growth, -- tech growth comes with a big price. twitter is on deck. mario draghi delivers the latest message, leaving the ball in the fed's court. fast, bojo. says it would have to change the brexit deal to get it passed parliament. -- we areare writing waiting right now for twitter. it just came out as i spoke. monetize will daily active users where the thing people were really looking at. revenuethird-quarter 815 to 875. revenue, $841 million.

that's a nice beat. alix: this looks pretty good. david: therefore, the premarket is down. [laughter] alix: maybe it is capex? like you mention, monetize a bull daily active users beat. bulloks like -- monetize a daily activele users beat. david: they've been doing a good job getting more money in the door. they still got a ways to go. 2/3 of the rate of they look like good numbers from twitter. alix: joining us now are evan brown, ubs asset management head of macro, and bloomberg's paul sweeney. >> one of the big issues for

twitter really focuses on ly activea bull dai users, the people that come back every single day. that's what advertisers want. twitter can't really compete on --t versus the facebook's versus the facebooks of the world. that's the kind of metric twitter really taps to advertisers. ared: one thing people looking at is geography. they had really favorable numbers in japan last year. it is expected they will be under the number this year in the u.s. paul: they make so much more money off of users in the u.s. twitter has established itself as not a big, broad advertising platform that it's going to reach huge tonnage of users like google or facebook, but our users are very engaged. we have a great demographic, and they come back time and time

again. lots of advertisers want that kind of platform. david: it looks like the market is catching up with us. twitter is now up over 2%. paul: i think people are trying to digest that as well. alix: we have twitter, google, amazon. to me, one of the biggest takeaways is these guys are going to keep spending money. it depends if you want to pay out for that are not. evan: that's right. it's hard to find growth in this market, especially within economy that is only so-so. these companies will keep spending. there will continue to be flows into these companies until something breaks. we are keeping a close eye on some of the doj and regulatory stories happening, but those are over a very long timeframe, such that we think these companies in the meantime can still do quite well. david: i thought that the earnings report from amazon was basically jeff saying, trust

me. bezos saying,eff trust me. paul: there's no ceo who is established more trust with the market place than jeff bezos. for more than a decade, he's said we are going to spend money to make money. we are going to make profits in the future. don't worry about it. that's really going to drive our topline growth, and we will turn on the profits later. of course, the cloud business is really a profit driver for amazon. came in a little light last night on the revenue, but i think everybody feels very convertible that the cloud business is a long-term growth story not just for amazon, but other players as well. alix: if it is going to cost that much for them to warehouse and do one-day shipping, how much is it going to cost the other guy? it is all relative, too. david: and a lot of cost increases were in warehousing. google?w about

paul: they came back with very strong topline revenue growth, showing that advertisers continue to really favor that platform. their cloud business and other bets continue to do very well as well. david: as we look at this and have gdp numbers out next hour, does the tech sector tell us anything about the rest of the economy, or is it two different things going on? evan: this area of tech, software and social media, is showing good resilience. the economic data come of the weakness we have seen has largely been in manufacturing rather than services. given that more and more of the s&p 500 market cap is services and these big tech companies, the resilience in the services istor and in these companies something that stands out, especially relative to other countries more geared toward manufacturing. alix: bloomberg's paul sweeney,

thank you so much for coming in early for us. ubs asset of management will be sticking with us. also stick with us for bloomberg television later today for an interview with twitter's cfo at 3:30 eastern time. in the markets overall, you are looking at a mixed picture. s&p futures are up by about 3/10 of 1%, no doubt helped by earnings. euro-dollar down by 1/10 of 1%. will we break the key support level for the currencies, all about the fed coming out next week? in the bond market, yields lower by about two basis points after the crazy wild ride you saw in the german bund market and btp's yesterday. coming up on this program, boris johnson denied. the european commission says no changes can be made in the latest brexit deal. more on that in today's first take. this is bloomberg. pm johnson: in the 98 days that

remain to us, we must turbocharge negotiations. ♪

david: it's time now for the bloomberg first take. the european union's has no to bojo. the uk's new prime minister is denied a chance to change the brexit deal. softbank's new vision. the company unveils the second vision fund, with a focus on tech. joining us is rachel evans, head of etf coverage at bloomberg news. with us still is evan brown of ubs asset management. so you are british. [laughter] alix: can we make the point that

david said bojo? david: it was written on the prompter. boris johnson came in with all flag flying, let's start with the irish backstop, but got jean-claude juncker and michel barnier saying no way, no how. has been very consistent in what it says. they have consistently said no, this is the deal you get. boris is now trying to play this game of brinkmanship and hoping that the eu, as we get closer to this deadline, will blink and be open to renegotiating a deal. so far, they are saying, no. we will stick with the deal. oris is pushing the country more towards a hard brexit. arguably, that is something he and his allies are very comfortable with. it gives them a lot of room to run in election. i think this is where we are all heading, a general election either in the fall or in the

spring look very likely. alix: the word on the street for some individuals is that maybe you want to start taking a look at some value. are you one of those people? evan: for us, let's wait and see what happens. if we get a no deal brexit, there are going to be a lot of cheap companies. ultimately, a no deal brexit is not a good thing come about the u.k. is not going to fall apart. big fall inect a sterling, a big hit to a lot of u.k. companies, and then let's see what we can scoop up from there. that's the game plan at this point. david: we have to wait and see on brexit. we don't have to wait and see about gdp numbers. we have them in about an hour and 20 minutes from now. the consensus is 1.8 for the second quarter. where are you? 2's, but are more mid more important will be the details. in the first quarter come of the

was really in the details. we saw durable goods yesterday quite strong. focus less on the headline number. focus on the internals. the internal story is quite good here. alix: which is so puzzling to me why you have seen such an enormous amount of flows into every area of the bond market at the expense of some equities. rachel: it is a really interesting dynamic care. people are looking very much at the fed. what the fed seems to be on path for his, regardless of what data says, i think everybody is trying to position. i was really taken with the shift into fixed income. we've actually seen outflows from equities in the etf land this week. however, a lot of it seems to be coming out of the very highly traded s&p 500 funds.

that suggests to me maybe this is more of a function of equities hitting highs rather than fixed income being more attractive. we're definitely seeing a push into high-yield and longer-term debt. alix: we had twitter earnings coming out, monetizeable active users stronger than estimated. next week you have microsoft, apple -- i think we had microsoft, right? oh, this is vision fund. i'm sorry. they are raising a second vision fund, this time without saudi arabia, this time with these participants like apple and microsoft. what does that tell you about the money sloshing around the needs to find a home? evan: you said it right there. borrowing costs are so low. everyone is looking for some kind of growth. you have a lot of money looking for investment. now the fed is cutting with a strong economy. you have to raise the question

here, are we stoking asset bubbles? because of this obsession about getting inflation higher, are we just encouraging more and more inefficient investment, more money chasing, fewer productive opportunities? that is a question the fed is going to have to ask itself next week. seeing ae we bifurcated market in which the etf's go intoand things like the vision fund? rachel: to a point. within more etf's overall investments as equity ties to cash -- as equity ties ized cash.t it is kind of interesting that they are coming out with this much larger fund, something like $108 billion. you do see a little bit of

retail taking over in the etf space, but i wouldn't view it as purely a retail -- it is really just that institutions are using etf's in a different way. alix: do you want to buy tech? evan: at this point we are neutral on tech. there are plenty of companies trading at multiples that are just enormous, so it is hard to be underweight just because the money keeps flowing in. what we'd rather do at this stage is tilt away from tech. because we don't think the economy is that bad, we are going to see a rotation into other cyclicals come the financials, energy, materials, industrials. so we are neutral tech at this point. alix: bloomberg's rachel evans, thank you so much. evan brown of ubs asset management, you will be sticking with us. -- coming up,gal oil andaluccio of vista

gas will be joining us. this is bloomberg. ♪ this is bloomberg. ♪

alix: it's the first oil and gas ipo of the year in the u.s., and it could be the only one. isentina's vista oil and gas the only company developing shale in the area that has the best chance of being a shale powerhouse after the u.s. galuccio was responsible for the development of the region. vista oild by miguel, and gas ceo. how was this process? you have oil prices going nowhere. what was it like to market this deal? miguel: it was a challenge, but it was a good challenge, and we finished in a good line. the market today was not in

favor. we have elections in argentina. before we get to the internal politics of argentina, investors don't like u.s. emts because they spend too much -- u.s. enp's because they spend too much. what was your pitch to investors to not do that? miguel: i think they still like shares in the u.s.. now they are a bit out-of-favor. , permian hasings found competition. -- one of thee things we have is that we learn from the u.s.. lessons that of we've taken into consideration. we have concessions for 35 years. that helps a lot.

secure ato drill to space in many different places. are related issues to that. two advantages. we learn from the u.s. we have concessions where you weaken plan at where we can plan our development, and we have more space -- where we can plan our development, and we have more space. alix: in the u.s. you are drilling wells to close to each other, and they cannibalize each other's pressure. what are you not doing that the u.s. has made a mistake by doing? isuel: what we are doing , thething we are learning

,ay you plan your development they came with a lot of technology here. everything we learned here, we are applying their. [indiscernible] i will give you an example. technology used to store crops in argentina, we are using to store sand. resources are looking good. alix: you mentioned the sand. that leads to the broader issue of infrastructure. when i was there, all you saw was just basic land. what is your thought process on that? miguel: we need to be careful samese we started in the place where permian started in many respects.

we have the capacity to allow us to have a good start without focusing in facilities too much. one thing that we have done, looking at the future, we launched a company six months serve vistagoing to and our competitors. invest what we need ahead of time and just focus on the development. alix: let's talk about the politics, then. investors are no doubt anxious about the elections. what does it mean for your business? thing is think one interesting in argentina, that we have a consensus about vaca muerta.

we managed to bring investment to the country. we managed to bring partners. we passed a law that gives us the legal framework. -- werse, in this time have showed to investors that we in argentina can have continuity. believe vacaat, i politicalere's concerns that will keep going the right way. the: you did just export first shipment of light oil out of argentina. in november, can you still do that? miguel: yes. we have challenges and pending

tasks. two are very important ones. one that we have to learn from the u.s. is we have to share information. we have to have a much faster learning curve. that information helps to have a more rational development. i think also we have to learn that incentivized ports basically change the whole business. i think we need to do that in argentina. completely inot the free market for importation. alix: why is that? we need to move beyond that. we need to ensure that everybody

that wants to support can support. alix: you have a tremendous amount experience -- amount of experience. what is your outlook for oil supply and demand, prices? how do you see it going in the back half of the year? miguel: that is a tough question. many people get it wrong. i probably would not be the first. are after the levels we are at for the next few years. i think demand is still strong. i believe we need to boost reserves. i believe that is going to play in the favor of oil prices. alix: so supply gap, and argentina wants to fill that supply gap.

is that they develop and goal? goal?t the develop and -- is that the development goal? miguel: we would never get the speed and scale you have here, our count byltiply 10 for argentina, we would be in credit will story. alix: i really appreciate it. miguel galuccio, vista oil and gas ceo. david: coming up here, did trade headwinds have a cooling effect on u.s. growth? we will find that out when gdp numbers come out. 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. ♪ alix: this is "bloomberg daybreak." i'm alix steel. happy friday, everybody. a bit of a rally in the s&p, with twitter surprising to the upside, adding 5 million users.

amazon still off the lows of the session. cash burn weighing on that stock. in europe, european autos, renault had a really rough quarter. shouldn't be a surprise considering how bad nissan was, but nevertheless, that is really filtering into the market. david: it really was awful. alix: really terrible. in other asset classes, it is a strong dollar story. the euro continuing on the downside after a dovish ecb statement. maybe mario draghi to the back end of the news conference. there's brexit back on the table. you have a little bit of buying in the long end. yields down by about one basis point. a soggy auction yesterday considering how whippy the action was in europe. david: let's find out what is going on outside the business

world. renita young is here with first word news. renita: president erdogan said even if the u.s. isn't selling patriot missile systems to turkey, the country is still buying boeing planes. there was an order to purchase about 100 boeing planes. union has rejected u.k. prime minister boris johnson's man's for a better brexit deal. johnson seems to be ruling out minor cosmetic changes. he's calling for the irish backstop agreement to be scrapped. if neither side backs down, britain will be on course to drop out of the eu october 31 without an agreement. hundreds of protesters staged a sit in at hong kong's main international airport terminal today. demonstrators dressed in black sat on the ground, holding up signs and chanting slogans

including, "free hong kong." protests have been happening in hong kong for more than month. demonstrators are calling for and antic reform investigation into alleged police brutality. 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 renita young. this is bloomberg. david: thanks so much. they didn't really disrupt traffic in the terminal, but the reason this is interesting is this is supposedly the first of three days of demonstrations. it appears they are going to have multiple days of demonstrations. we will see what happens, but by monday there may be news to report in hong kong. alix: if the last protests have been anything to go by, they may be tumultuous. david: beijing hopes this is going to go away. it doesn't seem to be going away. alix: no it doesn't. david: we have u.s. gdp numbers coming out just about an hour from now, the most important day

before the fed decision next week, with consistent estimates of 1.8 percent growth in the second quarter, coming off of a the first% in quarter. we welcome now bloomberg's carl brown ofa, and evan ubs asset management. we have a chart that indicates what happened in the first quarter, where you see that gdp went up, but the sales through to domestic purposes went down. do you think that might change? carl: we saw unusual narrowing in the trade gap. that is positive for gdp, but temporary results of saber rattling in the trade war. people were patting supply chains, and we had weak economic data the first, which means people were set with bloated inventories and not a lot of demand for inventories. all of that propped up gdp on

the back of weak consumer spending data. q2,et a reversal of that in and i think we will see the strongest consumer spending data since about q4 2014, so 4% is possible, which is good news. it goes back to that old cliche that u.s. consumers will carry us through in terms of growth. we may not see growth as great as we have seen in recent years of the cycle, but nonetheless, with consumers the only game in town, we should be able to eke out about 2% growth over the remaining quarters of the year. alix: if you come inside the bloomberg, you can see what carl was talking about. that bar that shoots up is where we are expecting consumer spending to go. icontributed to that, suspect, a lot in the second quarter. [laughter] alix: what do you expect the average to be? is the consumer gangbusters? slow? ofl: to see sustained pace

4% growth i don't think is in the cards at this point. we are not seeing income gains that would justify that. nonetheless, we are seeing hiring and income data that tells us consumers will be a bright spot in the economic backdrop in the latter. part of this year i think we should be -- in the latter part of this year. for the yeare in as a whole above expectations. we will be exceeding fed forecasts as they are trimming rates in the background. david: that is good news for the consumer if that comes to pass. is that good for the economy? business spending seems to be going the other way. is that a healthy economy of consumers are spending more and businesses are investing less? evan: that is a good question. ultimately it is the consumer that drives the economy. worry about business investment oath in the market and in the fed is a little but overblown.

we've seen investment, off somewhat, but it is not really contracting at this point. what we are seeing is this big increase in surveys and president trump was elected. investment never got as high as those surveys would suggest. now those surveys are coming down, and business investment is cooling a bit, but not falling off a cliff by any means. david: this is what i don't understand. how do you put together your consumer numbers with those business numbers? theoretically the ceo looks at the consumer spending more and more and will have more capacity to deliver to them. carl: we have slowing growth, which reduces the need for business investment. we were about 3% in 2018, something like 2.2 point -- something like 2.25% this year. constraintapacity that pushes consumer investment. reforms were largely sacrificed at the altar of the

trade war. david: let's save that one. we will use it again. carl: business investment was really curtailed by a crisis of confidence, and that was largely due to uncertainty over the trade war, whether just escalating with china, extending to mexico, or reaching out to europe. businesses are hunkering down, not so much pulling back on hiring, but very wary to make spence of capital expenditures. alix: google saying they are going to wind up hiring a lot. does that mean you want to not buy cyclicals and industrials? what do take away from that? evan: in the end, we think cyclicals are so depressed at this stage. you see some improvement in the we. economy, and as long as don't get further escalation on the trade war, which we don't think we are going to get closer to the election, president trump is going to be a little bit more careful, then we think cyclicals

can rebound here. david: let's talk about what really matters. let's talk about the fed. what does this mean for the fed next week? little bit below consensus, at 1.6% on the headline growth number, but it is the underlying fundamentals that matter. if the fed is looking at a strong consumer, they will have a little more confidence the economy is going to do well enough. doesn't mean they aren't going to back away from this minor course correction. in fact, the critics will say, how can the fed be cutting cutting?he fed be that is the risk. they want to do just maintenance cuts and not be pushed into expending a lot of their ammunition. alix: right. does this print matter? is the ego data we are going to

get actually going to matter? carl: i think it is important what the underlying engines of economic growth are showing. will it push the fed off of its course for next week? absolutely not. david: evan, where are you? two rate cuts this year? carl: i think we will --evan: i think we will probably get one in september and one in december. if you want to steepen the yield curve and show commitment to getting inflation higher, they might go that route. is not going to please mario draghi. david: evan brown of ubs asset management and carl riccadonna of bloomberg, thank you so much. oning up, questions raised

the real numbers for india's economic growth. that is coming up next. alix: on your bloomberg terminal, check out tv . ,ou can check out our charts send us a question, and tweet us. this is bloomberg. ♪

renita: this is "bloomberg daybreak." coming up later on "bloomberg markets," kevin johnson, starbucks ceo. ♪ renita: this is "bloomberg daybreak." here's your bloomberg business flash. netflix forecasts higher sales -- nestle forecasts higher

sales helped by starbucks. softbank is unveiling a second huge vision fund for technology investment. the japanese conglomerate is hoping to raise $108 billion. investments are expected to include apple, microsoft, and foxconn. it is part of a strategy to extend their reign as the most influential investor. president trump lashing out at the prime minister of sweden over what he says is unfair treatment of an american rapper. rockysician known as asap is charged with assault over a fight in stockholm last month. over twitter, the president urged swedish officials to give the rapper his freedom, saying, "we do so much for sweden, but it didn't seem to work the other way around."

i'm renita young. that's your bloomberg business flash. [laughter] david: that story just gets weirder and weirder. it is weird enough for the president of the united states to be tweeting about bail for a rapper in sweden. it turns out kanye west is behind the whole thing because he's a friend. he did it the first time, and then came back again, the president did. alix: maybe there's a really good answer, but what have we done for sweden? [laughter] alix: i genuinely don't know where the leverage is going to be with that one. david: my great-grandfather came from sweden. alix: so we got david westin. [laughter] alix: we turn now to our weekly "business week" profile. first up, india's eco-stats have a credibility problem. the country's rapid growth may be overstated. despite rising tensions in the

gulf, crude prices have not seen a spike. -- andorcycle mi motorcycle makers target women. david: this is a great one. we will get to that. joining us now is peter coy, "bloomberg businessweek" economic editor. we had questions about chinese data, and now we have disrespected advisor for president modi saying numbers are way overstated. peter: this is someone who is in the modi government during much of the period in question. now he's at the peterson institute in washington, and he's used other data which is more reliable vehicle sales, electricity consumption, and so on, and compared that and said the numbers may be overstated by as much as 2.5%. so instead of growth being 7% or more, it could be down around 4.5%.

it is not just that the number is wrong. it is that it goes to the credibility of the indian government, which is crucial. david: and it goes to the question of foreign direct investment. there are people investing in india thinking it is really growing fast. if that is not happening, that may put pressure on india. peter: india is looking towards going to market with a $10 billion overseas bond offering, denominated possibly in euros, yen, or dollars. they need strong demand for that to get attractive yields. if investors have the impression that they don't know what's going on in india, it is going to raise the cost of financing. alix: the indian government has not been very friendly with some u.s. companies wanting to get in, like walmart and amazon, doing business there. they really want us to support their local companies. i wonder what this does to change the local growth profile. peter: it is down to hurt.

this comes on top of another controversy over the unemployment rate, which the modi government suppressed an anfficial -- suppressed official report that said did not hit a 25 year low. i think the idea was always, not be as big or wealthy as china, but at least it has a democracy and more of a functioning government. concern.s the alix: let's go to the second-story, which you wrote, about oil and iran. it was a great article. for iran in particular, you

highlighted economic reasons why they are really stuck right now it comes to their confrontation with the u.s. alix: --peter: right. iran is looking for any leverage they can use in a very tough position with the u.s. sanctions. they've had this low-level unconventional strategy in the gulf of seizing ships temporarily, releasing them, some bombs going off here or there that they deny responsibility for. this reminded me a little bit of the tanker war of the 1980's, with iran and iraq at war and each country attacking the ships serving the other country. dozens of ships sunk back then. inangely enough, oil prices 1986, in the midst of the tanker war, actually fell sharply. that seems like a precedent for what is going on now. the price of oil is down about 1/4 from its peak last october.

david: so not as high percentage of the oil of the world is coming from the strait of hormuz as in 1986, because of shale. peter: it has made all the difference in the world because as soon as iran manages to engineer some kind of crisis which would push the price of some pain tove donald trump, possibly make him back off of the sanctions, u.s. shale producers, reopening wells, producing very rapidly, and suddenly the iran strength goes away. i liken it to the fifth fleet serving the gulf. alix: that is huge. you talk about the applications of the shale revolution in the --., earning an end there earning an energy independent status, but that is a huge lever. it is just acting their

own best interest to try to make more money from oil, and it is a foreign policy tool. david: there's a great piece in here about women and motorcycles. it circles around a woman named ,herry billings, who posted among other things, "i love you so much i want to squeeze you." what was she talking about? all of the motorcycle she has owned. then she said, "if you are learning to ride, you're going to kill yourself writing with men. they ride like bat -- yourself riding with men. they ride like bats out of hell." [laughter] david: this is what every man is afraid of, that they will go off

on their harleys. so the motorcycle industry is targeting more women. peter: the number of women who own cycles has roughly doubled since 2010. they are up to 19% of all motorcycle riders and up to 1/4 among millennials. it really is a new thing, and so important for the cycle manufacturers. david: particularly harley davidson. they had bad earnings. harley needs women. in the u.s. come over 50% of the population is women, so if you target them, you might actually make some money. but with joking aside, you are seeing the same thing with retirement funds because women live longer and have a lot of money to invest. you're seeing a shift in that area. the wealth is going to them, the motorcycles going to them, they seem to have it all. peter, thank you so much. you can read those in the latest

issue of "bloomberg businessweek." coming up, the deal we keep being told is imminent, but not quite happening. the t-mobile and sprint merger is coming up next. alix: and if you are going to your car, listen to bloomberg -- onon seriousness sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

david: this is what i'm watching what's again. t-mobile and sprint. we keep being told it is coming, but now an official at the department of justice says today there will be a major merger announcement. as we know, it is a very big deal between the number three and number four provider of mobile service. in order to get it done, they have to spin off about $5 billion of assets to dish. dish would be in position to become the new number four. alix: so what is the big strength that t-mobile and

sprint would have after all of the device to tears? -- after divestitures? david: the whole claim is that they would go after 5g. they've both been struggling against the number one and two. they need a lot of capital investment. they say this is going to get it done for them. the department of justice has been talking to state attorneys general to get their sign off. alix: isn't part of this whole thing spectrum, too? aren't they going to spin off or sell to spectrum, but don't they need that to get 5g? david: they believe they have enough retained to do what they need to do. alix: i also wonder how are behind they will be or not compared to verizon and at&t. david: great question. alix: particularly verizon, since they went the technical side. david: that's exec lay right. -- that's exactly right.

they've appointed a new ceo who really knows his stuff. they concluded they couldn't do it on their own, each of them, and they have a shot now. alix: with electric vehicles, you've seen a lot of tech startups and tech companies, to the fold. we haven't seen that in this particular instance with 5g. it is still the old-school telecoms trying to reinvent their business from the inside out. david: that is a fascinating point. waymosn't seen like the of this world come forward. alix: coming up, denise chisholm fidelity the management sector strategy, will be with us. this is bloomberg. ♪

♪ tech comes with a big price tag.

google sales beat, amazon reports double-digit sales growth, but with more cash burn. it is all on you, consumer. pressure is on consumer spending to deliver, while business investment continues to flounder. and gaming the fed's next move. mario draghi the latest central banker to go dovish. now it is all in jerome powell's court. david: welcome to "bloomberg friday, julythis 26. mcdonald moat -- mcdonald's earnings came out just a moment ago. sales beat by a big margin. alix: they came banging line with estimates in terms of adjusted earnings-per-share. revenue a little bit higher, and u.s. comp sales superstrong, 5.7%, also beating estimates. david: they've made a lot of improvements in their stores, a lot of changes in their menu.

be paying off for them in same-store sales. alix: you put a lot of tech investment into it, and it enables that kind of growth and efficiencies. that stock up 1%. we also have earnings in tech overall. twitter posting better monetizable daily active users. they really delivered and beat on that. google also impressed in terms and add sales revenue. amazon cloud revenue good, but they are really spending to make one-day deliveries. that is actually weighing on the stock. david: meanwhile, ,tarbucks saying it did well including in europe, where they are selling through nestle there. we will speak with the ceo kevin johnson shortly. alix: as you look at all these numbers and we wait for second-quarter gdp, it doesn't

feel like we are in the dire world mario draghi seems to describe yesterday. the dollar is the strongest currency in the g10 space as the euro takes another leg lower. you are seeing modest buying in the law and -- in the long end. if you have these better numbers and you are able to have commodities rally even though you have the stronger dollar, crude up by 7/10 of 1%. david: mcdonald's is the most recent read on the state of the all-important u.s. consumer. chisholm, now denise fidelity head of sector strategy , and from washington, our own peggy collins. you are responsible for the u.s. economy, sri se -- economy, as far as i can tell. let's put up a chart of gdp against consumer spending. peggy? peggy: thanks, david.

as you said, the consumer is really holding up the u.s. economy right now. as we saw with mcdonald's earnings coming out, earlier this season coca-cola posting good earnings as well, we are seeing the consumer continue to buy. part of that is that we have a lot of jobs still in the economy. the unemployment rate is at 3.7%, record lows, but we are still seeing people like federal reserve chairman jerome powell saying we are not at full employment yet. employers are continuing to new types ofo hire workers they might not in the past. that is really driving some of the consumer spending we are seeing, and that is helping the economy even though we are seeing some global trade headwinds in terms of slowing down. alix: if you take a look at your to date, consumer discretionary is the second-best performing sector in the s&p. what is reflected in those numbers?

denise: it is certainly and economically sensitive sector that is procyclical, as opposed to the global economy, but it has some really critical tailwinds that could drive it forward as well. one is that the potential for fed cuts, both the federal reserve and potential the ecb, have both increased the odds of outperformance for the consumer discretionary sector over the next year. we actually did have a contraction in real retail sales last december when we had the selloff. as much as the data might have been a little bit fluky come that signal holds at least 90% of the time in history. in the the fact it is top quartile of its valuation that has never been a mitigating factor for performance, which makes the reward for the sector pretty positive. david: let's put up a chart tracking hourly earnings against

retail sales. as long as the earnings hold up, are we going to keep seeing the consumer hold up the u.s. economy? walter: i think we are seeing --peggy: i think we are seeing signs the consumer is still holding up the u.s. economy. the question is whether we will see any headwinds move into the economy. companies are holding back on business investment. they are nervous about where things are going with trade and .lobal growth if they start to slow down a bit in terms of investment and hiring, that could start to trickle into the economy and make consumers less able to spend. we are not seeing that yet on the consumer side. alix: if you take a look at the rise in wages, do you look at that also in a bifurcated way when it comes to consumer staples? if the wage gains are in the lower income section of the labor force, that change is kind of what works. denise: from a composition

perspective, it sure does. what is really important to focus on when it comes to average hourly earnings is the acceleration or deceleration. when it is acceleration, higher odds of consumer discretionary outperforming consumer staples. when it is decelerating, the opposite takes hold. it is because of that defensive ballast against when wages go lower, investors get more defensive. so far, wages have been pretty solid. the consumer is the key part of the backdrop that's been strong in the u.s. economy. we need to keep a focus on the potential for shocks to that base. so far we are not seeing any, which increases the odds of a prolonged economic cycle. david: i want to make sure i want to -- i want to make sure i understand. -- you seeing they has to be are you saying there has to be a further rate of increase? if they keep going up at 3.1%, is that enough? denise: enough.

it is the deceleration that becomes problematic. alix: what does this wind up telling us about where we are in the cycle? tom lee, for example, says you could see 3300 to 3400 in the s&p 500 because we are midcycle, not late cycle. how does the consumer play into that? peggy: i think the consumer is the driver of the economy, as we've been saying, but you also are looking at the fed next week. the fed is poised to cut interest rates next week. we are hearing about 25 basis points. that could help fueled the record expansion we are already in. we are already in a 10 year record expansion for the u.s. economy. most people would say we are at the later end of the cycle come of it if we keep seeing some of these job numbers that are posted and if there is still slack in the economy in terms of more people able to bring into the economy in more jobs, we could see more. there are signs that there are

cracks lurking under the system in terms of credit, leverage loans, and overleveraged companies that could crack if the economy starts to slow. david: peggy collins, great to have you join us from washington. denise chisholm of fidelity is going to stick with us. let's get updates outside the business world. really young is here with -- renita young is here with first word news. china, dozens are missing after mudslides across much of the region. tested aea says it has new missile meant as a warning to what it called "south korean military warmongers." south korea is unhappy with its rival's weapons and of element and plans to hold military

drills with the united states. kim jong-un supervised the test launch. iran reportedly testfired a medium-range ballistic missile that traveled 1000 kilometers. that is according to cnn. it cited an official saying that the test didn't pose a threat to shipping or u.s. bases in the region, but it is the latest move in an escalating tension with iran. 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 renita young. this is bloomberg. david: thanks so much. staying on the subject of iran, there is escalating tension in the gulf. we actually had a chance to sit down with mike pompeo, the secretary of state yesterday. he said he was willing to go to tehran to get negotiations started. this is what he said. go. pompeo: i would like to

to speak the truth about what the leadership has done and how it has harmed around. david: that's a noble sentiment. i'm not sure the ayatollah will let him go over and speak directly to the iranian people. alix: it will be hard to get the iranians to talk to the u.s. without rolling back some economic sanctions with oil. at the very least, they want to give waivers to the countries that buy iranian oil so they can start importing a bit more. i don't know how that happens. david: iranians have said you've got to pull back on the sanctions, and the president has said he will not, so a rock and a hard place. , shareholderup walter todd of greenwood capital. this is bloomberg. ♪

renita: this is "bloomberg daybreak." posting its outlook for the year. the company says sales of humira fell during the second quarter internationally. the drug accounts for nearly 2/3 of their revenue. renault is lowering its sales.ar outlook for the largest french automaker struggling with an auto market downturn and dismal results from partner nissan. renault says it's partner's poor performance in the first half cut income. the ceo spoke with bloomberg. >> it is not dragging earnings because thanks to all of the job we have done, we have been the cost of all these elements. be the onee will not

that we are inspecting for the future. renita: renault results capped a mostly looming week -- a mostly gloomy week for the auto industry. tesla posted a worse than expected loss. a seconds unveiling huge vision fund for technology investment. the japanese conglomerate is hoping to raise $108 billion. investors are expected to include apple, microsoft, and foxconn. it is part of the founder's son's strategy to extend his reign as the most influential investor in the industry. i'm renita young. that is your bloomberg business flash. alix: but i find most interesting about this story, you have tech companies investing in tech companies, and it sort of sidelined saudi arabia. david: the say they are still talking about saudi arabia,

and it is a little unclear why. he may have been really offended by what happened with jamal khashoggi. alix: with other countries and companies haven't seemed to care because you have so much money. he has the power to say no because he can get microsoft and apple and their billions of dollars in cash. david: it is pretty impressive, $108 billion. alix: it has been a big 24 hours for tech. twitter with impressive earnings, amazon under some pressure as the company warns that growth is going to come at a big price tag. joining us on the phone is walter todd, greenwood capital amazono owns both and alphabet in his portfolio. with us still is denise chisholm of fidelity. walter: i think this is a matter

of very low expectations even the performance of the stock. , which isce margins always a good thing to see. revenue growth was solid. all of that was very good, plus you've got the stock buyback, using some of that huge cash balance they have on the balance sheet. when you look at twitter, the focus is on the daily active user growth, as you mentioned, up 5 million. advertising revenue about $25 million better-than-expected. the efforts twitter has undertaken to clean up the platform is having a positive impact on user growth. i think that is really the focus today for investors in that stock. david: when it comes to alphabet or google, one of the things that struck me is there was not a lot of discounting for possible government regulation, as opposed to facebook. do you think those are in two

very different situations, or do we just not here as much about it with google? walter: facebook was up 40% year to date, google was up 8%. i think a lot of the concern around google was already in the stock heading into these numbers versus facebook. it had been a headline, but given the stock price and performance year to date, it had been somewhat ignored. when you look at google and alphabet, you do have that going forward, so that could weigh on the shares ultimately s that progresses. also just want to point out you -- have some below love thy some below the line help for alphabet in terms of lower taxes . alix: let's not forget that $25 billion buyback. help me understand, it is a similar conversation to consumer

discretionary that we just had. did biggest performer for the s&p this year is still tech. where do you find the value in tech right now? denise: we do a quarterly sector update for clients. what you've seen is really technology sectors dominating the fundamental story in terms of strength. if i were to put up two charts, it is very unique for the technology sector of all of the 11 sectors. it is the only sector with data since 1962 that is below average on valuation with top quartile operating margins, which means one of two things. either you are discounting a lot of what you are afraid of, whether it be market degradation or regulation, or technology is uniquely positioned to get the double tailwind of earnings growth and multiple appreciation on a go forward basis. david: is technology uniquely the basic sense that the incremental cost of adding a user is basically zero, and overall capital costs are very limited?

it is a different creature from manufacturing. walter: absolutely. you look at the economy today, i know you talked about the consumer versus the industrial side of the economy are two very different places. i agree that technology is in a iod place, and tactically think the sector may be a little bit extended here when you look at the percentage of the s&p. when you fold in some of the other different sectors like amazon, you are pushing 30% plus of the s&p weight. we like technology and we are exposed to it, but i think tactically it's had a good run, so you could see some pullback i think in the month ahead. david: thank you so much. that is walter todd of greenwood capital. denise chisholm of fidelity will be sticking with us. stick with bloomberg today for a

interview with twitter's cfo. huawei in more on today's bottom line. this is bloomberg. ♪

david: time now to look at three companies worth watching this morning. first of all, i'm watching starbucks. they came out with earnings after the bell yesterday, and they did very well. there stock is up as a result. they did well in china, growing in china really fast. even in europe, they are selling through nestle, and it even affected nestle. alix: nestle is the one i am watching. there has been massive interest in the starbucks line. nestle is on track for yet another record. they've really been crushing. organic revenue is up and their margins expanded. organic sales and margins expanded. david: remember all the activists shareholders that said

you should break it up? say thaty do go on to they are going to expand may be plant and animal based proteins, so beyond meat is not just a fad. david: fedex is not having as good a time over in china. we are going to bring in brooke sutherland. it seems the huawei issue is not going away. brooke: the latest is china saying they do not believe fedex's explanation that the rerouting of huawei packages are not a mistake -- packages are a mistake. they say the rules from the u.s. were unclear, and say they shouldn't be responsible for policing packages and shouldn't be liable if they don't know what is in these. this is just not a great situation for fedex. china does not make up a huge percentage of its revenue, but it is still substantial.

david: it is also opportunity costs because you may want to grow their. ups is growing in china quite a bit, so it may cost in terms of their brand, whether people want to use it in china. brooke: absolutely, and throughout asia. for some of these other countries, if they are deciding how they want to plan logistics operations, if you can't get into china, that does create problems for some of these companies. it raises questions about who else may be in the crosshairs of this type of boycott push. there were reports that the likes of honeywell and raytheon could find their products boycotted because they are involved in that taiwan arms deal. alix: not only that, but the broader push from the government to have companies use local manufacturers. basically, some of the lower end anducts from deere caterpillar are coming from inside of china. same thing with chipmakers.

you are sourcing it internally. that is the thing. david: buy american has a counterpart, buy china. david: it is a real threat --brooke: it is a real threat to fedex and ups. alix: denise chisholm of fidelity is still with us. how do you look at this? denise: the fundamental data has been quite poor and a fundamental driver of the weight on the stoxx over the last year -- on the stocks over the last year. investors, asfor much as this seems to be the time when you don't want to own them, this is the opportunity. these are the quartiles of these fundamentals where you actually have 70% odds of outperformance, in conjunction with the fact that we are seeing easing industrials as a sector and transports are one of the key beneficiaries. alix: how does that wind up squaring off with the future and

what we are looking at next week? brooke: next week we calm down slightly on industrial earnings, but we will get numbers from ge. byis significantly affected interest rates, not in a good way. if interest rates go down, that significant raises ge's pension balance. alix: brooke sutherland, thanks a lot. good to see you. denise chisholm of fidelity is sticking with us. coming up, second-quarter gdp numbers for the u.s. coming up soon. do we see a 25 basis point cut from the fed next week? this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. away from the first read of second-quarter gdp. deutsche bank says there's something for everyone in the report. equities up earlier in the session, s&p futures up .2.

quickr asset classes, a check at what the dollar is doing, holding on to its strength in the market, although off the highs of the session. less buying on the 10 year. totally flat. the number dropping. gdp for the second quarter coming in much better -- 4.3%. . big change personal consumption is 4.3%, gdpr 2.1%. david: opposed to an estimate of 1.8%. up 2.4.price index a slight revision to the positive side from last month. alix: the core pce coming in at 1.8%, typical goldilocks scenario.

core inflation not as strong. slower for the first quarter. 1.1%. i wonder if this can change the fed thought process? david: that looks good. let's bring in a practiced eye. michael gave been joins us. denise chisholm is still with us. michael: the personal consumption number, household spending, unambiguously strong. the data in the corner was pointing to that. my guess is the rest of the report and be soft. business spending will likely be negative. we likely have major tracks from net trade and inventories. growth is about in line. i think it is the composition of the data that is worrying the fed. solid household consumption, the expansion is likely to continue

but weak spending correlates with the industrial slowdown. alix: spending on equipment falling in the second quarter. his .6% in line or worse? michael: slightly better than we thought, that in the margin of error with what you would expect. depending on the revisions, that could be the third consecutive quarterly decline. housing activity down five to six straight quarters. there is an indication that you have a manufacturing slowdown, but you also have an indication that monetary policy may be tight and those things are what are combining to cause the fed to ease. david: we will put up a chart. it is not updated for this quarter, but you will see the trend micro was referring to. denise -- the trend michael was referring to. when will this show up in the overall gdp numbers? denise: it might not show in terms of the u.s. consumer --

the u.s. consumer dominates in terms of the overall gdp numbers. business spending is quite somer, investment spending durable goods bounce back from a significant contraction over the last year. overall,i is below 50 with the juxtaposition that the u.s. consumer, wage growth, income growth has been strong. from an investment perspective, you look at what your concerns are for the cycle. in the data, there is a fork in the road. a lot of the odds are strong odds for market advance and strong returns in a non-recessionary scenario. when you think about recession, what i think about is a shock to the u.s. consumer. to the extent this report shows we are not seeing shocks to the u.s. consumer, i think that is positive from the framework of we may see a prolonged cycle continue. alix: net exports and inventory subtracted 151 basis points from second-quarter gdp. government spending boosted by

the most since 2009. government spending helping gdp? david: that is before the new deal. alix: that is before the debt limit. david: more stimulus on the way. alix: talk me through those points. does it drag like you thought it would be and does get worse or stabilize? michael: it is about what we thought it would be. they added strongly to gdp in the first quarter. these are volatile categories and do not add to growth much. not a big surprise that that reverted. i would smooth through the q1 and q2 data. i agree the government spending data is quite strong. the budget deal that just passed the house yesterday or this anothershould add about $100 billion in spending above current levels. that plus household spending is likely to keep the economy in a low growth, low inflation expansion. david: if we come back to the bed, if they made a mistake as many people think they did when

they raised rates, is it showing up in the economy? where does that show up? denise: if you look at the historic data, which is interesting from a federal reserve standpoint, as much as we think they have a mandate, inflation is the focus, gdp is the focus, what changes their trajectory is not the unemployment rate, it is more often than not inflation. inflation is what potentially gives them cover for the cut. what you have seen as a 50 basis point to deceleration in core inflation which puts a 50 basis point cut on the table from a probability perspective, even though it is rare and has only third of the time since the mid-1990's. 50 basis point is rare, but if you look at the overall mandate and what has changed the trajectory for the federal reserve, it is on the table. alix: you are seeing selling on the front end. forael, your expectations

25 basis point cut next week. does this change? how you read it? michael: this is in line with the 25 basis point cut. i agree there's an argument for going 50. the june data is good and the fed messaging was clear. i think we are comfortable with 25, signaling they are likely to do more and i would agree with denyse. the main indicator that suggests policy may of been tight is inflation. i think you can also add housing and maybe bank lending concern categories. i think there is a good argument to recalibrate on attorney policy stance. go out on the economy. we talked about business investment. we are concerned about that because of productivity. where are we in productivity? we have seen a decline in business investment -- is it showing up in productivity gains? denise: not so far.

productivity has been lower but has bounced over the last year. i think productivity is a question mark. the driver you alluded to is business spending. that is the differentiator that is correlated to profit growth as opposed to gdp growth. investors should know gdp and profits have broken down from a correlation since about 2000. what we have seen israel gdp growth accelerate to wherever -- is real gdp growth accelerate to wherever we are, but profits have decelerated. we keep surprising to the upside. it would not surprise me at all, despite the fact that gdp may business spending along with profits may pick up over the next year. alix: digging a little deeper as we round this conversation out. disposable income growth, just 2.5% and also a savings rate

falling. does this tell us about where wages are headed and how the consumer is feeling? michael: i look at consumption in the second quarter against the 1% in the first quarter and say consumer spending at a 2.5 rate in the first half aligns very well with growth and real income. if there is a tweak here or there, the household can pull the savings rate lower. the not think 4 is were consumer spending at, i think it is around 2.5%. david: ginny's chisholm and michael gapen. thank you for being with us. young withto renita first word news. renita: protesters staged a sit in at hong kong's international airport today. they held up signs and chanted slogans including free hong kong. protests have been happening for more than a month. demonstrators are calling for democratic reforms, the

dissolution of the current legislature, and an investigation into alleged police brutality. the u.n. human rights chief says the world's most powerful nations are turning a blind eye to syria. they say the syrian government has continued a relentless campaign against civilians in northwest syria and the national community has responded with a "collective shrug." the u.n. says in the last 10 days, more than 100 civilians, including 26 children, have been killed. the creator of showtimes billions joins some of the biggest names in the hedge fund industry for the take them to school poker tournament. the event benefits reform now, a nonprofit that advocates for not -- four high-profile education for public schools. the top prize went to a billions writer, a theater producer, and

a tech salesperson. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. young.nita this is bloomberg. we are big fans of billions. they have shown this charity poker game before, but the image of him going up against the right of rebellions is great. -- a writer for billions is great. ofsaid i've left them out 7000 and he turned me into a little boy. [laughter] it is all for a good cause. it is for educational reform. the show is a lot of fun to watch. alix: are you a poker person? not at all. you cannot bluff. david: i have no poker face. you see it on my face. whatever it is. alix: coming up, the case for investing in small caps.

we will speak with francis gannon. remember, bloomberg users, interact with the charts on gtv . browse the charts and check it out. you can catch up on analysis and save the charts for future reference. this is bloomberg. ♪

renita: this is "bloomberg daybreak." coming up later today on bloomberg markets -- the close. twitter cfo. this is "bloomberg daybreak." fedexis rejecting claims has claimed it mistakenly rerouted huawei packages united

states. china is also warning it found other violations by the american delivery firm. the case has stoked concerns beijing is starting to crack down on u.s. companies. bloomberg has learned china has been preparing to at fedex to a blacklist of underlying -- unreliable entities. analysts are lifting their price second-quarter sales rebounded from a surprise slow down. news of a huge $25 billion share buyback program is sending the shares of 8% in premarket trading. barney's new york is looking for ways to remain open if it files for bankruptcy. bloomberg has learned the luxury clothing stores talking with existing lenders, including wells fargo about a new loan. the company has been hobbled by steeply rising risks as cash runs out and consumers defect to other outlets. i'm renita young and that is

your bloomberg business flash. david: thanks. time now for follow the lead. we take a look at small-cap stocks and how they are faring in a word of record highs the s&p. to give us the lay of the land, we turn to taylor riggs. taylor: we also want to take a look at relative to the dollar. we know small-cap stocks should be buffeted by a stronger dollar and we saw some big outperformance of the russell 2000 since trump's election through 2018. this is even after wild swings within the dollar. the fed was in a hiking cycle but you got comments from trump about liking lower interest rates and currency manipulation by other countries. now that the fed is on pause and you are getting a dollar that is range bound, you're getting russell 2000 performance that is looking choppy and waiting for that direction from the dollar. what this means, as you as hinted, is that the russell 2000

performance relative to the large-cap peers now down to the worst since 2009. you can see the ratio of that outperformance only now at about a .52. the story look similar as we take a deep dive into some of the individual sectors. this is the russell 2000 sectors relative to the large caps. getting outperformance in two sectors, health care and utilities. defensive sectors otherwise. looking back within energy and other defensive. now it looks like even in the midst of a little bit of a trade fight and all of the dollar weakness, the small caps are not outperforming the large-cap peers. alix: thanks so much. , heing us is francis gannon has $14 billion of assets under management in small caps. oneou take a look that last which showed the outperformance of health care utilities, it was

looking -- it was like looking at the s&p 500. when you go? francis: in this environment you are seeing massive underperformance by small caps. and one00 basis points standard deviation of underperformance. historically, when this is happened, looking at the russell 1000 versus the russell 2000, it means small caps should outperform. this is an oddity to have negative performance for small caps with positive performance for the russell 2000. from a sector perspective, it is not surprising to see the health care sector during that much better relative to others on the s&p 500. part of that is driven by the fact that growth is doing extremely well within the russell 2000. in eight of the past 11 years, growth has outperformed value by wide margin, and in health care is being led by the non-partner, biotechnology companies in particular. david: we have relatively low

interest rates and it appears they make a lower. is that helping small caps or hurting. wehave talked before that have a lot of small-cap companies that do not have enough to cover their debt servicing. are we sustaining companies that should be changing? something- francis: people think about is small-cap companies are inherently fragile. i we by company and takeaways with the inherent risk? we try to invest in companies that do not need access or focus on leverage to grow their business by can do it through underlying fundamentals. in this market, with rates potentially coming down, i do not think that changes the scenario. where we saw the big large underperformance in terms of high-quality businesses versus lower quality breath and was during the zero interest rate moment in time. you would think with rate coming down next week, potentially 25 or 50 basis points, i do not think it means the overleveraged

businesses are that might -- alix: what you do. and large-cap space you have not -- what is the story in small caps? francis: the valuation opportunity in small caps is quite large. the story for me as you cannot by the market, you have to buy the individual companies. from a bottoms up perspective, there are opportunities, particularly in cyclical areas of the market which have been left for dead. we've been fighting this narrative of recession, even with 2.1 gdp growth this morning. we've been putting a narrative of terror and earnings were -- ariff and earnings recession. david: if you believe small caps are undervalued, why? why would it be that the market does not give them the valuation they deserve? caps remain one

of the most inherent efficient asset classes out there and money in the large-cap space still chooses some of the same type of names and small-cap's, the same thing has happened with not earning companies, software companies, and yet i think there is enormous opportunity from a valuation perspective in industrial businesses. economically sensitive businesses that the market has not focused on. alix: what are they? francis: i would focus on higher-quality businesses. if you can pick something within the small-cap space, pick quality. -- isy is never used word an overused word. focus on companies that have a higher turnout capital and can generate earnings and navigate through what has been an uncertain economic environment. we would put industrial businesses, machinery businesses , there is a lot of interest in small-cap is mrs. based in the middle of the -- small-cap

businesses based in the middle of united states that will also benefit outside the united states. small-cap sort companies according to how dependent they are on the dollar? francis: we do not source them based on that. we are looking for the opportunity the bottom-up standpoint or we can find any opportunity. alix: francis gannon, thank you so much. great to catch up with you. coming up, the u.s. consumer coming through. gdp rising more than expected. 2.1% in the second quarter. the market reaction. what it means for the fed. if you're heading out and jumping in your car, get into bloomberg radio on sirius xm channel 119 and the bloomberg business app. that is the view from our office. a beautiful friday. happy friday. this is bloomberg. ♪

alix: here is what i am watching

-- the u.s. consumer coming through. u.s. gdp 2.1% in the second quarter. ,oining us is michael mckee bloomberg international economics and policy correspondent. i want to dig deeper into the headlines. the market reaction is prestandard. what were some of the standout for you? michael: the numbers very strong. we saw people buying an enormous number of durable goods. not sure whether was already for traders were all what but we -- all refrigerators were all what but we bought a lot of something. business spending contracted and that is something the fed has been worried about. business spending down .6%. residential investment, houses, we were buying durable goods but not sticking them in houses because housing went down 1.5%. a mixed picture in these numbers not particularly good for the overall economy going forward except the consumer. these numbers have

higher-quality -- you do not have as much of an inventory affect this time? michael: a lot of inventories worked off did have a big impact on growth. the setup going forward is we are relying on the consumers. savings went up but mostly dividend and interest payments to the rich. they've revised all the numbers going back. donald trump's percent growth rate when away. 3.5% for last year. atdoes suggest that few look the business investment aspect, tax cuts did not work. you brought up durable goods. you buy them and do not replace them for years. you cannot count on that kind of spending to hold up. michael: you cannot count on that kind of an increase. we are still at low unemployment, still seeing wages rise. americans have a high savings rate so we can spend. it is a question of what we will spend it on.

alix: you have selling on the front end. nobody understands why the fed will cut. these numbers do not help make the argument. unless you will argue business needs lower capital to increase its investment, which is not what business ceos seem to be saying. david: they're going to cut because they said they are going to cut. alix: bloombergs michael mckee, thanks for a much. openg up, bloomberg -- the with jonathan ferro. u.s. gdp comes in 2.1%. thank goodness for the consumer. this is bloomberg. ♪

jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪

jonathan: u.s. growth coming in better-than-expected ahead of a much-anticipated fed decision. mario draghi making investors wait until september. the ecb putting together a stimulus package. amazon does not deliver for investors with burgeoning costs for its one-day shipping push. good morning. here is your friday morning price action. update points on the s&p 500. in the fx market, the dollar stronger for a six straight session. euro-dollar 1.1134 and treasury yields unchanged. 2.08%. let's begin with a big issue. investors clicked over the outlook for the u.s. economy. >> we know there is a slowdown. >> growth slowdown. >> slowdown in the u.s.. >> fundamentally the u.s. economy, i do not think, is threatened by the recession.