecutive years, you should be real nervous. david: ok, bill. good advice. thanks so much to bill smead of smead capital. always great to have you with us. coming up, consumers snap up burberry's latest collection, boosting sales.

more on that in today's bottom line. this is bloomberg. ♪

david: time now for the bottom line, where we look at three companies worth watching this morning. first of all, i'm watching fiat chrysler because goldman sachs has reinstituted coverage of automakers in europe. they came out and said we don't like fiat chrysler very much, in part because of their slowing product cycle. we also have a sell rating on daimler, but they did like aston martin, but who wouldn't like an aston martin? lisa: not the most controversial view to say that auto manufacturers in europe are struggling right now. -- watching burberry, shares watching burberry, shares surging as much as 12%. this came after burberry revamped their social media

presence and really took off in china, interestingly enough, despite some of the slow people talked about their, as well as the version two international brands. burberry seems to dupe doing that seems to be doing pretty well there -- seems to be doing pretty well there. david: the third comedy we are watching today is boeing once again -- the third company we are watching today is boeing once again. for more, bloomberg's brooke sutherland. it is like watching a slow moving train crash. we had the 737, and now you are starting to see it seep in. continuallyng has been very optimistic about returning the 737 max 8 the skies, but the faa uncovered an issue with the microprocessors that gets overwhelmed by data in certain circumstances. as optimistic as boeing what's to become of the airlines have --start planning for reality

as boeing wants to be, the airlines have to start planning for reality. they say we expected to get 58 of the planes next year, now we only expect 30 for the peak summer schedule, and they are really having to adjust plans because of it. lisa: let's talk about what the costs are for boeing. it is not just the potential liability and loss of orders, but they may have to pay for the actual storage of these jets, which is not a cheap endeavor. brooke: it is not only the storage. they are parking these planes in the parking lots at the boeing factory because they are running out of space, but they also have to compensate the airlines for loss of revenue, especially if you cut into these growth plans down the line. so far the impact airlines has kinda been a silver lining because this helps with their pricing power take out all of that capacity, but down the road, if you see airlines really cut back on growth targets, they can't add the planes they want

or carry the number of passengers they want, that's right. it comes down to what does boeing owe them. david: what does it say about the marketplace that you can take that much capacity out and it really doesn't show up in pricing? why aren't fares skyrocketing? brooke: they are rising, actually. pricing has been under pressure at airlines to start the year. analysts and investors are worried that maybe we are adding too much capacity, so it is actually somewhat healthy. lisa: brooke sutherland, thank you for being with us. minutesp, we are away from u.s. retail sales for june. we will watch for those numbers and get -- and give them to you when we get them. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore...

excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. lisa: this is "bloomberg daybreak character i am lisa abramowicz. alix steel is off today.

marginally positive outlook on the u.s. open -- the ftse leading the way. if you flip up the boards, a little bit of a selloff in bonds. yields rising. the euro losing versus the dollar, copper gaining as growth prospects are more positive today. the argentinian peso falling out of bed. david: talk about positive. retail sales numbers, .4%. the projection was .2%. auto and gas it is up .7%. this is a pretty bullish number. lisa: and it comes after a beat in june. another solid report. in june part of the reason why was because people said because gas prices have gone down, it gave people more disposable income. that is part of what the driver was. gas prices were stable. david: we want to bring in peggy

collins, bloomberg managing editor for the u.s. economy. great to have you with us. these are pretty encouraging numbers. peggy: that is right. saying, this is another month of stronger retail sales than people thought might come in. it does complicate the view for the fed. we saw job numbers strong in june and now you are seeing retail sales. consumers have been the strongest part of this economy and it looks like they are holding up. the question will be whether this data puts more pressure on the fed in terms of not to cut even though we are seeing more pressure to cut. lisa: it is interesting looking at these numbers. is this not necessarily an indicator the federal reserve will look at, but a lagging indicator? typically the consumer falls behind the business cycle. is that something we are expecting a -- expecting to hear

from the federal reserve? peggy: the federal reserve is looking closely at things like employment. there are other pieces of data that we may not look at as closely. in general they are looking at the strength of the consumer. in hisjay powell testimony say the u.s. economy is in good shape, but what they are trying to do is keep it there. wouldr or not a rate cut be what we need to keep the economy going is a question mark. david: there is a dichotomy, even with the bank earnings, between the consumer and the companies, where you have consumer spending money, whereas companies are not investing. i will put up a chart that puts two things together. that is wages and retail sales. retail sales bounce up and down. wage rate growth has tapered off, but is still over 3.1% year-over-year, a pretty robust number.

i wonder how the fed deals with two different stories? peggy: the question about inflation and the fed feeling they have not seen the uptick in inflation they were expecting given the low unemployment rate and the rise in wages. the other question is what is the business dynamic? we have the consumer on one side that is holding up the u.s. economy. on the other side we have the trade war and tariffs looming. what is that doing to business investment and to expenditure and what is that going to businesses in terms of hiring? that is a big question in terms of the dichotomy you are talking out between the consumer and businesses and what they're looking to do going forward. lisa: looking through some of the numbers, a level the 13 major retail categories increase, led by 1.7% in non-storytellers. interestingly, there was a

decrease in department store sales, highlighting the new reality of retail sales which has shifted online. how complicated is it to assess the economy where you do have these issues that there is a transformation going on led by some of the big technology companies that have disrupted how we buy stuff. lisa: transformation is the key word. it has been transformative in terms of technology, not only in how automation has changed the labor force but in terms of how consumers spend. how easily they are able to spend. thatd a story yesterday was basically looking at are we measuring the data well enough now that we have all of this technology? i think it is a big question mark in terms of how technology is driving the consumer, not only in the u.s. but globally. david: that is a very interesting report. i did see a report that gdp

numbers were 1% understated because we do not yet account for things like cell phones and iphones. is there a move in washington to rethink the methodology of how we report growth? think there are a lot of people thinking about this, including our bloomberg reporters who are thinking about alternative data. traders and wall street -- traders in wall street are looking at satellites in the parking lot at walmart, but there is also a move to look at how we're collecting data at the government level and adapting that to new technology. it will be a story we are following. lisa: piggy collins, thank you so much for your insights. from --p, insight insight between the valley and easy executives. google, amazon, and facebook heading to washington to face the antitrust panel. bloomberg users can interact

with the charts shown using gtv . you can check them out, you can save them, you can build on them. look for more coming up. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up later today, john shrewsberry, wells fargo cfo. lisa: time for follow the lead, deep dive into stories making headlines and moving markets with insights from industry veterans and in writers. today we are looking -- and

insiders. today we are looking at the state of big tech as amazon, facebook, and google head to washington. wedbush securities director joins us from long beach, california. thank you for being with us. what is the goal of congress members that will be questioning big tech today? michael: congress is bound by the law and all they can question is things they are empowered to question. there has to be an existing law. the antitrust laws are pretty clear. it is congress is job to look for anti-competitive behavior and that tends to focus on pricing power. any company that has a huge market presence, think at&t back in nearly 1980's where they were the dominant carrier, they can jack up prices on consumers. how you hitw facebook or google with that. if someone wants to develop a social network or a search

engine, they are entitled to. the barriers for entry are not pricing, it is that everybody belongs to facebook and everybody uses google. of these companies, the only bigany that arguably has a enough market share to influence pricing is apple. that is something my colleague dan ives covers. even they have 40% of the handset market and there are plenty of tiny manufacturers that almost give away phones. i think apple commands huge make a greate they product we are willing to pay for. samsung makes an equally great product and charges about the same. i'm not sure there's any activity congress can explore, other than perhaps the app store and the 30% charge because google place along. congress is probably going to question things like why 30%, is

there collusion, how did you settle upon that? steve jobs came up with that based on what the movie studios were getting from the cable companies on pay-per-view in the 1990's. he negotiated with the record labels the same price the parent companies were paying for pay-per-view movies. i am not sure congress will come up with anything here. when i talk with investors, they seem to care about potential action by regulators, by congress. this seems to be a perennial worry. perhaps we are not seeing it in the tech shares on fire this year. at what point should investors sit up and take notice. what could regulators do to curb the growth in tech? michael: two different things, regulators and legislators. regulation is highly unlikely. congress cannot pass a budget or raise the debt ceiling. i'm not worried about new

antitrust legislation. regulators didn't pretty much do whatever they want and tested in -- regulators can pretty much do with they want and test it in court. if regulators want to tell facebook you cannot do cryptocurrency, of course they can say that. that is a real risk. you hear mnuchin talking about why he is worried about cryptocurrencies. they can curb growth and you will see that from regulators. legislators, different story. they have to have a basis for what they do. regulators can interpret existing law and come up with any kind of crazy regulation they want to, which can be challenged in court. lisa: which company you think is most at risk to something like that of the big techs? michael: of existing businesses, apple. store 30% charge will

come under increasing scrutiny. you're already started to see competition of epic games charging 12% for in app purchases. you will start to see other guys. google stadia with videogames have not announced what they will charge, but my bet is it is under $30. amazon will probably come in. clearly new businesses is the wild west. facebook is not going to be allowed to do what it wants to do. the government is going to be all over that. anyone that handles data, facebook and google, should be looking for regulation on how they handle data and who they share it with. legislation, probably not. lisa: michael pachter of wedbush, thank you for being with us. david: let's turn to the question of cryptocurrency and facebook. jay powell expressed his concerns about a cryptocurrency. yesterday mnuchin said it raises

national security issues. today is the senate's turn. we welcome one of the members of the banking committee, republican senator john tierney louisiana coming to us from the cap -- john kennedy of louisiana from the capital. welcome back to bloomberg. thank you for being here. senator kennedy: thank you. david: what you get out of this? : facebook wants to control the world's money supply. what could possibly go wrong. i listened to her previous , whom appears to fancy himself an expert on congress. i respectfully disagree. our jurisdiction is deep and why. wide.l -- is deep enand we will be asking questions like who will regulate your bank? what is your bank going to do?

is it going to hold deposits and transfer money? are you going to invest deposit money? what about the privacy concerns? some social media companies, including but not limited to facebook have a checkered history in violating people's privacy rights. antitrust implications will be looked at. the first of probably many hearings to try to understand this new product. wea: we have heard -- david: have heard several possible objections or concerns, first from jay powell when he was testifying before congress and then from the treasury secretary yesterday. they include national security, consumer protection, money laundering. what is at the top of your list? that might indicate the best way to regulate it? sen. kennedy: i have read a good

bit about facebook's proposal. i want to use my time today to learn more. i think the threshold question, before you get into the weeds that i just talked about is integrity. people have to trust their banker. you want -- a banker has to have integrity. he is to be honest with his customers. he has to respect their privacy. that will be a threshold question for facebook and all of these companies. david: from your understanding, and i understand this is an initial proposal from facebook, from your understanding right now, could regulators stop facebook from doing cryptocurrency at all based on current legislation or with her need to be new legislation? sen. kennedy: yes, and so can congress. david: who would you look to to do the regulation? is it the fed? sen. kennedy: we do not know yet. we will talk about that today.

as you know, there are a number of regulatory agencies that might have jurisdiction, probably do have jurisdiction. i am not anti-libra. i think this is an interesting idea. i'm not anti-facebook. facebook is not a company, is a country. they have 2.2 billion users and they are saddling up as partners with other big social media companies. i meant what i said when i started this interview. they want to control the world's money supply. what could possibly go wrong? i want to delve into that. time they aresame not the only ones trying to do that. i wonder when it happens. alibaba in china is going forward with cryptocurrency rapidly. is there a danger the chinese will control the world's money supply because we are sitting on the sidelines? sen. kennedy: my committee does not have jurisdiction over alibaba.

we do have jurisdiction over facebook and the other social media companies. i think the chinese banking system is far inferior to the american banking system. i think our friends in china, in terms of their banking system are worrying about how they will stay solvent. david: facebook has said this is just an idea. we want to talk to the regulators. we have a lot of negotiation going on. have you or your staff had discussions about facebook executives? are, have youthey heard willingness they are -- sen. kennedy: i have not heard a peep. the only time i've been contacted by facebook, and one theirg i suggested general counsel had a casual relationship with the truth. they sent a bunch of lobbyists

by my office to tell me why i was wrong. i listened politely and that was that. david: i remember the last time we saw mark zuckerberg and other people appear before congress. this was after the cambridge analytical situation. there's a lot of talk about real informed, report back to me on that, we will take action on this. did anything come of that because there's a sense congress talked a good game but do not deliver in the end? sen. kennedy: i'm frustrated we do not have a privacy bill. i introduced a number of them, so have my colleague. we need a microwave right now, we do not need a crock pot. i think you will see legislation. i remember mr. zuckerberg's testimony. he promised to come forth with his ideas about how social media should be regulated and i think all we have heard is crickets. david: have you pursued it with

him? have you said where is your answer to our questions? sen. kennedy: it is not my place. mr. zuckerberg is an adult. he knows what he said. he has people to remind him. up here you learn quickly you have to watch what people do, not what they say. david: a good role in life in general. that is senator john kennedy of louisiana joining us. let's go to viviana hurtado for the bloomberg business flash. viviana: a disappointing quarter for dominoes. the pizza chains revenue missed estimates. still, earnings were better than expected. domino shares were lower in premarket trading. the billionaire founder of l brands says he wishes he had never crossed paths with jeffrey epstein. he says he was never aware of any illegal activity. yearsr and epstein had a long business relationship. alphabet unveiling and app to

provide air traffic control for drones. it was approved demand -- it was approved for unmanned aircraft. .'m viviana hurtado that is your bloomberg business flash. warnscoming up, jpmorgan its lending will fall in the second half. taylor riggs is watching the highlights and that is coming up next. if you're jumping in your car, tune in to bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

lisa: here's what i'm watching.

jpmorgan shares following the banks mixed earnings during an analyst call happening right now and taylor riggs is listening in. taylor: it is all about mortgage loans and the nii. let me start with the nii. both the ceo and cfo coming on the call and saying they're forecasting three cuts this year given the reduced drop in the nii. that is down from a height we saw in the first quarter. nothing to get concerned about is what they're trying to get across. another area of focus within the analyst call down to mortgage loans. loans were down, you are seeing a decline in home lending. ray katz people are already benefiting from. jpmorgan was saying going up again and quality of the loan and structural challenges to remain within the mortgage business. they're working on optimizing that balance sheet and de-risking the portfolio from a servicing perspective. wee credit cards loans,

heard the same thing for him citigroup yesterday, seeing strong performances in credit card loans. jpmorgan jumping on the call and trying to balance out the difference. talents in credit card spending in credit card loans is not the wind blowing, that is accountable business. nii is the wind blowing so they're trying to redirect us to the loan portion of the business. m&a remains healthy. they said the second quarter was strong, so maybe softer into the second half of the year. overall, m&a looks good. as we continue to listen to questions from the analyst, the credit is good, the consumer is strong, and it goes back to the fed and what you can manage between the rate cuts we are now expected. lisa: taylor riggs, thank you so much. let's get a check on where we are in terms of premarket action for the banks. what we have been seeing is that goldman sachs is the outlier of

1.2%, whereas the others are indicated lower. on the equitybeat trading as well as investment banking revenues. it does seem the town is the investment bank side is what is going to make or break ranks in the second quarter. david: exactly. bifurcation between the consumer and the commercial. that does it for us. coming up, bloomberg -- the open with jonathan ferro. jared what are, bank of america woodard, bank of america global investment strategist. from new york, this is bloomberg. ♪ i don't know why i didn't get screened a long time ago.

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♪ jonathan: coming up, wall street reporting results. net interest income dominating the outlook with many investors convinced the fed is on a one-way road toward rate cuts even as u.s. retail sales come in hotter than expected. brought gains across most categories. with 30 minutes until the opening bell, good morning. here's your tuesday morning price action. futures unchanged on the s&p 500 , but the move is in the bond market. yields bleeding higher, up four basis points on the 10 year to 2.13 and the dollar showing strength. a weaker euro. down .33%. let's begin with the big story. many people convinced better numbers will not change the fed's next move. >> the u.s. economy seems to be doing fine. >> he with the economy see downside risk. >>