alix: sexy risk -- backseat for risk. glutea warns of an oil overwhelming storage. loan loss provisions bite big banks. goldman sachs and citi now on deck. and a rout in retail sales. we get the latest read on the u.s. consumer. welcome to "bloomberg daybreak" on this wednesday, april 15. i'm alix steel. it is definitely risk off. a big part of that is oil, as the iea issued a terrible demand forecast. s&p futures around the low of the session. money moving into the dollar as the safe haven. want to get right to the news of the morning. , you putmerica results

money away for loan loss reserves. alison williams joins me now. what were some of your takeaways. [no audio] actually, we are still working on her audio, so let's go to annmarie hordern first. part of what we heard was from fatih birol of the iea talking about how bad demand would be, despite any production deal. annmarie: some seriously drastic headlines out of the iea.

the other part is what they are talking about what this means for storage. it is testing the logistic capacity to the limit. on the demand side, they see april serious demand destruction, down 29 million barrels a day. for the year, what that means is 9.3 million barrels a day, the worst we have ever seen on record in terms of demand. what the opec+ cuts probably did was maybe pull us back a little bit from the brink, but not doing that much. you can see that with what is talking about in storage. they say that could be exhausted by the middle of the year. all of this putting downward pressure on the future prices. wti falling below $20 a barrel. the physical market as well. on top of that, in the macroenvironment, all of this is deflationary.

also, what this mentions -- also, the iea mentions what this means for the industry. alix: -- still a demand issue. annmarie: they talked about slashing their upstream by as much as 32% this year to 335 billion dollars, the lowest level in 13 years. we've seen this from all of the big majors, including exxon in the united states. companieshese reducing their permian spending. the texas railroad commission, which oversees and regulates the oil industry in texas, there was a meeting yesterday you can actually watch live, you saw the fragmented industry in the united states on whether or not they should pro-russian and make this -- whether or not they should proration.

alix: annmarie hordern, really appreciate it. one thing that also caught my eye is a piece from bloomberg opinion author john authers. he talked about growing concern that the entire u.s. stock market has grown top-heavy for quite some time. the five largest companies in the s&p i market cap, this chart shows the combined weight of these stocks in the s&p. you can see how they've grown in the past five years. generally, buying the biggest stocks has been a bad idea because these have nowhere to go but down. in theory, that should bring some of these names down and shock the entire market, but we have not seen that yet. if anything, they have started to outperform more, especially stocks like amazon and netflix. i just want to recap bank of america numbers. earnings coming in about $0.40 a

share. they beat on equities trading and investment banking trading, but the numbers were all about the loan loss preserve. reserves built by about $3.6 billion. total provisions for losses $6 billion. coming up, more on your news, trade and analysis on the markets in today's first take. this is bloomberg. ♪

♪ alix: for more on bank of america, that stuck down more than 1% in premarket, but really , alison williams

is now with me. what were some of your key takeaways from b of a? alison: you hit on a couple of the highlights already. big provision across the banks. is that going to be enough? it is going to take us a while to figure that out. at ratio to loans coming in 1.5%, sort of between wells fargo and jp morgan that we saw yesterday. this is what we'd expect, given the mix of their portfolio. we will see what we get from citi later. the other thing at bank of america, and we saw this at jp morgan as well, huge growth in deposits and loans. wells fargo had that to lesser extent. obviously, they are working within some constraints. we saw commercial loan pick up of about $70 billion. investors really focusing on all these drawdowns, etc., but the

other side of that is deposits. growth ise deposit just people coming down these lines defensively and keeping that intact, but part of it is also a flight to quality. the other interesting slide we got from bank of america day really mapped out what we are seeing in terms of deferrals. that is sort of another question , something that jp morgan and wells fargo both said we are in the early stages, looking at bank of america, really the small business loans where we have seen the percentage of deferrals. the number that we got from jp morgan, that $8 billion reserve number, is the $4.8 billion comparable to be of a? is jp morgan lending more, or do they have more un-credit worthy people, or are they being a lot more conservative? alison: well, they have a bigger card business.

that was a big part of it. the two numbers you want to compare, you want to look at the reserve builds in bank of america. there are builds of about $4 billion through their income statement, and their accounting as well. to your point, it could also be that the bank is more conservative, but the majority thehe provision reads to bigger economy. but the card business, if you think about the higher losses in that business and really upfronting those costs, it would make sense that someone like j.p. morgan has bigger provisions. it would also make sense that someone like citigroup would have a sizable position. we will see how that plays out, and if it will make g-v morgan either look more conservative or make jp morgan either look more conservative or less so. alix: i'm also struck by no

covid layoffs. can you talk to me about the a,ficiency ratios for b of and for banks as a whole now? question withg the efficiency ratios is probably going to be on the revenue side of things. we did see jp morgan lowering their cost guidance, and that is related to business volume that's point. -- business volume at this point. america and j.p. morgan, the banks are committing , they've made different commitments, but in terms of the banks generally supporting their staff, making payments to the staff, saying they are not going to do layoffs , obviously that makes costs a little more sticky this time. but what we are going to want to hear about is what is happening on the investment side of

things. jp morgan, even though they are going to have lower costs related to less business and less volume, they are not making cuts to the important technology spending side of things, and that is what i think long-term investors would want these banks , even though in the near term, you will see cost ratios going up. alix: when you get on the call, what is going to be the biggest hole not answered yet for b of a ? alison: what we haven't seen that is a granular break out of their loan loss reserve. we are going to want to take a look at that, compared to what we saw at jp morgan. that is what i want to hear more about. to your point, what are the economic assumptions you are pricing in to try to get a sense of how conservative they are being about the environment?

when we will start to learn more about how these deferrals play out? they've given more information around those, but what kind of carries are you expecting? anything that they can offer in terms of april activity, obviously it is early, but the capital market side of things is helping to fund this provision. what are we going to see going forward? finally, obviously the wealth business. what are the trends they are seeing there? alix: alison williams, really appreciate it. coming up on the program, more of your news, trade and analysis on the markets in today's first take. this is bloomberg. ♪

alix: time now for bloomberg

first take. joining way from our in-house team of wall street veterans and insiders, michael mckee and damian sassower. want to start with you. there is a lot coming out overnight, particularly in china. a lot coming out in the u.s.. give me the big sweep of what we need to know. michael: in china, they lowered a lending rate to banks by 20 basis points, medium-term one year. it matches a cut they made to the seven-day rate last week. those two kind of move together. it is not seen as a huge deal, although it puts more cash into banks that they could then, in theory, lend out, but it is perhaps a precursor to a cut in the prime lending rate, their main rate that the people's bank of china may do sometime in the near future. they have sort of moved past a whole coronavirus lockdown, so

as to get back to work, they are now trying to stimulate their economy. this is seen as a sign that they are getting ready to cut their main interest rate. in the united states, it is going to be about retail sales, 2/3 of theomy -- economy. bloomberg economic folks are looking for a 15% cut. this could be a horrific number. we will see additional sales at grocery stores, of course, but gas stations, not only are people not driving, but the price went down. no one is buying cars. no one is buying clothes. we also get industrial production. it will be interesting to see how much capacity utilization there was in march because factory shut down -- because factory shut down about halfway through. the thing that really worries people is as bad as the numbers are today, next month should be even worse. alix: totally right.

e-commerce will tell that story also. we have a lot coming out. it feels like the markets are ignoring any kind of bad news over the last few days, and now maybe different. what do you make of the risk off day? damian: it definitely feels like that. we have seen spreads come in quite considerably. what is interesting is we have oil back below $20, and what that dovetails with is the amount of emerging-market primary issuance over the better part of the last two weeks. right now, saudi arabia is in the market raising $17 billion of dollar debt. dhabi -- we've seen abu qatar qatar airways -- raise. you are seeing a lot of portfolio managers potentially

getting a bit of indigestion from all of this new issuance. alix: so what does that tell you about investor psychology ct,ause, in the same respe we saw marriott able to issue debt. that means investors are having a shorter-term view of what is happening. damian: that's a great point. obviously, a lot of the facilities the fed has put into place provide a measure of support for all of this, but what the fed lives and breathes is in the security market. the dollar swap lines, the discount window. when you start moving into the commercial paper funding facility, these are unsecured facilities. you have yet to see those levels come down much, and it seems to me the fed is drawing a line in the sand between its willingness to lend against collateral and to lend against no collateral. i think that is a key point here. it is something i am watching.

we will see if they lower the rate on the repo facility, which is providing much-needed support to emerging markets. but if you look at emerging markets and the steps the imf is taking, clearly the imf is focused on the decline in worker remittances. covid has impacted 2.7 billion workers globally, 81% of the labor force. these recent loans to places like el salvador, kurdistan, it is all aimed at declining salvador,s -- like el kyrgyzstan, it is all aimed at declining remittances in emerging markets. mike, i feel like the bloomberg has a lot of interesting stories out today about what else the fed can do. on the one hand, credit suisse talking about yield curve control is going to be key, and also the relationship and the

crossover between the fed and the treasury is more money is actually still needed. michael: treasury still has about half of the money congress appropriated to work with the fed that they could put to work. there are calls to open up additional lending operations to universities and nonprofits. while those are important, they aren't the fed's main concern. not they are looking at is bailing out people, giving them money. they feel that is congress's job . but making sure you can trade.

eye, estrella selling bonds in the biggest sale on record. i don't understand how this

isn't the eventual marriage of fiscal and monetary policy. there was a great article on the bloomberg of mnuchin talking to pelosi and powell 30 times a day. michael: call it monetization. the fed doesn't like that word. it has always been what they are doing. they worry that the intent matters more. it is not that they are trying to get rid of the debt for political reasons. they are just willing to absorb a lot of it because it is what they need to do to keep the economy going. the question longer-term is how long they can keep that up. they did for years during world war ii. of course, a lot of people looking to that as a sign of what they might do in the future with yield curve control, something like that. debt,ates low, absorb the allow the economy to keep your own -- keep growing. the other issue is how quickly the rest of the world will continue to absorb the debt being placed i all of these governments. alix: hang tight because goldman sachs is out early. can't remember the first time that's ever happened. earnings coming in at $3.11 a share. that is below expectations. fixed sales and trading coming billion.er, two $.97 equities also coming in stronger at 2.1 $9 billion.

that stock still down by about 2% in premarket. bank of america also jumping around as we try to suss out what this means. --rall trading route new trading revenue at 5.1 6 billion dollars. very similar to what we have seen from the other banks. the trading aspect still holding up very well as you had a lot of action in the first quarter, although earnings hurt and profitability heard by loan loss provisions, which i don't quite see yet. goldman sachs ceo david solomon saying profitability was affected by economic dislocation, so there you go. the numbersp here for you, goldman sachs down now by about 1.5%. at have a earnings coming in $3.11. billion coming in $2.91

. forecastgetting a gdp 5.5%by about 6.2%, but up in 2021. a deep contraction here in the u.s., and then a rebound. they do say first quarter provisions for credit losses are coming in by about 307 -- excuse me, $937 million for some credit losses. we will break this down on the other side of this break. thanks very much. goldman sachs coming up, more. this is bloomberg. ♪

♪ welcome back to "bloomberg daybreak." by 1.6 sachs stock down

percent, coming out early with some numbers here. they missed on earnings. trading revenue coming in really strong. investment banking super solid at over $2 billion. again, putting aside a lot of money for loan loss reserves. joining me now is bloomberg's sonali basak and sarah hunt, alpine woods for fully manager. thing wehe number one are looking at was goldman sachs is there investment figures. on the trading side, fixed income trading revenue was up 33% to 2.9 billion dollars. over at j.p. morgan, we saw about a 34% gain. we are seeing the relative jump about in-line, meaning they are all able to hold some share in a tough market. that is the big question, given that trading is still such a big proportion of goldman's books. we did see investment banking down, as you would expect, but a jump still in equity underwriting and debt

underwriting. we will see some questions on the call about debt underwriting. there was massive issuance, but we want to see where share gains are made and lost in that business as well. alix: to focus on that for a second, the overall allowance for credit losses at $3.2 billion, can you compare and contrast that with bank of america and j.p. morgan, from what we have seen? is it apples to apples? sonali: at goldman sachs, this consumer business is a small percentage of overall revenue. at bank of america, it is the main show. we know right now for jp morgan that the estimates were based on about a 10% unemployment scenario upcoming, but they've revised those forecasts down to 20%, so they could be meaningfully higher. it is a much bigger percentage of the revenue. for goldman sachs, since they are still heavily tied to markets, the question is, their large corporate clients, how are

they behaving in the face of uncertainty? we see goldman taking a lot of efforts to make moves among small businesses and play their part in it comes to the lending programs and the efforts they made in the light of the covid crisis. alix: right. is a huge push now for david solomon, a big focus rather than, say, what is happening in the trading and investment banking world. how much exposure or risk does this put them at? how do we understand that? sonali: that is the number one question, and it is not just the growth of the consumer business. one thing they did highlight on the first page of this presentation is that the online business has been doing well in this scenario. again, people may not be going to the bank as much necessarily, but they may be going online and putting money away in deposits and savings accounts. that is something they might be able to highlight this time around. again, interest rates are low. what does that mean for the

business moving forward? he made new targets for performance just a couple of months ago, and didn't really outline what that would look like in a downturn. he might be asked to do that now. fair point.int -- when you look at bank stocks down today on the results, do you take that as commentary on their numbers? is it more general risk off? how do you understand what to do with financials right now? sarah: i think the biggest problem goes back to the interest rate question, and arby going to be stuck in a very low interest rate world like europe has been for the past several years. that is tougher for the baxter weather than some of the other issues they are facing right now. -- that is tougher for the banks tow -- for the banks weather than some of the other

issues they are facing right now. there will be a flurry of activity as people are trying to raise money and drawdown credit lines and buttress their cash reserves, but the question going forward is are we stuck in a very slow growth environment. alix: according to goldman sachs, they are basing all of this modeling on u.s. gdp followed by 6.2% this year, but then rebounding 5.5% in 2021. that still sounds to me somewhat of a v, verging on a u. what is your base case? sarah: i think people are writing off 2020 already in saying, it was a pandemic year. it doesn't really count. given the amount of destruction we are seeing, how quickly that can be the case. in big businesses, there's a lot of subsidies, a lot of money going out the door, and they are trying to do that for small business, but america runs a lot

of small businesses. they are hugely impacted by no revenue coming in. i'm not sure the programs are fast enough and big enough to help the smaller businesses. the question is really going to become the economy rebound without a lot of those smaller businesses coming back as quickly. alix: in the meantime, it is all going to depend on the trading revenue. we asked on the call with jp morgan what we can expect from these numbers in investment banking. still: clients delivered little bit in the first quarter, but to what extent are they taking on leverage again? .lso, the volatility depends sometimes it is gapping. but they did show in full force and the first quarter with volumes skyrocketing. for goldman sachs, they are keeping pace with jp morgan. the big question tomorrow is what does morgan stanley look like in trading as well. they are going to want to show that they were able to hold ground among those big three.

i do want to mention one more thing. they did post some losses among equity investments, which we did want to see. it looks like they sold some assets also during the quarter, so were able to harvest some gains. that aeague pointed out 10% decline of the equity and debt holdings would be a significant impact to revenue, but it was not a huge impact in this quarter, which is a good sign for this business that they have been growing. one more quick when is that consumer banking rose 39%. so all of those aspects i was telling you about savings and deposits, goldman was really able to show up in the first quarter and show that their model is good for this type of environment. alix: and just to reiterate, we got some clarification on the investment banking revenue. it actually came in at $1.74 billion, so still he beat, but

not as much as we originally thought. is volatility good? is volatility bad? a lot of people trading right weren't around in 2008. are we in a new volatility regime? what is fair value for vol, and how do you translate that into asset allocation? sonali: in the last couple of years, some of the volatility in certain parts of the markets did not exist. for the first quarter of this c was this strengthened fi strengthened by currencies, credit products, and that type of volatility is something the banks might be able to capitalize on when it comes to the fixed income trading in the next quarter's. alix: sarah, what do you think? sarah: it is interesting because the fixed income trading, you would expect to have huge volumes given that rates fell so

much. to the extent we have been living in a low volatility world, i joked to the other day i would never complain about the volatility again because high volatility has come with some real seismic changes in different sectors of the market. on howe get some handle this is going to affect everything, i expect volatility to stay relatively high. you get different ideas about how the economies can reopen and what the results will be, and as different waves go through the market of either optimism or pessimism, you see the markets react to that, and they can react very sharply. i expect that volatility to continue until we get some sort of path forward where you can start to project forward, where right now i think that is a very difficult game because we just don't know what the answer is. don't know when things will reopen to the extent we expect them to look like normal, and we don't know the timing of when people will start to travel and open things up again. i think it is very difficult to project anything in the longer

term, and as we get through more of earnings season, i think people will start to get a feel of how to look at what is happening now and project that into the next quarter, but longer-term projections are very difficult at this point. alix: agreed. when you have the vix at 40 and the s&p at 2846 as of yesterday's close, do those levels sound right? if not, what do you do? sarah: i think this is the question we are all asking ourselves right now. you had such a fast drawdown in such a fast snapback, and the question is, does that sound like -- right now, the market looks like a discounting mechanism. we are going to write off this year, not worry about earnings, and look at 2021 and assume there is some sort of big move back because things will get back to normal, and there will be a fast snapback of economic activity. i think the real question is is that going to look the way we are projecting it now, or is that going to take longer, or is

it going to happen quickly? right now, it looks like the market is predicting a pretty fast snapback, basically putting you back where you were in 12 months. we will see if that happens. i would love to think that could happen. i think the trajectory of this disease and of the economies being able to open is still a big question. that puts i? the market is supposed to be discounting income streams, are you sure that next year is going to be as good as you think it is? if not, do we need to come in a little to reflect that risk? there's so little money to be made in fixed income on the holding at side because you have no interest rates that people are being pushed back into equities, which has sort of been the global story since 2008, 2009. the question is how they will resolve themselves and whether or not the fundamentals can catch up fast enough to where the market is projecting their

going to go. alix: really good to catch up with you, sarah hunt of alpine woods. hope you're doing well. bloomberg's sonali basak, thank you as well. a few more headlines crossing from goldman. they say they continue to limit future capital distribution. all of the banks said they would not do any buybacks. dividends are the big question. they do expect reduced levels in some investment banking. reduced revenue in asset and wealth management. in the general markets, we are looking at pretty solid risk off kind of day. part of that is oil. euro-dollar heading lower. european stocks around the lows of the session. you can see them move into the dollar, a move into yield. gold still trading around the highest level we have seen in about seven years. i am hearing calls now for record highs for the gold market as those negative real rates

really put money into the gold trade. barrel,hing $19 a rolling over. it is all a demand story. it will be really hard for risk to catch a bit. we want to give you an update on headlines outside the business world. here's viviana hurtado with your first word news. the trump campaign sending out a fundraising email that accuses china of lying about the outbreak. senator josh hawley introducing a bill that could make geithner liable for civil claims regarding the virus. president trump cutting off funding for the who, saying the agency took china's claims about the outbreak at face value. now a temporary lifeline for the u.s. airlines have reached preliminary deals for the u.s. treasury department to get billions of dollars in federal aid. it gives them room to limp along while they wait for travel restrictions to ease. the government is requiring the airline to repay some of this assistance at interest.

germany, for the six day and a row, the number of new coronavirus cases falling. there were a little more than 2100 new infections this month, the lowest increase. still, germany is likely to extend nationwide lockdown measures until may 3. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thanks so much. a headline crossing on the bloomberg, france is expecting the g20 to offer african nations a moratorium on debt. pretty big headline is the imf meetings continue. coming up come out of hibernation. david tice, ranger alternative management cio, one of the biggest bears, is back on the street after a big hiatus. if you have a bloomberg terminal, check out tv . click on our charts and

graphics, interact with us directly. just go to tv on your terminal. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, mike wilson, morgan stanley chief u.s. equity strategist. ♪ alix: a risk off day developing here. futures dropping as earnings continue to roll in. joining us is one of the best-known bears out there, david tice, ranger alternative management chief investment officer.

david, really great to talk to you. welcome back to the equity world and the bear calls. give me your 32nd production on where you think the market is going to go -- your 30-second prediction on where you think the market is going to go. david: great to be with you. this virus is very sad for where we are. think a lot of people are not looking at the true facts. we've essentially had a fibonacci retracement of about 50%. unfortunately, this stimulus is not really stimulus. it is just keeping the wheels on. it is going to be too little, too late, and not big enough. there's so many companies with 70 people that are potentially going to fall through the cracks . this $1200 is not going to last long. if you have sales down 50%,

these earnings are just going to get wiped out. unfortunately, this is going to change the mentality of people. people are not going to go out to restaurants as quickly. i still think a vaccine could be 2021 before it is out. is going to be issues. this is a depression, not a recession. days, and in the old the last crisis, that low on the s&p, how bad does it get? what does that retracement look like? this is not really 2008. this is not 1987. this is more 2000 to 2002. therefore, i think this market could easily be down 60%. cisco, ciscoack at

had a 30% decline, and then suffered 69% decline after that first 30% decline. there's a lot of people that feel like stocks are cheap after this first decline. these stock prices could go down a lot further, unfortunately. something popular that you worked with was short equities come along gold. does a trade like that really work in a condition like this? believer insuch a gold, and believe that gold stocks are a record level relative to the bullion. you look at the federal reserve and treasury efforts to get the back where it was.

even as the dollar rally short-term, gold can still go up. we are going to break through 1800. we are going to break through $2000 on gold. it makes all the since of the world to me. alix: when you have days like the last few days, when you have a super solid rally within the s&p, some sectors erasing the bear market decline, the high-grade market wide open. that? you think about will those problems come home to roost later, or can we live in a risk on environment a little first before we get to your predictions? david: really, these are typical oversold rallies frankly, people ought to be think about selling every rip rather than buying every dip. we had about a 55% rally

retracement from the low. it is possible it could go to 70%. but there's no way we are not going to retest these lows, which is 2200 or so on the s&p. , maybe once we retest they hold those lows for a little bit, but eventually it is going to break through. we are going to have lots of buffeting between good news and bad news. there's going to be good news on the virus front for a while, where the number of deaths in the number of instances of the diseases is going to peak. we are going to be feel really good about that. once we get back to work and eliminate social distancing, there's the potential for that to pick up again. we still have concern about the second wave that we know is going to come in the fall. what is going to be the death rate at that point? the spanish flu had a much more severe second instance.

there's just a lot we don't know about. anything the government and the fed can do to change your mind? david: no. unfortunately, when jimmy rogers, famous legendary investor talks about markets versus central banks, there's nobody bigger than everybody. there are so many people out there, and so many trillions of dollars. granted, this has been the biggest response that the government, the fed, that we've ever seen. however, that also has consequences. you can't have modern monetary theory. that is going to have consequences down the road. debtmassive amount of before we get into this, therefore, i don't think

government is going to be able to fix this. we need earnings again. we don't need bailouts. we don't think this $1200 is going to last very long. next oneing to be the? next one?o be the alix: david, really good to catch up with you. we would love to have you back to get your perspective. tentative, rachel are -- david tice, ranger alternative management, thank you. this is bloomberg. ♪

alix: just a recap on what is happening with earnings so far today. goldman sachs down by about 1.5%.

provisions for credit losses swelling by $937 million, as they also have two allowances for credit losses coming in at $32 billion. one loss preserves eating into profits, something very similar to we saw from bank of america, wells fargo and jp morgan. bank of america profit plunging 45%. they are allocating $4.76 billion for loan losses. that is the most since 2010. we will have more on those bank earnings. walter todd of greenwood capital will be joining me after the break. this is bloomberg. ♪

♪

alix: welcome to "bloomberg daybreak: americas." i'm alix steel. citi out with earnings. attorneys coming in light at $1.05 a share -- earnings coming share.t at $1.05 a came inst to credit $7.13 billion. the ceo saying they do have a very strong position on capital, as well as liquidity. that 87% ofut employees are working remotely. bank ofn and america, there's been a lot of articles about them having

employees come into the office. ofy have a $21 billion worth new credit facilities approved. all of the banks, a similar story, putting a lot of money aside to protect against losses. at stock paring some of its losses, 2.7% down in premarket. joining me to help me break it down even further is sonali basak, as well as walter todd, greenwood capital cio. he holds positions in bank of america, as well as jp morgan, in their portfolio. we are getting fixed trading revenue super strong, $4.79 billion for citi. sonali: that fixed trading number is a very large number, and a 39% jump higher. in absolute terms, it is a little less, but still a solid print. in equities also, i 39% jump. trading revenues are good. as you mentioned, $7 billion in

credit losses here, it is an interesting estimate. let's see how severe their expectations are for a downturn compared to their peers. that number at bank of america was quite a bit lower. that said, they did eke out a small gain in their consumer business, a business that jane fraser also overseas. want to hear more collect about how their consumer business is holding up in light of this pandemic. we want to see where they are expanding loans and how deeply they will be hurt. also take a look at net income, down 46%. analysts were expecting 26% decline, so pretty brutal. keep looking for the press release. walter todd, i want to bring you in. would you be adding to your positions of b of a and jp morgan now, based on the macroenvironment? walter: good morning.

thanks for having me on. i think we are comfortable with our positions. we have been buyers of them over the past couple of months. i think it is important to recognize that we have seen quite a move over the past few weeks. bank of america is up 35% off the lows. i think you can still be patient with these stocks and with the market overall, but i think when you analyze the market and stocks specifically, trying to look through but these companies are going to look like coming out the other side, which is difficult because the view is not very clear at this point. but i think the thing to focus on what the banks specifically is the book value, and what is going to happen there, and do some stress testing around impairment of book value, and with the valuation of these companies looks like with that. even when you do that for bank of america, take the book value down 20% from where it is today, it still looks like a relatively inexpensive stock.

same question, just reverse, would you be adding to any back positions? is there an attractive entry point anywhere here? walter: i think if you can buy these franchises below book i think in the long term, you will be rewarded for doing that. again, i think the timing of it, you've got to be careful given the volatility that we know we have seen in the market and will probably continue to see. we continue to look for opportunities to do that. alix: sonali, what else stands out? sonali: one of the major things i am looking at, at citigroup, their shares have underperformed their peers. i'm looking at their international business, where revenue in emerging markets has been sluggish. the efficiency ratio at about

51.1% is still lower than some of its peers. we saw costs rising at goldman sachs this morning. how citigroup will keep a lid on costs is a question. they also made the promise to not be doing massive layoffs in this time, but how long will that last, and how will that impact their spending? citigroup for a while was a cost-cutting story. they did keep a lid on costs last year, but how do they do that this quarter with this efficiency ratio? alix: it's a really good point. walter, david solomon said they may continue to limit future capital distribution. would you like these banks if they didn't pay dividend or suspended their dividend? walter: no. i don't think they are at that point yet. if you listen to what jamie dimon said in his shareholder letter, as well as the call yesterday, they've done a lot of significant stress tests beyond what the government requires,

and feel we are recoverable except for the worst case scenario, which is very dire, paying the dividend. at some point, maybe they have to suspend those to believe the capital, but at this point -- capital come about at this point, the have the capital buffers to continue to pay the dividend. i think that is different from banks in europe that have been cutting the dividend. the banks in the u.s. are much better conditioned from a financial standpoint and should be able to continue to pay those. me somen you give insight into the share price movement? yesterday, when wells fargo and jp morgan reported in a strong market, versus today, when you have goldman, citi reporting down, do we know anything about these results? in theory, we should want the banks to loan out a lot of money

to help the economy and help be a conduit for the economy. can you walk me through some shareholder analysis on that? sonali: it is a very complicated question because people did expect loan losses. they did not expect loan losses to this degree. then, after the banks reported, they still expect worse moving forward, so there is no way to really make shareholders all that happy when there is so much uncertainty that lies ahead. in the statement today, michael corbat of citigroup saying some of this was significantly impacted by changes in accounting rules, which means they are factoring that into account even though there have been reportedly some talk about delays in implementing that. we see banks moving forward to really get ahead of the curve this time rather than being caught on their back foot. will they get rewarded for that? it is still eating into their profit in a low interest rate environment. that will impact their net interest income. so it isn't at this point out

trying to a huge degree that pain that they are feeling on their lending books. alix: break point. walter, sort of a broader question, where is your favorite buy right now? where do you go to hedge all the risk? walter: cash? no, i think it's important, you just mentioned the reaction in the share prices of banks, i think it is important to have a barbell strategy with any portfolio. you're going to have names that are more cyclically facing, like the banks, that are feeling a majority of the pain. they are going to be more volatile, and they have underperformed so far, but you need to have exposure there for the point when we start to look the on eventually end offset that with health care and some of these other areas that are doing well in this environment like some of the pharmaceutical names.

having that barbell approach with any portfolio we think is important given the volatility that we have seen and will likely continue to see going forward. alix: fair point, walter todd of greenwood capital. coming up, we are going to get more -- excuse me, market check first. s&p futures down by about 59 points, right around the lows of the session. it is a move into the safe haven muscle you have dollar and treasuries and most bond markets in europe getting hit. the sort of pacing around highest level that we have seen since 2013. oil getting hit, hard to get any bid in oil is in the teens. coming up, more on the bank earnings of the morning with gerard cassidy, rbc capital markets head of u.s. equity strategy. this is bloomberg. ♪

alix: a common theme in the bank earnings, wall street protecting themselves from losses, building up a lot of reserves. joining me now is gerard cassidy, rbc capital markets head of u.s. equity. what has been your overall take as these big five have reported? rd: what we have seen is a cities.two january and february were too

good months. today we had five large banks report. they also indicated the first couple of months were strong. but march is the big month that has shifted dramatically, specifically on credit losses and the provisions for future losses. that has been the big swing factor. that is what has driven earnings down for these banks, even though revenues have held up fairly well. it is all about the provision for credit losses. questions. in terms of investment backing revenue, can all of these banks sustain that trading environment? gerard: that's a good question, and you are right. the first quarter trading notronment was awesome, only in equity, but in fixed

income. volumes in the month of march relative to january and february, and almost every category, the volumes are anywhere from 1.5 to three times greater in march then january and february, and that has shown up in everyone's fixed trading, commodities and currency trading, as well as equity trading. that kind of volatility is not carrying through into the second quarter -- is now carrying through into the second quarter and will make things a little more challenging and the second quarter quarter, and our view. which leads me to the loan-loss reserves. areou feel like some banks being too conservative or more conservative, or do you feel like they are really lending out a lot more and have more risks than we thought. i am trying to understand why we all underestimated how much they

would have to take in loan reserves. it is the $64,000 question. we will have better answers to are question when the 10 qs filed in early may. give uswhen the banks the underlying assumptions for money they have set aside during this loan-loss provision. the reason the numbers are so is clearly the shifting sands in the economy have been so dramatic that the banks have been forced to play catch-up. there's also a new accounts expectedgy of current credit losses come eight's what we refer to as life of loan losses. so for the first time, the banks are having to estimate what losses they would like for the

loans, which is contributing to the increases in loan loss provisions. great point. in wells fargo, you have and underperformed, but all the others, you have outperform. how strong is your conviction in those calls right now based on the environment we are in? gerard: it's a good question. i would say that it really comes ok onto investors' outlo what is going to happen after the drop off of the economy in the second quarter. we are working under the assumption that the third and fourth quarters of this year would show positive growth off of the lows of the second quarter. see this continuing throughout the year and into next year, that would certainly

push investors to the sidelines , so look fortocks a bombing in the bank stocks we think is going to take place around this time of the next 30 days, and look to bank of america and j.p. morgan, and for the more useful investors, i citigroup. that is the assumption in the second half. we would belong. alix: good perspective. appreciate it, gerard cassidy of rbc. thank you very much. coming up on the program, morgan stanley takes its s&p targets backup. we will break that down with mike wilson, morgan stanley chief u.s. equity strategist. this is bloomberg. ♪

alix: morgan stanley's equity bet, the firm raising its s&p targeted 3000 because it sees higher multiples resulting from a faster and fuller normalization of the equity risk premium. 20 me is the man behind the call, mike wilson -- joining me is the man behind the call, mike wilson, morgan stanley chief u.s. equity strategist. walk me through year process here. mike: we are just kind of coming full circle to where we were at the beginning of the year. that was our original price target. that came down a bit as the recession began. but then, we've been impressed, to be honest come up with the reaction by the fed, how aggressive they've been in intervening directly in the credit markets. if there is one thing we've inrned in the last 10 years, an era of financial

repression, you've got to grab the risk premium what is appears. back in march, that was comparable to what we got to in march of 2009, so a very similar valuation. we since come back down to about 500. but the normal equity risk premium is about 350 in the post financial crisis. it is not going to happen tomorrow because there is still a lot of uncertainty, but we think by year-end, we could get back down to those normal levels and that would argue for a higher multiple, given where rates are at about 18 times. alix: i'm also struck by the caps.or high why? mike: we've been underweight small caps for the last couple of years because typically, as you end a business cycle, the

small-cap stocks struggle, and they have struggled. in the last year alone, we had no earnings growth in the s&p 500, but small caps had negative earnings growth. so they've been in a bear market for quite a while. now that we are moving into a recovery stage at some point this year, typically small caps do better. it is just a simple call on the business cycle. we had the end of the cycle in a recession, so the next stage has got to be recovery. typically, small and mid-cap's lead on the way out. the second part of the call is related to policy. policy response has been at the small and medium businesses because that's where the jobs are. in some ways, the nature of this crisis is potentially going to lend a bigger helping hand to these small and mid-cap companies than they would normally get. what people have also said

we need to see a move higher's rotation in leadership. what does that then mean for tech? many say netflix and amazon are fromly going to benefit the virus. they are still deploying capital, etc. what do you think? ,ike: there are secular winners no matter what kind of regime we are in. amazon is a perfect example. on oura name we had portfolio really since february. we didn't into the bait this crisis, but clearly, they are showing their metal that this is a winning format, whether we are in a bull market or in a bear market. i think there's winners no matter what happens. however, as you point out, the big winners of the last cycle were secular growers, which included a lot of tech companies. there's some wonderful tech companies in their.

however, we do not think they will have the outsized performance they had in the last cycle for a couple of reasons. we don't think interest rates can go much lower, and number two, as you begin a new business cycle, the more cyclical parts of the market tend to do better because they have more operating leverage, and as you've been saying this morning, that's where the upside can come from. it is not that the tech stocks can't go up. it's that they will just lag in the recovery given that they are really a defensive high-quality play. so where does the leadership come from? mike: i think it can come from two areas. we have been recommending barbell. high-quality stocks that have gone on sale, we want to be buying those. we've been adding some of those over the last two to three weeks. the other side, you need to start thinking about buying cyclical stocks, perhaps banks,

which are in the news this week for having reporting numbers. we have to go through this catharsis on the earnings. banks is an area of consumer discretionary, potentially pockets that have been beaten up in some of the industrial areas and even materials, so early cycle stocks tend to do better. the barbell of high quality and early cycle stocks that we think and make it through and have operating leverage to the recovery. alix: final question here, what do you do with something like utilities? the typical safe havens we have seen. what do you do with stocks like that? mike: we downgraded utilities a few weeks ago because it has been a big outperformer. it has been great to own and the last couple of years because we've been ending the cycle. you could say the same things about other bond proxies. those types of stocks we think could start to fade as the

recovery becomes more evident. as far as gold goes, and things like gold that are inflationary plays, we think those are the going to continue to get a bid. gold is the easy one because it is clear that the banks are printing money, and people will want to buy gold stocks, but there are other banks in the gold space. i would say gold and other inflationary hedges should continue to do better over the course of the next six or 12 months. mike, really appreciate it. mike wilson of morgan stanley, good to catch up with you. the latest read on retail sales, and after a production coming up next. this is bloomberg. ♪

alix: a risk off day developing in the market. welcome to "bloomberg daybreak: americas."

retail sales coming out. the dollar climbing as the safe haven of choice. the move in the treasuries is firm. however you're seeing solid selling in the bond market in europe. yields of 12 basis points. spain and portugal also seeing higher yields as well. you are also seeing a move out of oil as that continues to rise. waiting for retail sales. let's get to this number, the empire manufacturing number for april, coming in -78.2. retail sales numbers out. the control group coming in positive 1.7%. that is usually the final demand we wind up looking at. we expected -2%. month basis if you back out auto sales, you are still looking at a decline of gas, backing out auto and down 3.1%. still looking at a record decline for retail sales by the most we have seen in march.

no doubt that will continue or get worse in april. the empire manufacturing number really ugly as well. joining me to break it all down is bloombergs michael mckee, our international and economic policy corresponded, as well as constance hunter. mike, your take away from all of the data so far? michael: the empire numbers are the worst ever. the biggest drop ever and to the lowest level ever. that is more than twice as much as empire has ever fallen during the great financial crisis. theoes tell you the story economy came to a dead stop in march is true. looking through the retail sales numbers. like -- i am trying to parse out the month over month numbers. here we go. the monthly sales numbers.

motor vehicles and sales parts were down 3.9%, which was expected because we had some of those numbers already. most of the other retailers down between 4% and 5%. grocery stores, you are expecting this, up 11.6% on the month. everybody went out shopping. clothing and accessories down 16%. this is the easter month. , youould've been buying are not. general merchandise down 11.7%. food services, this is a bit of -- i gave you some of the wrong numbers. i was giving you the three month numbers. these are even worse. i will take all of the blame. clothing stores down 50.7%. motor vehicles down 23.7%. food and drink down 23%.

grocery stores up 29%. sorry that the data comes out in a truncated form because it is only on the web. we are looking at historically awful numbers. no other way to put it. what we will see with the more than 8% decline overall is we finally get the first quarter gdp number into negative territory. we will see what people like the atlanta fed gdp now factors come up with. confirming aally dead stop for the economy except grocery stores during the month of march. to digest allrd of this news at one time. you are doing a great job. appreciate that. constance, you are joining us as well. we knew this would be bad with empire manufacturing negative

and retail sales record drop, is this in line with how bad we thought, is this worse? give me your perspective. constance: i thought it was going to be atrocious because we were looking at the web traffic to various types of stores and looking at the foot traffic joint one of the things we knew basket size was going up at food and beverage stores. increase is a% little higher that i was anticipating. something like clothing and accessories down 50% is in-line with what i was expecting. drinking places down 23%, again in line with what the foot traffic data and the opentable data would tell you. motor vehicles also in line with the auto sales data we got earlier this week. shutter to think what is coming in april.

like -- go ahead. constance: you go. think whatkes us about initial jobless claims? what is that going to peak, and even if we peak the claims will continue to rise. the overall amount will be staggering. you are going to bring up the empire manufacturing, which saw unemployment, new orders, everything down. constance: new york state is experiencing a very significant outbreak centered around new york city. psychologically, the whole state, it has a significant impact. remember all of these survey indicator as mood well as a data point.

all of this data gives you a sense of the mood. you saw the paper by baker and bloom that came out earlier this comb a bunch ofcom sentiment data at their estimate is q4 gdp will be down 11%. they are forecasting this will last from a long time. it is probably the most pessimistic paper i've read so far. let's hope they end up being incorrect. what would change that is having science that allows us to feel more comfortable, but right now we are not there yet. your question about when to job losses peak? i think this depends on how quickly firms can get to the loans. there was data released about some of the loans coming out.

the largest recipient is construction firms, which i thought was interesting. that is not a part of the economy that has been shut down everywhere. only in certain states. alix: to give a perspective on the market. the s&p is dropping like a stone, futures are off, you have yields here as well as over in germany down nine basis points, the dollar jumping, all of the traditional safe haven moves and risk cap traits you would think of our continuing. mike, when i am looking at the retail numbers, it is a similar question two initial jobless claims. hard to say when they will peak, but in terms of retail sales is is the worst it is going to get? can it get worse? you cannot close a restaurant twice. michael: that is a good question. what we are seeing with the empire numbers is what we are seeing a month.

we do not think he can go down all that much further. most of the retail sales numbers are results from earlier in the month. they picked up some of the closers throughout the month, but i think you will see a realtor klein in april -- a real decline in april. everything will be extraordinarily negative because everything is closed down. what will be interesting to see is the percentage change from the month of march. if you are looking at february to april it would be astounding. we are already down so much on a percentage basis. can it be much more? that will be the question. todayaly in an interview said she thinks the economy will still be contracting in the fourth quarter. the economy will contract all year. we will not see growth resume until 2021. that is the most pessimistic

i've heard from anyone on the fed. she is not a voter this year but it's interesting because yesterday we had jim bullard say we could see a v-shaped recovery and she is saying that will not happen. nobody knows, but for these months, it is as awful as we thought. which is surprising the way markets are trading. you thought it was priced in that apparently not. alix: totally right on that. constance, if you wrap in what mike was just talking about in terms of what more can the fed do, i was hearing things like to thends, which leads monetization of debt. what you think? is a job: i think this for fiscal policy. the fed is stretching their policy ato implement the max. i think what you need is a

fiscal program. how we preventk businesses from closing. the cows may have left the barn on that one. when you think about small businesses and the number of companies that are in businesses below 50 people, that is a lot of companies and a lot of employers. those firms do not have a lot of cash flow. they have 20 days cash flow. if they see numbers like motor vehicle parts and dealers, we think about auto dealerships, we think about numbers down 25%. these are firms that do not have the cash flow to expand that. making sure firms remain viable and going to firms and going to firms in getting money directly to firms has to be a fiscal policy. testingto step up our and contract tracing because that is the thing that will make

people feel comfortable about going back out into the economy if we do reopen. alix: if we reopen. that was striking. thanks a lot. constance hunter and michael mckee, thank you both very much. let's recap these terrible numbers. empire manufacturing down 78, this is a record low, and retail sales following the most ever by 8.7%. you see things like beverage and alcohol and food sales increasing, but everything else is down, in particular clothing sales off in the risk off bid continues to grow. we want to give you update on was making headlines outside the business world. here is viviana hurtado. viviana: billionaire bill gates is criticizing donald trump for cutting off funding to the world health organization, calling the president's move dangerous. who pushedp says the china's misinformation about the

coronavirus. now to a temporary lifeline for the u.s. airlines. the average preliminary deals with u.s. treasury department to get billions of dollars in aid. it gives them room to limp along while they wait for travel restrictions to ease. -- government is requiring the treasury can also take stock warrants in the companies. we end in spain where the government reported the biggest rise in coronavirus cases in six days. in the last 24 hours or more than 5000 new infections, but the death toll declining to 523. spain's health minister saying the country already past the peak of europe's most extensive outbreak. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. -- i am beyond hurtado viviana hurtado. this is bloomberg. alix: thanks so much. from record highs to record lows. we will take a look at what

happens in volume over last month with craig fuller, freight ways ceo. bloomberg users come interact with the charts shown using gtv . this is bloomberg. ♪

viviana: coming up later today on bloomberg markets, joseph stiglitz, columbia university professor. ♪ viviana: you're watching "bloomberg daybreak." i'm viviana hurtado with your

bloomberg business flash. we begin with frontier communications. it filed for chapter 11 bankruptcy. it is one of the biggest health company organizations and almost two decades. the company is a plan to cut $10 billion in debt after years of losses and wireless telecom. frontier provides internet, tv, and phone service in 29 u.s. states. the irs breaking for another epidemic. the tactics about scammers. they are trying to get their hands on the $1200 stimulus checks being sent to millions of americans. the rs officials warning it is an opportunity for scams and low-tech crimes -- that is stealing checks from mailboxes. and that is hurtado your bloomberg business flash. alix: time for the bottom line. we look at companies and sectors worth watching. today we will get a read of the economy and the trucking and freight industry. freight volumes have gone from record highs to record lows in

here's a man who can give us real insight, craig fuller, freight ways ceo, widely considered the go to for information on the freight market. walk me through what has happened in the last four weeks. craig: it has been one for the record books on the high side and the low side. we saw surging volumes throughout. february, the half of so around valentine's day is when the market started to firm. then we saw massive surges where volume jumped 30% over those february numbers. what has happened in the last two weeks is there has been a significant drop off in volumes and now we are at a record low. in the contract market, we are down 10%. that is the business most of the larger truckload carriers are involved in where they have assisted runs and tends to be

more exposed to cbd and grocery than other parts of the market. stock market volumes are off 50%. it has been a stressful time for the industry both on high demand trying to respond to these demand surges, but also very low volume. on the demand search side, before we get to the low-volume side, i am reading a lot of reports truckers cannot get to work because they are closed, they cannot get to food or bathrooms, and you give me an idea of what it is it like to be a trucker when you're in the high demand portion? craig: what we saw a couple of weeks ago was the panic that was going on around the entire economy. aroundsed the issues what truck drivers are faced with every day. when they started closing restaurants, when they started closing public facilities, that really impacted truck drivers

because they do not have a life where they go home each evening and cook dinner at their houses if the restaurants are not open. they are dependent on getting food on the road, which means public restaurants. they tend to buy their groceries atbulk or they buy them walmart to stock up for the week , or they buy them at truck stops. the challenge is there was not enough supply. trucking is a critical part of our economy and what we have seen across the entire country is the shipping community, folks shipping stuff, whether it is big-box retail or grocery, has stepped up to try to accommodate drivers offering access to their restroom facilities. access to food. we are seeing the higher quality shippers that understand the

need to take care of the drivers step up. it is still a challenging market. it is challenging for everybody, especially those who are out delivering the goods. alix: i cannot imagine. on the other side, you said that for a lot of trucking companies it will be brutal. we are talking bankruptcies? how much time to the companies have. certainly there is a lot of distress in the market, particularly those companies exposed to the stock market. of there certain sectors freight market which are expensive. that is tanker trucks, because people are not buying gasoline. obviously what has happened in the permian basin has impact the demand for freight. haulers and people who haul the auto parts and cars, and flatbed, which is exposed to oil and energy and construction.

those parts of the freight market are in significant distress. the broader market, particularly the ones that are the large public carriers are doing ok. we saw jimmy hunt report its earnings last night. it surprised people it did better than the worst projections. business, there trucking business has done well. where we see distresses and companies with a lot of exposure to stock markets, the smaller trucking companies as well as the freight brokerage businesses. i think the larger asset-based enterprise scale trucking companies will weather the storm just fine. the reason i say that is because i think we are near a bottom. i think the freight volumes in terms of the deceleration or disintegration is starting to bottom. i think we are at a point where we will see freight volumes return. they are certainly not going to

,ack to what we saw in march but we will see firming as the economy restarts. that is when we see freight markets start to recover because manufacturers have to restore their operations and companies that have been off-line will need fresh goods. we will freight volumes return as they go back to work. good toaig, always catch up with you. i love your insight. craig fuller, freight ways ceo. i have to get you back to get your update. charles schwab also reporting $.58, thatoming in was down from $.69 year on year. open to say clients record 609,000 new brokerage accounts. that is an extraordinarily large numbers. the stop down over 3% on the premarket. coming up, bank of america

shells -- shares also falling. we will bring you highlights from the analyst call. this is bloomberg. ♪

alix: bank of america's analyst call underway. bloombergs sonali basak has been listening in. what have you learned? sonali: we are listening to the ceo brian moynihan and the cfo. in the first is it weeks of april, down 40 to 60%. we have some insight into how the consumer is behaving. $60e they were spending billion weekly, that has dropped to $50 billion and that has normalized from the trough we have seen in mid-march. they are trying to provide bright spots to the consumer. what we do not have is the net income interest expectation

through the end of this year, which we believe will be under pressure. alix: especially on a risk off day. equity futures still treading around the lows of the session, now off 81. btp yields jumping. canary in the coal mine? that is possible. coming up on "the open" with jonathan ferro, he will be joined by peter to jeannie -- this is bloomberg. ♪

♪ from new york city for our audience worldwide, good

morning, good morning. "the countdown to the open" starts right now. your price action this wednesday morning shaping up as follows. equity futures down hard. session lows. off to .9%. a classic risk off set up this wednesday. 8, nine basis points. the dollar stronger with everything in g10. the commodity market getting a lot of attention. typically we shrug off and iea report, the latest one talking about breaching storage capacity, sending crude below $20 a barrel. we talk about the oil market later in the program. we have to wrap up some earnings on wall street. banks have a huge interest in one thing -- credit provisions. we started the show this way yesterday. we bring in bloombergs's and ali bostic wit