sonali: welcome to "bloomberg markets." i'm sonali basak. president biden says he will be on the campaign trail. biden is absolutely determined to remain in the presidential race and will resume campaigning next week even as allies have begun seeking his exit from the race as inevitability. we will bring you more on that in just a moment. i want to say also, this comes on the heels of an nbc report earlier today that was refuted by the white house, the idea that his family is also considering ways to breach the discussion with the president. also comes on the heels of a closure of a republican national convention as well. we will bring you more as we get it let's get a quick check of the markets. s&p 500 still down on the day. now down about .4%. and a nasdaq 100 even steeper losses there about .7%. tech having a really difficult

week. dow jones average down .8%. vix is elevated. volatility higher today at about a 16 handle. one equity mover we're watching is cybersecurity giant crowdstrike behind a power outage that disrupted corporates around the world. a faulty patch paralyzed the operation's appliance including banks, global retail giants and health care systems. we're going to discuss this tech issue with mandeep singh. and you're still watching crowdstrike. shares down 13%. they've been fluctuating all day. still in loss territory how. did this exactly happen and how much blame will they be assigned as all of this is sorted through? mandeep: a lot of times, even if

there are bugs, they don't bring down the entire system. so in this case, this was a worldwide outage caused because windows couldn't reboot. and the challenge they have with rolling this back is it requires manual reboot in a lot of cases. so even though they have rolled back the changes, windows won't get functional on its own. to answer your question on the blame, microsoft will say it was a crowdstrike update. and remember, crowdstrike and microsoft are the two biggest end point security players. so microsoft actually has a product that competes with crowdstrike. and i think there will be financial like its in this case because customers all sue for what happened. sonali: for the microsoft perspective here, what was their fault exactly? mandeep: well, so all these things when they're rolled out are tested properly. and microsoft couldn't have done a great deal given every software vendor installs their software on their operating

system. and some of the functionality does have an impact. it didn't happen on linux which is the other operating system. or it didn't happen on apple operating system. so you have to ask yourself why windows? and probably crowdstrike only rolled out this change for windows. they didn't so it for linux and apple. sonali: much more on that story later on. that is bloomberg intelligence senior analyst mandeep singh. back to that story. president biden says the stakes are high in the 2024 election but the choice is clear. following the republican donald trump's rnc speech and he will be on the campaign trail next week. wendy benjamin joins us on biden's latest statements and how do you read his reaction here, given what we have seen throughout the morning on escalating conversation around whether he will stay in there race or not?

wendy: i think he really had no choice other than saying he will resume campaigning this week. he's not going to decide he's out until he's ready to say he's out. or he may decide but he's not going to say anything publicly. we have this headline saying he will resume campaigning next week. if he said stay tuned for an announcement, that headline would be tremendously different. so we don't really know what's going on with his closest aides and his family members. there certainly steams be this groundswell pushing him toward the exit. but, you know, biden as he said in that statement, seems to be very confident still that he is the only democrat who can beat donald trump despite a lot of democrats saying otherwise. sonali: how do you see the path ahead for president biden at this point? what does this weekend look like

to you, wendy? wendy: well, he has to recover from covid, first of all. so we have to, you know, he has to stay isolated during that time. he could certainly, you know, go on zoom or, you know, through zoom, go on television appearances or things like that. none are scheduled. we don't really foe wow he's feel -- know what the doctors are feeling. we don't know what his condition is. so this weekend, there's going to be a lots of huddling and a lot of tough talk and a lot of difficult conversations and then we're all on pins and milds to see what happens next week. sonali: wendy benjaminson, thank you for the breaking news. investors pulled out of mega-cap names. that trade feeling some pain today. let's discuss the week that was with bloomberg's jess minton

there were some compelling trades. now the question is does it stick, jess? >> especially if you want to follow the money and look the flow data. so they saw their second largest inflows ever at close to 10 billion. that bank of america does modeling on that we did get this morning. but then also of course we talked so much about the equal weight index. we have a story where it's looking at the rate of change. so since 1990, the equal weight is around 14% whereas at that point in the four prior ones, the equal weights was up 15% points on average. even though we've seen a vast improvement over the last week with what's happening with the broadening out, a lot more needs to improve. so the question is do we continue to see that broadening out happen?

sonali: alex, you talk to a lot of strategists in wall street. the trades going up to this point in the year, a.i., high-flying tech, a lot of that is either facing pressure, reversing or at least not as exciting as some of the newer trades out there. are people changing their thinking? alex: that is the view from many wall street pros. we've seen a lot of head fakes as expectations around rate cuts have fluctuated and they're going to need to see some more assurance that the fed is on track to cut rates as soon as september and especially that fundamentals are holding up as well. andrew tyler of jp morgan chase said although he does see legs, investors are going to turn their attention back to fundamentals. the magnificent 7 companies are expected to report earnings growth of 29% year-to-year in the second quarter. and even though that is stalling

from previous quarters, that is still an incredible showout from noise companies. so that could rekindle enthusiasm for the big tech companies. sonali: how fragile are these companies to myses? >> incredibly fragile. we've seen companies beating expectations over and over again in recent quarters. so that makes the bar higher this time around especially for those magnificent 7 names. sonali: jess, you're saying for even that rotation trade which should have been a conviction trade, right? jess: that's right. sonali: you're betting on companies that have not been doing well on this rally. what is with it that people need to see? because the bond market is betting pretty firmly on that september cut. jess: we have the big tech coming and the same week as the fed decision. we still have another month to go before we hear from nvidia. so what you should look for is

nvidia's customers and especially when you're thinking about meta, microsoft, alphabet as well as amazon. it combined over the last four quarters. there's about $150 billion of capital expenditures that were spent. so if you start to hear from nvidia customers that bears any sign of pulling back, that's where you would see fragility. the small caps her to equal weight, there's coal buying. so that an optimistic sign. sonali: people hoping for better days. lastly, jess, another thing we're following this political influence underneath the markets. how strong is the trump trade now coming out of this week? jess: it is dependent on what happens moving forward over the next few weeks. the democratic national convention isn't until the week of august 19 that's later that week we also have jackson hole. but it's more of a confusing with when i was talking to traders yesterday last night. there was an event over the financial district near the new york stock exchange and they

were talking about how if there was any sort of unexpected news from the biden administration that could potentially unwind in a short term some of the financials implications with the trump trade. but the biden trade has been slow and steady. so it's more convoluted. sonali: we were talking at earnings at large and -- no matter what happens watching nvidia. what else are you watching for, alex? are there certain catalysts that are going to make a bigger difference than others? alex: at this point, it's just about earnings reaching up to those expectations that everyone has been hoping for. we've been kind of waiting for the earnings catalyst to help lift the market which has been in a mire this past week. if you look at data overwhelmingly it shows the earnings season has been supported for the s&p 500 from when jp morgan chase reports. since 1999, s&p 500 has risen 67% of the time.

so the expectation is just that those earnings reports hold up and we continue to see data come in a goldilocks backdrop. sonali: coming up next, we're going to talk about earnings. american express on a marketing spree as payment on its credit cards slow on the second quarter. more from our interview with the c.e.o., next. this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

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sonali: it's time for stock of the hour. american express expects its marketing expenses to increase in the coming months after consumer spending on the firm's credit cards fell short. bloomberg's caroline hyde spoke with stephen squeri.

she joins me now. you think about the stock lower, you did see the revenue miss a little bit but every other metric beat. why such negativity? caroline: i think ultimately, this is a record run. not only in terms of revenue but the share prices have been their all-time high. stephen squeri wants to invest in the business but this is about just doubling down on the millennial, the gen z spender and they want to be refresh the gold card. he thinks the investment that they can make sell off a key asset. they can ultimately drive up earnings per share, raise the cost per year and stick to their # 1% growth quarter on quarter

in terms of the overall revenue while still trying just spend into this moment. maybe it's a little bit of nervousness. sonali: talk a little more about the gold card. who is it trying to bring in? caroline: you and me. gen z. i think it's people who want the rewards. they're going to be traveling and spending out in restaurants. also, they have been doing this m&a. they have done a deal for tok. getting in and understanding how they can service us. not just as a u.s. traveler, but as an international traveler as well. they've really been starting to make sure that amex is accepted and, you know, when we're traveling around europe and paris and italy and france and london, they've doubled down on these 50 cities and ensure that they're accepted. so m&a is an interesting one. sonali: can we talk also about crowdstrike for a moment? crowdstrike really did impact a

lot of the financial community. what did he say to you about that? caroline: look, everyone's going to be affected was his main point of view and they did have a slowing of their service at the beginning of the morning and largely, he said the way in which they felt it was a load of phone calls. people are stuck in an airport. they're unable to rebook. and so they're getting on and not wanting to do with the chatbot but the real person behind that. they were affected but most businesses in some way have been affected by crowdstrike. i'm about to get on a plane later. so fingers crossed whether or not it's running. sonali: very good luck to you. a lot of people have been sitting in airports. we hope you are not one of them, caroline. thank you to caroline hyde, co-host of "bloomberg technology." coming up, mark zuckerberg calls trump badass but stopped short of endorsing him for president. this is bloomberg. ♪

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sonali: mark zuckerberg stopped short of endorsing donald trump for president after the republican nominee gained support from the likes of ken griffin and elon musk over the weekend. ken griffin yet to donate. but zuckerberg spoke with bloomberg's emily chang about the election for her show, "the circuit." take a look.

mark: i've done some stuff personally in the past. i'm not planning on doing that cities time and that includes not endorsing either of the candidates. look, there's obviously a lot of crazy stuff going on over the weekend and, i mean, on a personal note, been seeing donald trump get up after getting shot in the face and pump his fists in the air with the american flag is one of the most badass things i've ever seen in my life. but, look, i mean, as on some level as an american, it's hard not to get emotional about that spirit and that fight. and i think that's why a lot of people like the guy. sonali: and you could watch the exclusive interview with mark zuckerberg on the circuit with emily chang on tuesday on bloomberg. now sticking with politics, hedge funds have spent two months unloading the best performing stocks on the

markets, amid a wild presidential campaign. hedge funds are now underweight. we have to kind of explain here. this the cohort of fast money you're watch the fastest of money here, the way the banks and hedge fund traders are interacting with the market. what is changing? >> in may, i noticed that hedge funds started selling u.s. stocks. then the pace really accelerated in june. and then tmt is the most underweight sectors. a deeper dive shows that semiconductor eck stocks account for the majority of the selling. and as i was talking to hedge funds themselves, hedge fund watchers, they all told me that yes, this is a strategy because hedge funds want to take profits from some of the best performance stocks and they want to have cash on hand ready as we

approach u.s. presidential election because this is basically a really good environment for them to place bets whether it's a long shot or short side and look at headlines we have now on politics. anxiety rises. and as someone else told me, like listen, the u.s. presidential election can start much sooner than november. and they want to be ready. sonali: explain exactly what that means. because does that mean that they will be risk off until november or even longer? >> that's one of the strategies. so basically, like three main strategies for funds. first of all, they see -- they try to look at different sectors. they look at policies from different candidates. the second one is more like risk on-risk off. so they try to reduce the exposure, which is long minus short decisions and as they get

closer of the vote, they can start buying again. and, also, it's important that they also want to have more cash ready in case we have some unpredictable moves in stocks. so remember 2016, people were expecting stocks would drop if trump was elected but the opposite happened. so they want to be really nimble. and the third one, the most complicated at a single stock level. and as someone else told me, this is shooting first and analyzing it later. sonali: it's amazing because when you think about the risk you saw, this week when you think about the biden stance on the semiconductor industry as it relates to china and you saw the way the stocks are selling off, how much opinions are starting to sour on semis in particular and when does that negativity start to also feed into other aspects of the technology sector? >> we still don't know. because one of the questions that i ask like it can be so risky.

ok, hedge funds are selling. what are the opposite happens? what if those tech stocks keep rising? fundamentals are so much better than a couple of years ago and if those stocks keep rising, hedge funds can perform really poorly. so we know that they are already behind the market, right? we look at performance over the past four years, this year alone, u.s. long-short fundamentals funds are up by 7.4% versus the s&p 500 +17 to date. so it's going to be pretty damaging for them. sonali: many are still below their high water marks since those losses of 2022. we thank you so much for your time. we're going to take a look at these markets here. because what a tough trade this week. we're taking a look here at the s&p 500. of course, on a one week basis, you're looking at it down about 1.9%. the russell 2000 is not down

over that same period of time. although you have seen a three-day sell-off since we've seen that rally as well. but you are seeing it more than 1%. that rotation trade has been an interesting one because we have seen tech stocks really lag in this market, particularly today as you saw, not just the outage this week weighing on sentiment but the last couple of days since that biden announcement on china as well on the stance he's taking on the semiconductor industry. and we will watch that trade into next week. the philadelphia semiconductor also meaning fully down this week. but that does it for "bloomberg markets" this week. i'm sonali basak. more markets ahead. stick with us. this is bloomberg. ♪

>> from the world of politics to the world of business, this is balance of power. live from washington, d.c. >> joe biden says he will be back on the campaign trail next week. welcome to the fastest show in

politics as the president tries to recover from covid and growing calls for him to drop out of the presidential race. i'm joe mathieu alongside kailey leinz. we have just returned from milwaukee. the big speech from donald trump, the problem for joe biden, and maybe even trump is that we are talking about the president's mental acuity, his age and ability to stay in the race even though many are still dissecting that speech that set an all-time record. kailey: it was more than an hour and a half long. it was a stunning split screen with donald trump meandering at times, talking about the policy he would like to pursue, while we are very much questioning whether joe biden will continue to pursue a second term as we have now eight or nine democratic lawmakers within the last 24 hours calling for him to drop out of the race. we have a third senator. another congressman calling for him to step aside.