>> this is bloomberg markets, i'm jon erlichman. sonali: matt miller's on assignment today. john and i are looking at the s&p 500 up. .4%. markets are calm. the four year yield is down on the day, 389. looking at the dollar also, cooling. the three year yield is down on the day. no crazy moves. there is a 1% jump on new york crude as well but again it's all pretty stable over here. jon: yeah energy stocks are on the move and everyone is curious

about earnings. general electric shares are on the rise by more than 6% today. the renewables and aerospace outlooks are satisfying investors. 3m, doing the same thing. shares are up 5% there. cost-cutting initiatives seem to be taking hold. general motors put together a solid quarter and had encouraging things to say about their outlook but the warnings seemed to be tied to the electric vehicle transition. how long it will take. we have seen gm under some pressure in trading today. strike uncertainty also in the air. alaska airlines is one of the names we have been tracking to the downside. down by 9%. even though there has been plenty of travel this summer, alaska or in travel is impacting domestic demand. sonali: absolutely and we are switching gears from the markets to the federal reserve in the

economy. studies have shown, including research from the fed, high interest rates are making the income gap first. according to our next guest, communities of color are paying higher interest rates. nicole alana joins us now to talk about what these ripple effects look like just before another big fed meeting. can you talk to us a little bit about the way that rates have been impacting communities of color already? nicole: tomorrow we expect the fed to trace -- increase interest rates even if it's just by 25, continuing their trend in order to cool off the economy, stop inflation, and slowdown consumer and business spending. as you mentioned, communities of color already pay higher interest rates. these are the communities that will be disproportionately impacted by higher interest rates. minority businesses, they are

1.4% higher. even when they have the same credit file. communities of color are 62.5% more likely to have a higher interest rate than their white counterparts even with the same profile. these communities will be hit the hardest. sonali: we know that small businesses are some of the largest employers in the country . are you seeing the same small businesses finding it harder to get alone with more pressure on job forces as well because of it? nicole: absolutely. half of small businesses say that their top concerns are inflation and rising interest rates. why? it drives up the costs of their doing business and they are 97% of the firms in the u.s., employing 50% of the private sector workforce. these are really key folks who

are making employment happen in communities. unfortunately when you think about small businesses of color, these ones often have the hardest time accessing credit and capital. when you think about the interest rate environment going up in the inflationary environment going out, it's going to make the costs of business go up more. what do people try to do? cut costs and unfortunately what's going to happen is it will lead to unemployment, they will have layoffs, it will pack the color the most. we know that communities of color are often times the first ones laid off in the industries that are the most impacted. you are going to start to see small businesses clamp down on spending with layoffs that will exasperate the racial disparities that already exist in the unemployment gap jon: in a rising interest rate environment, some people say that with those challenges you can offset them high interest

rate savings accounts but what does your research tell you about that? nicole: these communities often can't or don't take advantage of those. the high yield savings accounts, the cds that often times earn 10 to 12 times higher interest rates than your traditional savings accounts, they are not taking advantage of these opportunities so when they have cash, whatever cash they have because of the income gap and wealth gap they often don't have a lot of cash sitting around at the cash they do have is not being put into these high-yield accounts. they are keeping it as cash coordinator additional savings account. they are not even benefiting from the good things that happen in a high interest rate and vitamin, hit on the one, not taking advantage, the costs of borrowing is going up. they are really getting hit all the way around. jon: i know that you have done

research on people with similar credit profiles and then when it comes to getting the credit at a reasonable rate, there are discrepancies there? nicole: yes of access to credit is often more difficult for communities of color. they are denied at a rate that is two times that of their white counterparts. denied at higher rates, interest rates are higher, often approved for less than the full amount and they are busting. what does it mean? oftentimes they are looking to credit cards to fill in the gap. when the costs of borrowing goes up in this environment, the costs to get a small business loan, mortgage or by a car, with the costs increase, you turn to credit cards. the impact of that is you start to see credit card debt and unfortunately in this environment increase on credit cards is also increasing rates. death continues to grow as they look to credit cards to make up

the difference because they cannot access capital credit in the same way. sonali: what does this mean for how you feel about future rate hikes? are you concerned that the negatives are just making it harder to get alone and out the benefit of reducing inflation? how do you feel at this point? nicole: the federal government's ledges -- is leveraging the tools they have. you have to the negative. the fact that it will make the costs of borrowing more expensive for communities of color. in not just the costs to buy a house, car, or consumer goods. also your costs to keep these things. if you have an adjustable rate mortgage, your rate will probably increase. if you have a small business loan that is maturing, the rate will increase. you have to think about things not just outside monetary policy but the tools that are available

to the about the unexpected consequences that are going to happen from unemployment, the higher costs of borrowing, the overreliance on credit cards. jon: helpful context, nicole. we appreciate your time today. nicole joining us at the next fit decision. today we have got to earn in sundeck. microsoft and alphabet are out after the bell. our stock of the hour is next. this is bloomberg. ♪

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after the bell. investors are going to be watching for signs of recovery in the digital ad market. course there are plenty of questions right now about the core search business as alphabet deals with a competition from a growing list of ai rivals. a senior analyst from morningstar joins us with a preview read a lot on that agenda. what are you going to be watching for? >> even the short-term but the impact of generative ai, whether it is from microsoft or from chatgpt, on the overall search. of course initially to begin with, you expect less ad spending this year anyways, but in terms of how the commercialization of those products may have impacted search, that's one of the most important things.

and youtube, whether the monetization has actually picked up and therefore may have accelerated a little bit of a recovery or growth rate if you are adding revenue. those are a couple of things. the third thing is we look for further improvements for the whole year, actually, in their cloud business. if you think about it the emergence of ai, specifically generative ai, requires a lot more computations, training, inherent. the hyper scalars, the demand services has, a little bit and is probably going to continue throughout the rest of the year. sonali: how much is a little bit, though? there is so much hype around ai but at the end of the day how much does it mean for how quickly google is able to monetize this? ali: on the search side, i think it will be gradual. you have to take into

consideration human behavior. as you know, google has become a brand. it's a verb that we, many of us use. most of us i should say. so whether, the question of how long it's going to take to change our behavior, that remains to be seen. we are assuming that change will be gradual. probably throughout the next 18 to 24 months. also of course, we are not necessarily assuming that utilizing generative ai in search is going to completely replace the traditional listing search. we think it's going to be a pretty balanced mix of both and it depends on the types of russians being asked in search. jon: what are the costs of doing business in the case of alphabet ? we often talk about traffic acquisition costs. is that something you are going to be watching closely? ali: certainly.

given the potential threat, that we think they will be maintaining their 90% market share, given the potential threat of what's been done, they may face some pressure in the fees they pay for traffic acquisition costs specifically to apple and samsung. that does remain to be seen but it is one thing to watch for, the traffic acquisition costs and whether they have increased and if there are indications that apple may place more pressure on google. sonali: thinking about youtube and ad revenue, i'm curious how you see the trends moving through the industry around what meta-might experience? ali: meta and snap might face the same things. there are uncertainties in a can impact at spending but the issues are regarding the monetization of the features

they have added that pretty much replicate what tiktok has done. so that's been basically pretty gradual. we have seen examples of that in the case of meta as it was very successful with stories when it copied and pasted what snap at done. it took a while, about a year and a half, but the monetization continue to improve and it's been very successful. we viewed the same happening with all three. but again -- i would say that we are expecting meta to be further along in terms of monetization of reelz van you two shorts. sonali: thank you so much does youtube shorts. sonali: -- youtube shorts. sonali: thank you so much. deutsche bank, ahead of their earnings coming european time overnight, announcing buyback with a sign of strength before

we get new international capital standards for the banking industry. we will also be looking ahead to microsoft ai progress and the activision deal after the bell. when you think about this, john, what will you be watching for? frankly all i can think about is activision. jon: you know that was a huge hurdle for the company, undoubtedly. but at the same time building on what we were just talking about with alphabet, there's a lot of ai hype in the air and microsoft is one of the companies putting that pressure down right now but some of that is not fully realize at this point. you have got their cloud business, the traditional cloud business starting to show sluggish performance compared to what we saw previously. so there is a potential scenario where you have one corner that doesn't necessarily live up to the stock market expectations. microsoft shares have had a huge run this year. i know that analysts today said that long-term you got ai opportunity feeding into all the

microsoft products. sonali: seriously everyone is watching the new businesses but it's really the old businesses that are the big money businesses. spotify has its worst day after reporting sales that came up short of estimates. those stories are next and this is bloomberg. ♪

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bloomberg television does have an interview with the deutsche bank cfo. spotify, shares are lower after reporting weaker than expected sales and a weak forecast report. ashley carmen covers all things podcast and audio for us. what does it all mean for spotify given the changes we have seen in pricing? >> yeah you can see its direct response given the average revenue per user declining, despite the user base climbing. it's an effort to raise prices in an effort to grow the amount of money in revenue and hopefully eventually reach profitability. jon: so in the interim the need to her control costs is one of the other realities the company has been highlighting to investors. >> 100%. they have cut staff multiple

times, cut employees a significant percentage and they cut podcast staff in june and we broke news that they are looking to sublease space in new york to cut back on real estate costs in addition to the general cost-cutting that we see at various companies like travel, food. sonali: you talked about increasing profitability but if you are raising prices what signal are you sending to the clients, the users? is there a lot of competition in this space in terms of stickiness? are people sticking around under the new regime? >> spotify hasn't raised prices in the u.s. since of launch. it's a pretty big deal that they are doing so now. that said, the primary competitors amazon music and apple music have raised prices to the same costs. presumably the competition, investors wanted spotify to do this because they believe they will be able to maintain user base. jon: at the same time we are

talking about a company that has amassed i believe 200 20 million paying subscribers around the world. does that afford them the moat, if you will? you are obviously competing with apple but is it their game to lose in the audio sector, assuming they can get things right, with how much they spend and where they place the money? >> you know that's the big question in the dark horse that we are watching his tiktok. they just launched tiktok music and various territories, not the u.s., and they have such a stranglehold on the gen z audience. what's going to be critical moving forward is how quickly and effectively spotify can bring gen z over to their platform and potentially not lose them to platforms like tiktok or youtube. sonali: speaking of, are there other costs they will have to

contend with as they navigate this price hike? >> the place where they were spending so much money was the podcast division. huge high profile deals with the royals, the obamas, kim kardashian. now we are seeing them cut back on that because that was their differentiator. they thought that if they had these podcasts it made them different from the other competitors. seemingly they are backtracking a bit. we will see how they kind of put together an original content strategy moving forward. jon: a helpful roadmap. ashley, thank you so much. let's get to today's for what it's worth. $20 billion, brand agencies and analysts estimating that the elon musk decision to ditch the twitter name could wipe out between $4 billion in 20 -- and $20 billion of brand value associated with twitter.

brand evaluations are pretty hard to measure but he is moving fast. some people are trying to crunch the numbers on the go. sonali: it's amazing to crunch it that quickly, it just happens, but i guess it's just all in a brand. jon: including the x brand itself. musk wants to hit the go button on what could be and everything app. is this like we chat, a model that hasn't worked in north america the way it has in china partly because of the way the banking system works in north america. sonali: and we have been hearing about the everything app forever, right? let's see if it actually happens in our lifetime. separately, elon musk is speaking at the pg&e innovation summit. for jon, i'm sonali basak. keep an eye on elon musk and

that everything app. this is bloomberg. ♪

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romaine: market volatility ebbs as investors bet on economic certainty. i'm romaine bostick. katie: and i'm katie greifeld. we have about two hours to go. we are looking at a rally on our hands. the s&p 500 higher by 0.4%. a lot of that coming from big tech and you can see that in the nasdaq 100. that benchmark of 0.8%. as we head into important earnings after the bell, you will catch it all here. you take a look at the bond market. a little bit of a rally after yesterday's selloff. two-year treasury