>> "bloomberg markets" starts right now. kriri: let's get a check on the markets. on the surface, it doesn't look like anything is happening with the s&p 500. you are looking at the benchmark flat on the day. it was down almost 1% earlier in the session. that means there is some intraday movement you are not seeing on the surface. a lot of that has to do with the earnings stories and tech. the bond market, getting more interesting. the 10 year yield inches closer back to 4%. what happened to the idea the bond bull case was now building? it seemed to be going in the

opposite direction slowly. the 10 year yield, higher by two basis points. what if we get to 4% on the 10 year yet again? the bloomberg dollar index, only higher by .1%. that dollar strength, seeping back into the story. it is smart money, the hedge funds. we will dive into that as well. the ripple effects of that are showing up in the commodity space. we are looking at brent crude trading at an 83 handle. divergent perhaps from what you're seeing in the other markets. it comes out to the economic data and specifically today perhaps more cues from the federal reserve as we get beige book data due at 2 p.m. new york time. we spoke about the fed effect on the investor playbook. take a listen. >> the tension between growth

and inflation, we have to see how that plays out. they don't want to repeat a 1907 by the damage is going to be so great that they are going to have to cut and cut hard. >> we don't want a repeat of the 1970's and so far it feels like corporate america has been able to navigate that environment. today they are really driving the trade. what's that's all year for the stock market if the 1970's scary inflation is in the rearview mirror? joining us to discuss is aaron brown -- erin brown over at pimco. two years ago, even a year ago, you looked at the bond market and the yields went up in the stock market went down and vice versa, then we are talking about margins and efficiency for the tech stocks. what is leading the stock market today? what is driving it? >> there's a couple of different factors. when you look at earnings, they

have still been fairly robust. certainly we are off the highs that we saw in the post-pandemic period. we saw earnings decline, but still earnings are quite robust. still suggesting there's decent strong demand ahead albeit waning. i also think by and large, equities outside of big disruptions to the market tend to move up. we have seen this sort of grind higher as the markets are really waiting for recession which looks to be on the sort of doorsteps of investors but has not yet hit. sort of in the absence of bad news, the risk is there is very little price then and there's a lot of complacency when you look at equities regarding the outlook ahead.

the bond market is telling you that there are risks that are starting to percolate and you are starting to see an economic slowdown. inflation is falling but is still going to remain high. equities on the other hand are really operating in absence of any risks on the horizon. i think that disconnect between stocks and bonds right now is telling you a story that equities -- you should be more cautious about equities. >> when you are looking at the individual names, tesla, ibm reported, it felt like it was an easy trade. if they are talking about cost efficiency or layoffs or margins for example, it was pretty easy. you do well on margins and you are rewarded by the stock market. what is the average equity investor going to reward any given s&p 500 company today?

what is the one thing they are looking for? >> i think companies that can do well and absence of high gdp growth are going to be the ones that outperform. we are going into a slowing gdp environment. we think we are headed into a recession by the back half of this year. if you can do well by extending margins or being able to operate in a low gdp environment and negative gdp environment and still have earnings rose, whether that is through margins or leverage more broadly, that is was going to outperform. i think the more cyclically oriented -- more economically leveraged names like industrials broadly speaking are going to be the ones that are going to be hurt the most. kriti: the companies that outperform in the absence of high gdp to me is an easy recipe for buy tech. when are we going to see the breadth, is that something you

are going to see postrecession whenever it hits, or something we should be seeing now? >> tech is operating in a little bit different environment than we typically see in cyclical environments. that's because the post-pandemic period where you had this really big most detect demand -- boost to tech demand that then fell as people returned to a more normalized environment again. tech in october got down to relieve the stress levels. since those october lows, you've seen a 20 per -- a 27% performance. a 40% return of tech and semi conductors. that pace of recovery is starting to wane a bit. we are starting to see sideways trading in tech relative to the overall market, inflecting a little bit lower. tech and the semi conductor

space in particular is attractive to buy at lower levels but i want to see about a 10% pullback from here before i feel comfortable getting back into broader tech. i think these names have outrun a little bit some of the first quarter optimism that we are likely to see out of earnings. you may see some disappointment over the near-term trading period. kriti: a little bit of a technical correction. in the absence of reallyclear macro correlation , as we see relationships breaking down, what is the stock market going to take its biggest cue from? >> i think credit. it always takes its biggest cue from credit. credit tends to be the canary in the coal mine. it tends to roll over first ahead of equities as you move into a recession. that's really what i would be watching. particularly high-yield,

for cracks in the system. kriti: timing is everything, the pricing of that from july of this year to 2025 -- erin brown e, thank you as always for your time and insights. time for bloomberg's first word news with simone foxman. >> the trial has been delayed. his attorney asked the court for a two-week delay to give the defense more time to for a pair. he is accused of sharing information about russia's war in ukraine and other top national security issues on the social media platforms, discord. the u.s. defense secretary says he fully anticipates sweet will be a member of nato in time for a summit of the alliance's leaders in july. austin encouraged turkey and hungary to ratify the bid as soon as possible.

he declined to say whether a recent u.s. steel to provide fighter jet upgrades to turkiye will provide enough incentive for ankara to finally boat. india is now the most populous nation in the world. according to the yuan, india's population is almost 1.4 3 billion. that edges out china. the increase will put more pressure on india's prime minister modi and his government to create jobs. once again, the bed, bath & beyond is laying the groundwork for a bankruptcy filing. trying to raise another $300 million from equity investors by april 26th. but a filing could come before that. bed, bath & beyond has been closing hundreds of stores across the u.s. and running big sales to clear out merchandise. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm simone foxman. this is bloomberg. ♪

kriti: breaking news here -- frc shares extending gains very quickly. it went as high as 11%, now pairing those gains to about 9%. you seeing this across the regional banks as well. the kre index is the ticker. you are also seeing this for the western alliance. we don't see anything that could be driving the chairs. folks talking about potentially technical stops being in play. we will bring all those updates as we hear from them. let's stick with a lot of the stock movement today coming from the tech names, specifically adrs of dutch equipment maker asml, usually lower in today's session just as the s&p 500

turns positive on the day. is her own concerns follow demand -- these are on concerns that falling demand will have long-term impact on results. ian king joins me from the west coast. thank you as always. for tsmc earlier, talking about cutting capex. how concerned is asml about that end production? >> there's a couple of things at play here. short-term, everybody's focus on, where are we? asml know all the big chipmakers, all the simpson's, intel's, tsmc's. they are hearing things are uncertain and we are not sure about demand in the second half of the year. where we had been hoping things will get better. long-term it is a very different story for them. kriti: expand on that long-term piece of the equation. they are still dealing with a lot of geopolitical tensions

around the world. talk to us about the technology position. >> everybody needs asml if you want to make advance chips. you're going to be lining up for at least a year to get the high-end product. they basically have orders securing the revenue for the next couple of years and making their revenue a lot higher. no need -- know concern about the matter. kriti: talk to us a little bit about the u.s. story. i see these stories from tsmc from and it does feel like and outside of america story.

when does this stuff startup -- start affecting the other tradable names? >> what we are getting to here is an idea where you have seen the stocks index. it's better than the nasdaq. obviously outperforming. now we've got investors saying, hold on a minute. maybe we are getting a bit of -- a bit ahead of ourselves. perhaps a profitable outlook for the second half when we were told inventory would go away and things would get better, perhaps is not that great. perhaps the smartphone market and the pc market is not going to come screaming back. you've got a mixture of concerns beginning to filter into the share price movements and perhaps being in the more underlined -- being more underlined with what the prospects are. kriti: a good chunk of the gains you have seen have fed into the

broader s&p 500. erin browne at pimco, saying a technical correction is due from all about optimism. bloomberg's thinking, think he was always -- ian king, think it was always. ---- thank you as always. joining us now to discuss more is our senior analyst from bloomberg intelligence. it feels like when people sour on your apples and microsofts, teslas even, their own back to the oracles, ibms, tell us what we can expect after the bell today. >> tech spending is slowing down. we saw that in a few results that came last month. ibm's no exception. it will see a slow down in its software unit and infrastructure unit. i think expectations are already

very low for ibm. i think the street is expecting about a three provide -- about a 3.5% growth in currency. the pessimism is probably in the numbers right now. i'd be very surprised if they really missed these low expectations also. kriti: you mentioned the tech spending. let's talk about red hat specifically. what do we expect from there? slower growth? >> yes. red hat has been growing nicely, 50% plus over the last several orders. we think that number will be in the 10%-12% range, somewhere around that. this is a software product that helps out companies to modernize i.t. infrastructure. we don't see this quarter that turning negative because these are far more stable business as compared to i would say consumer spending oriented companies. kriti: talk to us about cash flow when it comes to ibm. maybe two years ago tech was all the rage not because they were

the fastest growing company in the s&p 500 but because they had the fastest growing cash piles. record issuance. what does ibm's cash profile look like? >> to succeed, they have to show cash flow improvement. they reported this year they are going to do about $10.5 billion entry cash flow. if that number slows down for any reason, i think that's not going to be good for the company or the stock. everybody is focused on, can they go out and improve their cash flow profile? because i think that's really what supports the dividend which is fairly high on the case of any tech stock when it comes to ibm. kriti: we talked about red hat and the cash profile which begs the question of further m&a when it comes to ibm. there was a very hotly corporate acquisition. anything in their future or the pipeline there? >> this is one company that's

going to make an acquisition this year. the reason we think that is, when you look at somebody like a microsoft, it's already stuck with the activation drama. adobe is dealing with a deal. there are not that many large tech companies that are out there that can make an acquisition. it is either the private equity firms and within our space ibm's the only one that can go out and buy something at this point. kriti: a really tough time, when your inflationary element is eating at your cash file yet you can actually spend it because of the regulatory environment. anurag rana, thank you for walking us through those crucial stories. still ahead -- it is a mixed picture for bank earnings and bank stocks. we will take a look at fears are on commercial real estate and keep an eye on first republic shares. frc shares up about 9%. stick with us. this is bloomberg. ♪

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kriti: this is "bloomberg markets." time for wall street week. bank profits slid from morgan stanley. joining us is abigail doolittle covering all things bank and ripple effects. as they caused a frenzy last month, some pieces of the equation or things like western alliance and morgan stanley, what were some of the news we got today? >> morgan stanley is paring some of the law says it started to see earlier in the day. the initial knee-jerk reaction to the worry about net interest income paring off to the worry about the trading figures being below expected. when it comes to morgan stanley here, you are looking at a bank that has been trading more richly than the others to begin with. it's not going to cry about what the stock reaction really is today, essentially flat on the day. western alliance, soaring in the

stock market. they have sold off very significantly. the idea of the deposit picture not only stabilizing but deposits coming back in at the beginning of april, a very positive sign for western alliance based on the west coast. people were really worried about the regional differences here among the banks, given the concentration of clients and the deposit flows we have been seeing so much. we have a lot more ahead -- tomorrow is a stacked day of bank earnings and zions after the market today. >> thursday is really the super bowl for anyone covering the regional banks. we've had a super bowl of a week already. in terms of the regional bank story, what's the one question people need to be asking? >> if the initial deposit issue looks like it a stabilizing that a lot of banks, then you look at a firm like citizens, where you are seeing pressure today and a stop for example because of the warning on profitability that muted net interest income figure, not worry is floating

over to a lot of banks, say jp morgan, making a lot of money in different businesses like credit cards. we have other credit card companies also some reporting, too. the health of the consumer will soon be a focus as people think about what the borrowing capacity is for these folks with the provisions moving forward and whether there are certain parts of the market that are no longer really affordable. >> essentially the trade-off and the deposit flow between the regionals and the banks. with the regional banks causing a frenzy last month, commercial real estate has been in the spotlight, one of the ripple effects of what sonali has just been talking about. paul marshall said in a letter to investors this month "we are now likely to experience a fairly severe credit crunch with significant -- which significantly increases the risk of recession. commercial real estate and especially office property is the next shoe to drop." you've been covering the stock market trade. walk us through the ripple

effects we are already seeing when it comes to real estate. >> there are of course these fears of some sort of commercial real estate, in particular office property, the crisis that is brewing. we are seeing signs of it and that goes back to the pandemic. with the pandemic, working from home, vacancies went up. adding interest rates to it, it is more difficult to pay the interest on some of these big loans. we have seen a number of significant defaults on some of these office property loans while the head of the regional bank turmoil. yesterday we had brookfield that defaulted on a relatively small loan. $161 million tied to about 12 properties in the d.c. area. they defaulted on more than $750 million of a loan tied to to -- tied to properties in downtown l.a. we had columbia property trust, $1.7 billion tied to seven different buildings. if you recall, blackstone

defaulted on a loan tied to their nordic properties. so this is the early innings probably of something we are seeing, rising vacancy rates, delinquencies at this point, more and more of these loans with special servicers, it'll be interesting to see how much further it goes. >> this is still something that doesn't feel like the broader market necessarily picking up on. there's nothing tradable here yet. >> is probably not anything too tradable here. office properties is the second largest class with roughly $750 billion worth of loans tied to this. . the decline that we've seen in housing is probably a bigger problem for the economy. but stay tuned to this -- whether or not it goes beyond this very specific area. >> abigail doolittle and sonali basak, all over that story. we will keep you posted. markets are still shrugging their shoulders. coming up, we will ask a great analyst on what to expect on tesla after the bell. stick with us. this is bloomberg.

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>> china is denying reports that it has exported drones to aid russia's invasion of ukraine. the commerce ministry calls to reports groundless and accused the united states of spreading what it called fake information. senior russian officials privately raised concerns 10 months ago about the risks of becoming too dependent on chinese technologies. moderate house republicans and democrats are floating a backup plan on the debt ceiling if president biden and speaker mccarthy cannot cut a deal soon. the proposal would suspend the debt limit until the end of the year and tie further extension until february 2025 spending cuts and reforms. there is growing concern that a default could come as soon as june. donald trump's recent surge in the polls has some top

supporters on the sidelines. trump-pence used his indictment. one supporter says he could absolutely win the nomination but it would spell doom for the party. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. >> welcome to bloomberg markets. kriti: on the surface it doesn't look like much is happening with the s&p 500.

a lot of volatility in the next nine months. the bond market is going to be interesting as we talk about what do you do in the absence of real direction from the fed? it's higher by three basis points. the bloomberg dollar index stronger by .2%. it's not enough to make a real ripple. nymex crude trading lower. jon: individual movers we are watching, the banking sector regionals and wall street. we've been tracking morgan stanley's performance which is close to flat after the quarterly results. navigating the headwinds in the egging sector right now. a notable upside for western

alliance. it is up 19%. staying with earnings, we continue to see the market reacting to netflix results from last night. things like the crackdown on password sharing that is already taken place in canada. tech resources a little weaker right now, but we have been closely monitoring the story. a global commodities giant back of the table suggesting they would like to revise their offer but if tech doesn't want to talk to them, they will take the offer straight to shareholders. one shareholder is pulling back saying he would like to see the vote to spin off the coal business. >> it doesn't make any sense to

me to take an offer from one company before the value creating split is being done to contaminate dirty coal with clean coal into a new energy -- entity that we don't know much about. when you can split them and have one and one make three in the sense that create competitive bids. jon: let's get more perspective on this. where do we go? it feels like a lot of investors at the end of the day want to figure out the value of this metals business that teck has at a time when electric vehicles and the demand for copper, that's a vote for next week. >> i don't find anything surprising in this saga.

teck came out and responded to the letter from glencore rehashing that it's not a viable option and pointing out once they get the split done, there is real value in base metals business. it felt like glencore was throwing the ball back in teck's court. we had some news out a few hours ago, one of the shareholders in teck did say that they don't support the split any longer. the things they highlighted that i found interesting was they said even if you split off the coal assets from the base metal assets, it's not a surefire guarantee they would get esg re-rated for the base metals business because they would still be streaming a lot of cash flow from the coal business. i think that's an interesting point that a lot of investors will be mulling through. jon: let's stay on that for one

more second, because on the one hand, there's a large appetite globally for the metals business. our own reporting has suggested the mining giants would jump at the chance of acquiring that business. on the coal side, it is tricky time particularly because of some of the newer complications from institutional investors owning those kinds of assets. guest: this is the whole point, teck wanted to do this split because they wanted to get rid of the whole assets. glencore acknowledged that saying if they acquire the company, we will spin off our coal assets along with there's. everyone is saying if you don't want exposure to coal, we understand that and that's what we're trying to make happen. that's key in what will have to get figured out. we have teck pointing out if you

have len court it's not as easy as everyone thinks. during a call one noted it could take at least two years to execute what lynn core is trying to do. -- what glencore is trying to do. kriti: a major deal in the commodity space, but we have to talk about the broader markets. i'm looking at gold scratching my head wondering what is going on. we were getting so close to the all-time record high on the to drop below 2000. what is your take on the metal space? >> gold is taking all of the messages from the federal reserve. we are seeing the way gold reacts, we spent over a decade watching it search because of the fear of inflation and the low rates and now we are in rising rates and that has been giving headwind to gold although like you said it looked like we were going to get to a record

now holding back. there is more expectation that given the wage numbers we saw this week, the federal reserve might continue to raise rates maybe even more than people were anticipating. that gives a pullback to gold, but if at any point the fed says we are done, there is expectation that old might finally get the support it needs. will it go to a record? no one knows. it's interesting the way it has been bouncing up and down for the past few weeks. >> you have to factor in the physical demand as well. coming up, tesla expected to report results after the bell. a preview of what we can expect. the shares are down about 1% on the day. ♪ this is bloomberg. ♪

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jon: this is bloomberg markets. time for the stock of the hour, we are watching tesla. it is set to report quarterly results after hours today. we think about what tesla has been up to, it's a more competitive environment with other players with their ev goals but elon musk is hoping that tesla can sell 2 million vehicles this year. with the top-selling vehicle, a price reduction since the end of january. we will see how that plays out in the quarterly results as well. kriti: i want to bring in our guest who has a buy rating on

the stock. it's a daring call. we talk about price cuts on the horizon, how does a company like tesla increase volume with this amount of price cut? do they have enough cash to do that? guest: if you look at tesla what they are doing is there the first in the market to dominate the ev space. they have the best profitability in the ev space so they are in the best position to cut price and take market share well ahead of others. if you look at the other startups in the ev space including some of the legacy oems like volkswagen, gm, even the newer they are running -30 or -40% growth margin. tesla is running positive 20% profitability so they are in a much better position to cut pricing and they can get a lot

of the subsidy tailwinds also battery subsidies. they definitely are making use of the subsidies that are out there trying to gain share. jon: at the end of the day, tesla will share -- will sell more vehicles this year than last year. i mentioned the figure elon musk is already talk about 2 million. those on wall street who have been pulled think that perhaps tesla sells more than 1.8 -- 1.8 million vehicles. you think they get to more than 2 million? >> the caveat to that will be what does the economy do? it's all about the consumer. from a consumer standpoint, tesla is in a good spot. they are ahead of other oems in the market in terms of pricing, profitability, technology.

the swing factor the back half will be where is the consumer? how stable is the consumer coming to market? from a production standpoint, i think tesla is doing very well. they are ramping up their texas factory, berlin, shanghai. it's still a question about the consumer if they can get the demand. kriti: i want to talk about the production side as we talk about their plants in austin, berlin, shanghai. what are the updates will be talk about securing a supply chain? needs art is dire is two years ago, but what is the update? what do you expect to hear on the call today? guest: definitely, berlin has ramped up nicely for them. texas is also ramping up well. shanghai doesn't seem to be having many issues. from the supply chain side, it

is definitely improved. from the batteries, some raw material costs have gone down. will that get reflected right away? , way not. the pricing tends to be on contract. definitely the availability and pricing side has improved quite a bit. that should be a tailwind for them. production i think is less of an issue. execution has been less of an issue at least on the sedan side. there's still a lot of questions on the cyber truck this till have to be answered, but definitely the sedan's seem to be doing very well. jon: the stock has had quite a run this year. is that consideration when we think about the market reaction

after the bell tonight? guest: as you look back, q4 of last year december quarter was tough for a lot of oems because a lot of worries about a hard landing, recession. as you look at the first quarter, you are seeing those concerns get alleviated. not only that, a big push from the administration. subsidies. he probably would have a tough consumer environment coming up. kriti: thank you as always. sticking with ev's, companies

are looking to find new ways to build sleeker and more cost-effective systems. all -- ♪ >> are solar cars the next ev evolution? decades of work on a solar car is slowing seating to a more pragmatic approach. the sunshine is hard to ignore as it never stops showing up and with the market rife with electric vehicles, there is an auto ecosystem increasingly wired for electrons. as far as cost, solar panels have steadily become cheaper and more efficient. over the past decade, the price of solar modules per watt of

power produced plunged by 78% to roughly $.24 per watt. at that rate, a panel array the size of the sedan has dropped from $222 to just under $50. currently toyota sells a solar roof as an option on the prius hybrid. what about tesla? elon musk and stated he believes the car is one of the least efficient places to put solar. that said, cyber is -- tesla is pursuing an option to add solar to its cyber truck. jon: coming up, we are getting ready to find out more from the

fed in terms of its year ahead outlook. we are minutes away from getting the data from the beige book. this is bloomberg. ♪ harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent.

jon: this is "bloomberg markets." we are moments away from the release of the most recent beige book that could help us understand the impact banking turmoil could have on the economy. aside from the curiosity over where rates go from here, the fact that we have been navigating through banking turmoil, does that increase the attention on the beige book? i think it does. the informational value from the beige book is limited given that there are no numbers that come out in it, but at times like this when there's a lot of

uncertainty in the wake of what's going on in the banking episode, this report probably takes on more added importance. in addition to the typical neighbor market, inflation -- labor market, inflation, and economy, we can hone in on and see where things are in the banking sector. this beige book will cover conditions from all of march through about april 10. it will give us a initial reaction of the fallout of the private economy on the recent banking episodes. how much are the banking episodes weighing on the economy? what's the right equivalent? it's really hard to handicap a specific number. if you look back at the literature on tightening and lending standards, heading into this episode we already saw

massive tightening and lending standards through the fed senior loan officer survey in january. historically, when you have seen net tightening in lending standards around the size that we saw in january, you typically see a lag of about one quarter growth on the magnitude of about a dragon a quarter on topline gdp. i wouldn't overemphasize we are going to collapse in the economies in the midst of a reception -- recession because the data is holding up in the wake of this. in the economy, there's a lot of increased risk and vulnerabilities as we had to the back half of this year directly related to the impact of the banking sector. jon: we will also be navigating more fed speak. how do you think that is going to influence the markets view on what happens on rates? guest: we will hear this later

today from the chicago fed president. he has been more cautious than some of the other members that have been on the hook for increasing rates another 25 basis points in may. when you look at what is priced into the markets, it's almost 90% odds the increase again in may at when he basis points. it is two weeks away we will get economic data. leading up, we will get eci, gdp, adp, jolts data, durable goods. one of the reports that i think is going to get a lot of focus is the fed senior loan officer opinion survey that will represent conditions in april. maybe the beige book today will preview the potential extent of the tightening in lending standards in the wake of this

episode so that's probably what we are more focused on their. the fed obviously the market pricing ahead of them a third meeting will play a role as well. right now thoughts are 90% with the fed take the option and go ahead? probably. it would want to avoid surprised. but this will give us information to help determine. if you look at the data since the march meeting, the odds of a hike have moved from 40% to 90%. we will see leading up to the meeting whether or not the fed delivers another hike. kriti: thank you as always. we are seconds away from the beige book. the market is virtually unchanged. stick with us, more markets ahead. this is bloomberg.

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still have the chance. markets remain in a holding pattern, or data out of -- more data out of the economy and we are waiting for that big fed decision. romaine bostick can figure down to the closing bell. two hours to go. bit of a repeat of the last few days. a market that lacks capital to move up or down. basically unchanged on the day across the board with the s&p 500 right around 4100. -- 4150. vix dropping down to 16. subdued nature of volatility gauges remains perplexing.