>> welcome to bloomberg markets. >> let's get a quick check of what's going on on the markets. continue gains on that's -- s&p 500. defensive sectors are pushing is higher. utilities are rising, energy as well as health care. in terms of the yields, the 10 year is coming down as investors by the bonds. they are selling the two-year so we are looking at 4.85 on the two-year as the curve gets more inverted.

oil continues to climb with nymex up to $76.85 for wti. >> it's a defensive rally if we look at shares of american express as well as csx. american express, their spending growth was the lowest it has been in years. on the flipside, some stocks are working. i find this one interesting, is the best performing stock on the s&p 500 right now. the reason it is rally -- rallying is because it came out with -- it's rival came out with a flea and tick offering. airbnb rallying as well as others because of the rebalancing taking place within the nasdaq 100. matt: the big story heading into

the weekend is the nasdaq 100 rebalance with new weightings expected for the big seven tech names. i'm talking about apple, alphabet. here is what our guest is watching on the rebalance. guest: look at what happened to netflix and tesla, the question is going to be around operating margins and the fact that tech is seeing margin issues, these are stories so i don't want to extrapolate into the full of the spectrum, but the question owing forward is yes, you have a fed that will be looking at we still have a strong labor market so the odds of them doing something in july or almost on hundred percent at this point. can companies continue to adapt and adjust and keep their earnings where they are? that will be the biggest question because the expectation for earnings is going higher in the fourth quarter and that will be a question. >> let's bring in his belly who has been tracking -- isabel who

has been tracking this. guest: we are seeing increased volatility and this is the big story, the nasdaq is going to rebalance taking effect on monday. you can expect today is the last day investors can line up their portfolios to mirror the nasdaq. you can see big moves from the likes of qqq which is the biggest etf that tracks the nasdaq. are people putting more puts to the south side? bets are more on the downside. another wrinkle is that the op-ed. -- op-ed. that's going to add a wrinkle to the market. matt: how much have they cut the big seven down to? they were up to 50% of the nasdaq 100. who is going to be gaining? guest: according to the methodology, the big stocks it's

about 50 but according to the methodology, it's going to be cut to 40 but that is still big. the stocks will see to have their way cuts will be the magnificent seven. the winners broadcom, adobe, costco, pepsico. matt: always good to know those names because trackers will add those. guest: they will have to shed some of the magnificent seven. it is a summer lull but this will jump -- jolt the markets back into life. matt: thank you for that.

now you know which stocks to take out or lighten their loads and which ones to add. let's get broader back to markets at large. our guest is chief investment strategist at charles schwab. great to have you on the program. you have a fantastic vantage point with so many trillions of dollars of assets over management. millions of customers trading stocks. what do you make of the run-up we have seen? guest: maybe this is good news, but i don't cents the kind of froth among our retail clients that you might pick up if looking at broader metrics like the percentage of bulls or the put call ratio. that may be because the folks that i talked to on a day-to-day basis are either longer-term investors as opposed to retail

day traders or they represent advisors on our platform that are managing money for their clients. it's not the kind of froth everywhere that in and of itself represents a risk for the market. many of those traditional sentiment measures show at best some complacent that could represent a risk. matt: a knee-jerk reaction could be getting out of equities and into fixed income because you have such high yields. the two-year yield is 44 -- 4.84%. doesn't make sense for clients to take less risk and get more return? guest: it depends on who the client is. he specifically said should clients get out of equities. i say neither get in or get out of any investment class as an

investment strategy. that is only gambling on a moment in time. the all or nothing decision making in any asset class i don't think makes any sense and to try to cookie-cutter in terms of allocation to equities fixed income doesn't make a lot of sense because it runs the gamut in terms of risk tolerance. we try to simple find this too much. that's not appropriate because investing should be a process over time. last year, there was a thought that stocks and bonds got killed. there was no benefit that accrues in terms of having fixed income exposure along with equity exposure. that got squashed and lightly soap. investors having that diversification always makes sense. amber: i went to pick up the point about froth.

money-losing tech companies had become a bad word in 2020 but you look recently and the money-losing companies are the ones that are absolutely surging. carvana, rivian. what does that tell you about our annual spirits creeping back into the market? -- our animal spirits creeping back into the market? guest: i would fade the move down the quality spectrum. i don't think this is a point in the economic cycle where you want to significantly sacrifice quality or profitability to be more specific. there are times where you got the potential for a big upturn in the economy. perfect examples when it ended 2020 when we started to get the

positive vaccine news. it made sense to go down the quality spectrum. that's where the leverage is in terms of the balance sheet and what has been the lack of profitability and that leverage to an upper profitability cycle. i think it's premature to be making that bet. i think you want to continue to lean into the quality factors and probably take some profits if you have seen outsized gains weld on the quality spectrum. matt: i'm not much on twitter, but i was listening to tom keene the other day and he referenced a tweet that you issued about multifamily units under construction climbing to 994,000 in june tied for an all-time high from may of 1973. the economic situation in this country still seem strong you look at labor, housing starts,

construction costs coming down. we are starting to build more and more because there are no existing home sales out there. are we set soft landing? are you worried that the fed will have to raise more? guest: the debate on recession versus soft landing is a new wants based on that we had a role in recession because the areas like housing and manufacturing. a lot of the goods categories that were big beneficiaries of the lockdown of the pandemic, those have gone in recession. in the case of housing, we have seen recovery out of what was a housing recession but then housing, there are lots of different dynamics in terms of the supply demand relationship. you mentioned the massive supply demand on the multifamily side. that's a risk factor. it on the single-family homes, you have the big difference

elevating the demand for new homes which are in short supply. you have to think of it in three different buckets, multifamily and new and existing in single-family. i think you will start to see divergence in terms of the metrics of the three categories. the housing recession may be over. i think the best case scenario for the overall economy would be better thought of as a continuation of the role. now you have rolling recoveries and you don't ultimately get a recession but to say soft landing everything lanced softly, we have had hard landings in many of the segments already. amber: how do you put that into your portfolio vision right now? investors have to think about the magnificent seven and everything else. everything else is not as expensive as the headline suggests. is that appetizing to you?

guest: we have been saying that for sustainability of the rally, you want to see broadening. maybe the best case scenario in terms of sentiment would be a convergence where you continue to see better participation down the spectrum in other areas than tech or magnificent eight magnificent seven category. but a bit of a pullback up the cap spectrum that might go along way in easing some of the frothy sentiment conditions. if i had a magic wand and could divine what the market was going to do, that's what i think makes sense. it goes back to what we already talk about which is stay up in quality. we have been factor focused not sector focused. this is not the environment where you want to make monolithic sector calls. there's high dispersion, low correlation. that gives you an opportunity to screen for things like strong earnings revisions, earning surprises, some of the

value-oriented factors like strength the balance sheet, self funding companies, companies that are able to maintain profit margins and focus on looking for opportunities with the factor-based approach as opposed to trying to do it with a monolithic sector or style-based approach. matt: great to get time with you. we appreciate the new wants to view --nuanced view. i want to quickly mention a story coming across the wire from bloomberg's. the author is about vitol group. because of windfall your last year, it has doubled the pay of its employees on average each employee at vtol is going to

take home $780,000 in salary and bonuses compared with 349,000 last year. it will be a very happy year for employees of vitol. that doesn't take into account stock payouts for the executives. coming up, autonation had a strong second quarter but the shares are down by the most since last september. we will tell you why when we come back. this is bloomberg. ♪

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hour. autonation is the down -- down by the most since september. margin pressure from falling car prices are overshadowing quarterly results. the company does not expect margins to return to pre-pandemic levels for the foreseeable future. matt: it is a very interesting time, we expect to see the margins get compressed not to pre-pandemic levels, but obviously as monthly payments rise, you have to do something to get the cars off the lot. let's bring in our guest who covers the auto industry for us out of detroit. a very interesting story. now we have two dealers in autonation and carvana whose top executive say they expect prices to continue coming down on new and used vehicles. guest: new and used are both

coming down. in the case of autonation, they had an eps beat and revenue beat. gross profit vehicle -- per vehicle fell 25%. as the inventory gets replenished, the automakers are returning to discounts in order to move them. it's back to the old ways and that is taking a big hit on margins. amber: this is very interesting. car sales are one thing. another stock we have been tracking is harley davidson. it seems to be there might be momentum on this name which has struggled. guest: there were very low expectations for harley davidson going into earnings next week on july 27. the davidson analyst said he had done dealer checks and demand is

higher than they thought. they have new high-tech models coming out. preorders look good. he sees an upside surprise and earnings. amber: thank you for joining us with that perspective. here's what we have coming up next. american express shares are little -- lower after earnings were reported. we will tell you why when we come back. ♪

it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. amber: this is bloomberg markets. shares of american express are lower today after second-quarter earnings. volume on the network increased 8%. that is the weakest gain since the first quarter of 2021 and a smaller increase than analysts are expecting. travel and entertainment

spending jumped 14% in the quarter. matt: they are difficult comps because at the same time laster, we were doing revenge travel, going to restaurants as much as we possibly could and depleting all of our access savings. now we will have to put money on the card without paying it off every month. our guest covers banks for bloomberg. they did see an increase to a record in terms of volume, but it wasn't good enough record for investors. guest: that's exactly right. folks are not expecting things to slow down as much as they have so you are seeing a return to normal faster than what analysts are dissipating. these are tough comparisons for amex to go up against a year ago when we were all doing revenge travel, getting out on the road and now things are more normal for amex. amber: one of the insights to

where consumers are spending is restaurants. they are still robust and coming ahead of other revenge type sectors like hotel and travel. guest: i thought that was an interesting statistic that within travel and entertainment, restaurants are the biggest category in terms of spend. what the cfo told me was this is because during the pandemic we got used to ordering out. that hasn't changed. even though we were turned in person dining, there has been more online ordering so that is boosted the entire category and consumers are spending more on that than flights and hotels. matt: the company also cut expenses deeper so earnings-per-share rose to higher than the street anticipated and they kept their full-year forecast. >> the company was pointing to

how strong of a quarter this was. a record on multiple fronts continuing the growth strategy they have had, but it wasn't as is what analysts were expecting coming into the day. amber: what do we see on charge-offs? guest: a lot more of amex doing what amex does. they are known for their platinum card and the big focus on millennials and gen z. we are still seeing a lot more that focused. matt: thank you for joining us. we were talking about the reason amex is down even though it beat on the bottom one. i also want to mention a rising stock, disney is up after a cnbc report that espn has held early talks with the nfl and the nba

to become already investors in the network. it's very interesting and i would love to see how they want to structure this. cnbc is reporting this, they cite unidentified people familiar with the matter and they say there are early talks in early stages. nothing has been decided yet, but the disney ceo is involved, bob iger as well as the head of espn and they are holding talks with at least those two leagues about becoming early -- minority investors in the network. that would be a very interesting workout. amber: especially because bob iger has said parts of the tv business or non-core. everyone is that obviously except espn. this could be one of the first assets to be monetized tv. matt: we will continue to follow this story. this is bloomberg. ♪

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amber: the dow gets ready to make it 10 and around. i'm scarlet fu. >> i'm katie greifeld we are kicking you off to the closing bell. a modest gain on the s&p 500 up about .4%. the nasdaq 100 housing back from beating yesterday. look at the bond market, not much going on. the two-year treasury yield barely up at all. we wait for next week central bank. the boj is expected to take the stage in addit