scarlett: welcome to bloomberg markets. the equity market takes a big turn shout -- south. this is one day after the fed's no decision. bad economic news is being interpreted. it is being seen as bad for stocks, no matter the size. look at the s&p 500 and the nasdaq 100, stocked with the biggest companies in the u.s., each down by at least 1%. we should mention this comes

before apple and amazon report their earnings after the bell. russell 2000 stuffed with small companies. they have been the beneficiaries of rotation away from tech. chipmakers getting hit the hardest by more than 5%. the fix is moving higher. today's data points include weekly jobless claims hitting almost a one year high in manufacturing. that pushes lower as traders are more convinced to cut rates in september. they are now pricing in three rate cuts this year. to put that into context for us, it's go to natalia to give us some equity movers and some more details on what we are seeing today. italia: let's start with those bets on interest rate cuts. we now see the market is pricing in three rate cuts by the end of this year. of course, that came on the back of yesterday's federal reserve meeting. today, we also got weaker than

expected economic data, jobless claims, and ism manufacturing. but now some traders have looked at the price reaction and are concerned that weak economic data is getting bad for the stock market. let's look at some of the biggest movers today. tesla is up by 6%. takeaways from the earnings report -- sales came better than expected, and targeted investments in ai are helping the company to sell advertising in a more targeted way for its consumers. we have got a couple of grades on the stock. it keeps moving higher. let's take a look at consumers segment. we've got really interesting reports from two burger chains. the first is wendy's. the stock is down by almost 1%. the company cut its guidance and posted weaker sales across

chains. higher prices are hurting u.s. consumers. on the flipside, we have shake shack. this stock is soaring. it is up by 15%. the company raised its full-year guidance and analysts are pretty optimistic about the stock. let's look at positioning and flows. it is also important we look at market moves. this chart shows commodity trading advisors' positioning, the way they operate when the market moves up. cte's and systematic funds increase exposure. the market goes down last week. they reduced exposure dramatically. this chart shows that last week they reduced exposure by about 50%. that is one of the biggest declines over the past year and a half.

as of now, the biggest question is, will they keep decreasing their leverage to u.s. stocks or not? some u.s. analysts say there is still room to run and everything depends on fundamentals such as earnings. scarlet: thank you so much. a fantastic wrap up of the equity as well as the positioning in the broader equity market. it is a big week for central banks. the bank of japan and the fed of course, and the bank of england today. for the ble, -- boe, the biggest rate cut since 2020. investors snapped up bonds. the yield on the two-year was down the most since last december as investors brace for further easing from the central bank. we sat down with the bank of america governor, andrew bailey. take a listen. andrew: we were looking in a sense for come from entry evidence.

we were not looking to change. we were looking for confirming evidence. that was in my view. we will be looking at this framework. are we seeing this more benign process which we can further perform? or does this structural issue, which is why we have riskier -- maybe covid change some elemental structure of the economy, which would make it more resistant, if you like, to measures to get inflation down. that is something we want to keep calm about. francine: it is 4% restrictive. andrew: we don't have a number on it. what i would say is this. do not expect we are going back to zero. zero was the product of huge global shocks -- the financial crisis and covid as well. something really bad has to happen.

we made a big point of saying policy is cut. that would be lower than we are today. francine: the government has said it will borrow an additional 16 billion pounds. does that change rates question andrew: i will wait until october because we do not always announce fiscal policy. francine: the fed, the boj -- they are adjusting policy. you see that in foreign exchange markets. what of those elements are important to you? andrew: we do not have any target for the exchange rate. that is in the past, in terms of that thinking. exchange-rate feeds through in terms of financial conditions. we are seeing appreciation of

sterling since we did the last reports. we fed that through. we changed enterprises and so on. i would say we certainly, over the last four or five years, the transmission back in march -- that played a large role. we have been facing essentially global shocks. these are not specific shocks that affect one central bank but not another. scarlet: that was the boe governor. let's discuss this further with marcus ashworth in london. i have read commentary from a strategist calling this a hawkish cut. we also see traders betting on to more rate cuts by december. what is it? >> it is a rather dull, cautious cut.

the r train to slow down. the european central bank of already done this. they copied a template. everyone is waiting for the federal reserve. if the fed cuts in september -- and more importantly, signals they are going to keep on cutting -- you will hear the music change instantly in europe. the economies are so much weaker. it is evident that inflation is bigger in the u.k. there is sticky service inflation. there will always be something that is sticky. this bewilders me. but they have had the courage to cut. we are down to 5%. as they admit, very restrictive. they are expecting inflation of 1.5% in two years time. there is obviously a disconnect with policy. they don't want to make any mistakes. they want to be proved wrong, shall we say, on the fact that

growth collapses from inflation rises. scarlet: we are waiting for the fed to take a leap. what does a rate cut mean for the new government? marcus: thank you very much. buckham to our new home and have a lovely day. that is what it is all about. if there was any doubt that rishi sunak calling the election early was a bad decision, this totally compounds it. i guess the labor government will go thank you very much for that, and move on. they are doing some things which are slightly odd for the alleged growth agenda, by cutting spending and signaling taxes are rising, particularly on wealth and entrepreneurial type growth strategies. they need a rate cut here. they need several rate cuts. they will be very happy indeed, i suspect. scarlet: we know the boe

economist will be speaking tomorrow. what will you be listening for, given that what happens depends on where the fed precedes? marcus: the chief economist was just confirmed for another term. she was one of the only internals who voted against a rate cut. very odd. he had made a speech a while back in june which had said that he was clearly leading toward a hold. that is fair enough. i can't understand. this is a guy who a year ago basically said we should be cutting rates. now he is saying we should be holding. it is evident inflation has collapsed from 11% down to a 2% target. i don't get him. i don't get his understanding of where he thinks the economy is. i respect he is going to be cautious. at some point, you can overdo restrictive monetary policy.

i think the bank of england is starting to appreciate that it was a policy mistake. the chief economist who should be leading the charge is in a different field, i understand. we will see what makes it. scarlet: we will see if we detect any changing tone from him. marcus ashworth, really appreciate it. we turn to the rotation with young yuma -- u ma. ♪

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scarlet: a day after the fed held off on cutting rates, we are getting evidence of weak manufacturing and jobs data.

that is sinking stocks but lifting bonds. yung-yu ma is bmo growth management chief investment officer and joins us now. can you explain to me the dynamic here? bad economic news was once seen as good for stocks and bonds. it is good for bonds but not good for stocks. yung-yu: it is great to be here. the bad news is good news for stocks is a very fine line to walk. it works until it does not. there is some possibility with the uncertainty that is out there that we will get continued soft economic data between now and the next fed meeting. there is a lot of time between now and then, a lot of time for the market to think the fed is behind the curve. there is a lot of prospect for the labor market to weaken more over the next two months. we think that that uncertainty has the potential to weigh on the markets. scarlet: as a result of the data we have seen today, we are

seeing bond traders pricing in three fed rate cuts this year. if you see, there was talk of one to two. most people settled at one to two. now it is three rate cuts. jay powell made clear that he is keeping september on his calendar as the next point, because that is the next fomc meeting, and he will probably use jackson hole to shore up that messaging. how do you see it playing out in terms of actual cuts? is it over the next couple months? yung-yu: we have been talking for the past few weeks that there is a real possibility the fed could cut rates i 50 basis points at the september meeting. the market just today is putting in that probability at around 20%. when we started talking about that, the market was having that probably around 5%, which we thought was a gross underestimation of the possibility for labor market or other economic weakness between

now and september. the fed was not in the mindset of cutting rates at this meeting yesterday. look at the arguments and the questions that chair powell received from reporters. really, there was a lot of potential to start rate cuts then, or the arguments for starting rate cuts yesterday were quite sound. we think that adds to the potential for the possibility of a 50 basis point rate cut in september, but we don't think that three rate cuts this year is a unrealistic possibility. a little more weakness, as chair powell said -- the fed has room to maneuver and the ability to cut rates. it could shift pretty quickly, especially if it gets perceived as being behind the curve. scarlet: that puts extra importance on tomorrow's jobs report. right now, the consensus estimate is for the addition of 175,000 jobs after 200-6000 for the month of june.

-- 106,000 -- 206,000 were recorded for the month of june. there is a rotation as the russell 2000 is underperforming the big caps. hunt for weakness. people seem to be biased toward worrying about big cap tech names and whether the earnings they are releasing are justifying recent games -- gains. yung-yu: we think the market is trying to sniff out weakness in areas anywhere it exists, focusing on that weakness. we don't think momentum will build to the downside. to the extent we do see mixed data or week data over the next few months before the fed's rate cutting campaign kicks it is going to be a campaign. think the rate cut is going to continue. we think the rate cuts are relatively sound. the market, amid the

uncertainty, especially before the election -- market could get a little bit jittery, especially given the run-up we had last year and the first half of this year. the rotation, we think, is going to continue to happen. at least the small caps and mid-caps having a bit of a catch-up trade. that could pause for a bit until the rate cuts get underway. think that is a possible scenario as well. scarlet: we are looking at a live shot of the white house as we await president biden to make some remarks on the prisoner swap with russia. the catch-up trade in markets is probably still intact and has room to run even if it does pause for now. where are we in this rotation trade overall? are we in the ninth inning? i'm curious to get your take on how much distinction investors are making between different centers in small caps.

yung-yu: in the early stages, everything is going to rally. we are possibly in the thir fourth inning. we do have small-cap earnings expected to accelerate by the end of the year and into next year. if that continues, the rotation or the catch-up trade, as we should probably say, is likely to continue well into 2025. and there is a question of whether or not we get tariffs if former president trump should win the white house. that could deliver more friendly fire. scarlet: really appreciate you joining us. yung-yu ma joining us, chief investor -- investment management at bmo investment management. president biden is delivering remarks at the white house. let's listen. pres. biden: hello, everybody. good afternoon. and this is a very good afternoon -- a very good afternoon. today, we are bringing home paul , evan, and vladimir, american

citizens and a green card holder. all four have been imprisoned nearly six years.a -- paul for vladimir since 2022. evan since march of 2023. and another since 2023. russian authorities arrested them, convicted them in show trials, and sentenced them to long prison terms, with absolutely no legitimate reason whatsoever -- none. paul, a former marine, was in russia for a wedding. evan, a journalist, was in russia, assigned by "the wall street journal." another journalist was in russia to see family. all three falsely accused of being spies. vladimir was a russian citizen by birth, but holds an american green card he is a pulitzer prize-winning journalist and was a pallbearer at my friend john mccain's funeral with me.

he spoke out against putin's regime. for that, he was convicted of treason. and now, the brutal ordeal is over, and they are free. moments ago, the families and i were able to speak to them on the telephone from the oval office. they are out of russia. earlier today, they were flown to turkey. soon, they will be wheels up on the way home to see their families. this is an incredible relief for all the family members gathered here. it is a relief to the friends and colleagues all across the country who have prayed for this day for a long time. the deal that made this possible was a feat of diplomacy and friendship -- friendship. multiple countries helped get this done. they joined in difficult, complex negotiations at my request, and i personally thank them all again, and i think the personnel. i thank them in person and i will think them again. all told, russia has released 16

prisoners. eight russians who were being held in the west will be sent home as well. these 16 prisoners from russia include for americans, five germans, seven russian citizens who were political prisoners in their own country. one of those russians runs a human rights organization which won a nobel prize in 2022. put in through him in prison for voicing opposition to the war in ukraine. four others worked with alexei navalny, the opposition leader who died in russian prison this year. now, they can live safely abroad and continue their work of advocating for democracy, if they so choose. this deal would not have been made possible without our allies -- germany, poland, slovenia, norway, and turkey. it all stepped up. they stood with us. they stood with us. they made bold and brave decisions. these prisoners being held in

their countries were justifiably being held. but it was important to get the americans home. if anyone questions whether allies matter -- they do. they matter. today is a powerful example of why it is vital to have friends in this world, france you can -- friends you can trust, work on, and depend on, especially in matters of great consequence like this. our alliances make our people safer. we see that again today. let me say this. it says a lot about the united states that we worked relentlessly to free americans who are unjustly held around the world. but it also says a lot about us that this deal includes the release of russian political prisoners. they stood up for democracy and human rights. their own leaders through them in prison. united states helped secure their release as well. it's who we are in the united states. he stand for liberty, for

justice. not only for our own people, but for others as well. that is why all americans can take pride in what we achieved today. i want to thank everyone in my administration who helped make this happen. the work did not start on day one. it started before day one. during the transition, i instructed our national security team to dig into all the cases of hostages being wrongfully declined -- detained, which were inherently -- which we inherited from the prior administration. i wanted to make sure we hit the ground running, and we did. as of today, my administration brought home over 70 americans who were wrongly detained or held hostage abroad, many since before i took office. additionally, i issued an executive order in 2020 two authorizing penalties like sanctions and travel bans on those who hold americans against their will. my state department has introduced new warnings for

americans about the risk of being wrongfully detained by a foreign government. it feels like this one comes with tough calls and never-ending guarantees. but there is nothing that matters more to me than protecting americans, at home and abroad. and so we will continue to work for the release of all wrongfully detained americans around the world. let me end where i began, with paul, evan, vladimir, and the families. they never gave up hope. i cannot imagine what they have been through. this lady right here has been in the oval office with us for a while. i cannot imagine their joy right now. they are home. tomorrow is a big day. it is the birthday of miriam. miriam, where are you? we have a tradition in the biden

family. we sing happy birthday. ready, all of you? ♪ happy birthday to you happy birthday to you happy birthday dear miriam happy birthday to you ♪ remember, no serious guys until you are 30. i love you. she is alistair's daughter and now she gets to celebrate with her mom. that's what this is all about -- families. able to be together again. like they should have been all along. i want to thank you again to everyone who did their part. we will welcome home our fellow americans. i look forward to that. god willing, we will be out at andrews. so thank you, thank you, thank you. >> what did you say when they answered the phone on the

others? pres. biden: i said welcome almost home. >> the abductor states are taking more americans to get more of the prisoners home. how do you handle perverse incentives question mark pres. biden: we advise americans not to go certain places. >> negotiations, can you speak to the complexity of working with six countries to support you? pres. biden: not one to take the time now, but i will do this later in the week. i particularly look great -- particularly owe a great sense of gratitude to the chancellor. the demands they were making of me required me to get some significant concessions from germany, which they originally concluded they could not do because of personal questions. but everybody stepped up -- poland, slovenia, turkey -- and

it matters to have relationships. it really does. these things matter. pardon me? >> could this improve relations with russia? is there any avenue for that after this prisoner exchange deal? pres. biden: as my sister used to say, your lips to god see her. -- to god's ear. >> would you be willing to speak with putin? pres. biden: i don't need to speak with putin. >> [indiscernible] pres. biden: we got home innocent people. thank you. all right. thank you, everybody. scarlet: president joe biden there at the white house, making remarks on the prisoner swap that was announced today, and exchange of 24 prisoners. it is the largest since the cold war era and includes u.s. hostage evan gershkovich, a "washington journal" reporter,

as well as paul whelan, a former u.s. marine. let's bring in kailey leinz, who is in washington, to bring us more context on this. we heard from president biden that he was thanking allies. he said there were six countries involved. he give a shout out to the german chancellor as well, think it matters -- you know what? let's go back to president biden at the white house. he is still speaking. pres. biden: it matters. >> what did they ask for in response to their cooperation question mark pres. biden: nothing. >> president trump said repeatedly he could have gotten the hostages out without giving any in exchange. what do you say to that? what do you say to former president trump? pres. biden: why didn't he do it when he was president? scarlet: let's go back now to kailey leinz. again, president biden leaving the white house east room as he finished making remarks on the prisoner swap, the largest since

the cold war era, 24 prisoners exchanged. kailey leinz, the bloomberg "balance of power" cohost, who has been listening to the conference. questions at the end test -- touched on the relation between the u.s. and russia, but also u.s. ties with countries that help the prisoner swap. and you give us context on the countries that were involved and the level of diplomacy that that required? kailey:-- kailey: as we heard te president say, intense negotiations with so many countries, complicated, at the table. germany, poland, turkey, no way, all involved in this. shout out specifically to olaf scholz. one of the key trades, a former

rebel commander killer in 2019. vladimir putin had been advocating for his release in particular for years now. convincing germany to swap him for some of these other individuals was critical. as we heard president biden outline, this was not just about american prisoners, though four of them were released today. including those journalists. this was also about freeing some russian political prisoners who had been advocating for what biden described as human rights and democracy which the united states holds dear and biden said it speaks to the efforts of the united states but he made this not just about the prisoner swap , but about the alliances that allowed it to happen. he said that if anyone questioned why allies matter, they do, they matter, talking about how deals like this come with tough calls in tough negotiations. i would point out that at one point you heard the question asked of the president talking

about criticism of the idea that swaps like this encourage russia to take more prisoners hostage, essentially, in exchange for getting former kremlin officials and others who have been in the view of the west properly incarcerated out, this is something we heard the house foreign affairs committee chairman talking about. he said he remains concerned that continuing to trade innocent americans for russian criminals held elsewhere since a dangerous message. when biden was asked about that he said that the way the u.s. is avoiding that is by encouraging people not to go to areas that may be dangerous. scarlet: i like how this turned into an impromptu news conference. we didn't necessarily expect that. one thing was thrown his way, a comment that trump had made as well regarding prisoner exchange . trump basically saying that under him, he would have gotten it done immediately after he won

the election in november of 2024 but before he was inaugurated. president biden had kailey: a pretty good response to that. yeah, he basically said why didn't he do it when he was president. a lot of those detained today had been detained since the time that trump was in office but paul whelan is one of the exceptions. this is the second time we have seen a prisoner exchange of this magnitude done under this administration, the first in 2022 when brittney griner was freed. they were not able to get out paul at that time and biden has been talking for two years about wanting to get him, evan, and others like him freed. the president said it in his earlier statement, this notion that there are still americans wrongfully detained abroad and he wants to work to bring them home. scarlet: good stuff, good wrap up. thank you, kailey leinz. let's return to the financial

markets here. we are bumping the bottom here when it comes to equity markets. the russell 2000 is the underperformer, losing 2.8% with all 11 groups in the red, but big caps are lower as well and tech is pacing the decline. everyone is giving back some of the gains yesterday. the 10-year yield coming down below 4%, traders are pricing in three rate cuts this year on the back of some weaker economic data when it comes to manufacturing, putting a larger focus on tomorrow's jobs report due at 8:30 a.m. the big tech rally is showing signs of sputtering today with the nasdaq 100 ahead of earnings out of apple and amazon. let's bring in dave lee for a bit more here. of course, the focus when it comes to the big cap tech names is spending on ai and if it is paying off. he wrote a leap -- recent column talking about the ai commercials

that google is airing during the olympics and it is a good metaphor what investors are kind of wondering about. dave: yes, this advertisement girl planning to write a fan letter to an olympic athlete and rather -- rather than sitting there with her dad and writing it out, like this nice exercise for a parent and child, instead she turns to the auto generated ai robot and wrote the letter and they thought -- is this really what it's used for? the reason i rent -- mentioned it in the column is that that could be the metaphor for the industry. investors are wondering -- all of these billions of dollars in growing quarter by quarter, do we really know what people are going to use this for and is it going to be worth the money? in this quarter, and as i mentioned in the column, there is not this satisfying answer just yet. what investors are being told is sit tight, but in the meantime we are going to keep on spending

massively. that might make people after that huge optimism early this year and last year, people might start to go -- when is this going to pay off for us? scarlet: believers say that it is a long-term benefit and could take years to pay off. the issue is what has made people sit up and say we want to see return or concrete evidence today instead of something later. dave: they are arguing, as you say, there's this long term view. there was expectation that some of these things would pay off sooner. a company like microsoft, their stock dropped and they announced earnings earlier in the week and that's because the cloud growth was not as big as people thought it would be. this year they have, instead of showing people that ai will be a driver of companies invested more in the cloud, they said 8% of their growth of your cloud unit could be directly attributed to ai, up from 7% in

the quarter before. it's growing but getting slower. what some of the other companies have done, and we saw meta-do this as well, they have said look over here at what's working and ignore the spending over here. so in the case of meta, advertising is up, and they said much of it was down to ai powering better recommendations, which is why their stock performed better as they believe that ai was going to help in the short term. scarlet: or they framed it better. here is what ai has done for us, but the advertising business was going to do well regardless. it's an election year with a lot of spending on the olympics. dave: exactly. that's the big question. meta has always been an advertising business. did it need to spend billions in to keep being a successful advertising business? possibly not. in the future, and zuckerberg

talked about this, they said they hope to eventually companies would be able to describe what they want to achieve with advertising and ai would do it for them and then in years time there assistant would be useful for all sorts of things and ai would bring it along way to benefits, but even zuckerberg, one of the biggest optimists on ai in silicon valley was cautious to say that yes we are getting some benefits now but the payoff is years and he reiterated something he said before, that the investors have wondered about things paying off before and he says they have always come good, a fair thing, they have always come good on that. he's trying to play both things. scarlet: we will be getting earnings from apple and amazon and we will speak with an analyst in greater detail but i'm guessing the numbers will show be patient, it will come, especially when it comes to the newest ai enabled iphone. the one company that has seen a flow through to the top line and bottom line is nvidia but they

don't report earnings until late august, so there is this long time where we are just kind of wondering if we will be getting more concrete evidence of ai paying off. how does this play out? dave: nvidia might be the canary in the coal root -- canary in the coal mine. then you have to buy the chips to train the models and start running the models when they are ready. so, they have been the biggest beneficiary and the earliest beneficiary but they might also end up being the company that we see suffering, if you like, earlier than these other companies. every analyst i talked to says the demand has got to tail off at some point, we just don't know when, and that will be the telling point. scarlet: august 28, i believe. we will check in with you later when those companies report results. coming up on "bloomberg markets ," let's get into the weeds and look at apple and amazon

earnings with laura martin, who is going to give us or take on what she is looking for from those countries. -- companies. this is bloomberg. ♪

scarlet: this is "bloomberg markets," the nasdaq 100 is currently at session lows in within the index, 85 stocks are in the red. 85% of the number -- members are declining. a broader retreat. apple is one of the biggest losers, which makes sense, given that it is a part of the group of companies that mega cap said was under suspicion over whether the investments and ai would pay off because after the bell, apple reports its latest

earnings and the stakes are high as they have reported a drop in sales in five of the last six quarters. for the second quarter that just ended, analysts are anticipating a recovery in sales and anticipating details about the apple intelligence features that will be included in the latest iphone. needham seen her -- needham senior analyst laura martin has a buy rating on apple in joins us now. 3% round does not sound amazing. what is helping it recover, given that so many people are holding off on buying iphones in china, waiting to hear more details about the iphone 16 when it comes out? laura: right, so i think this stock has gotten much more interesting as a debate topic, because you are exactly right. the big issue being debated on wall street is whether the generative ai features that they promised will be in the iphone

16 that gets released next month or if we have to wait a year and if those features are enough to drive iphone replacement cycles starting this year. i happen to think it's going to take another year, but the stock has been running on the fact that they think there will be enough generative ai efficiencies and tools and features in the current iphone, the 16, that people start replacing them now. other than total revenue in the quarter that we are expecting from the june quarter, half of that is iphones. iphone is the only product big enough to actually move the growth rate of apple from 3% to 4% and 5%. nothing else is big enough by itself to move the entire revenue growth rate. scarlet: it's astounding, products is $60 billion on the top line. it's a fraction of products that is the iphone when it comes down to it. what is apple doing when it

comes to services in the lead up to the rollout of apple intelligence? certainly it's helping to boost margins a bit? laura: yeah, 14% growth for services at a 17% margin in that should drive about 100 basis points of expansion for the enterprise. services are really powerful. they are bundling more services together to give you a discount and are doing family plans. it's really hard for anybody in the family to exit or use a google or android phone. so, they are doing more and more things to try to lock you into that ecosystem and sell you more and more services and products like the apple card or apple pay. they are trying to load you up with services because they have such a high margin. scarlet: shifting gears to amazon, which i know you are more excited about, top line is 11% sales growth. a big part of this will be amazon web services but based on

what we have heard from alphabet and microsoft, how much optimism can you fold into what we could get from aws and how much they are monetizing? laura: right, this is the big question we need answer tonight. google stock was down 3% after a solid earnings report for june. yesterday they said the same thing, raising capex guidance, up more next year, but the stock is up today. we need to see what amazon is going to spend a ton more money on, building ai infrastructure and we need to see what the stock does. our investors giving it a pass or are they going to be mad that earnings are going to have an -- have a headwind because they are investing tens of billions in these data centers for generative ai? and i'm looking for advertising. we want advertising to grow because we think it has 70% margins. that is a big important number. scarlet: 70% margins is

incredible. what about the retail business? i don't expect that the retail margins are as juicy as what we saw in the other parts in advertising, but certainly it is a part of the business that amazon is focused on making more efficient and it is starting to pay off, isn't it? laura: yes, we are looking for 300 basis points of margin expansion and cleverly when they added those ads to your amazon prime video, they are tying the ads to purchases, meaning they are getting more purchases. remember, we had a prime day. they think we are going to get better e-commerce numbers and maybe higher margins thanks to the flywheel of having all of these connected television ad units from prime video driving more e-commerce sales on amazon. scarlet: it's a tale of ecosystems at apple or amazon. laura, always appreciate you

speaking with us. coming up, we are going to talk about real estate and by greg friedman, whose firm owns 6 billion in real estate, says that the sector is shifting towards normalization. this is bloomberg. ♪

my career in crossfit was the greatest lesson in teaching me how to confront pain. it's not the scale of how painful it is, it's just you confronting something that you just don't want to do. doing that week after week after week for a decade built a resilience in we're supposed to have many chapters in our life.

when those chapters are starting to close, it can be either painful or exciting. what's on the other side of it has huge, immense opportunity. >> i read a statistic today that young fry tag out that luxury hit a 9% demand growth in the month of june. the economy end of the hotel segment was a 2% drop. so, we are in the right sector. scarlet: that was sean hair at trinity explaining how luxury real estate remains strong. i'm pleased to say that greg friedman joins us from peachtree group, they own more than 6 billion in properties. and our very own abigail doolittle as well.

greg, thank you for coming in. i know you are visiting from atlanta and we will get to some of your portfolio and what is in there, much of it hospitality, but i wanted to get your state of play on what peachtree sees in your home base of atlanta. greg: it's a thriving city and doing well but with commercial real estate it's a challenge. atlanta is having a challenging time and it is that way in america across the board. office is secular distress and then you have the balance sheet that everyone is dealing with related to interest costs being so much higher than a couple of years ago. abigail: let's talk about that balance sheet stress. you really get to see the plumbing of this system. josh segan joined us not long ago and said it looks bearish in other folks we spoke to who are

closer to the banks and financing think that the commercial real estate playbook this cycle, it's worse for longer. you happened to see both. where are we, what inning, how bad is it? greg: unfortunately i think it will take a couple of years to come out of what's happening right now. we are going through a sluggish cycle for commercial real estate. it has been that way for the last couple of years with values coming down dramatically. some stabilization of values over the last six months, just given that there is a lot of capital chasing commercial real estate but the reality is there are a lot of challenges ahead because of the new rates reset that has impacted those long-term so we went from a decade before 2022 where we had 0% interest rates and they were much more compressed than what we are seeing today. before you talked about -- abigail: before you talk about

the equity side and hotels. that was on the credit side. during pandemic you were one of the biggest buyers of loans out there. are you still and is it easy to get these deals done? greg: yes, during the financial crisis we bought a bunch of loans. there will be an opportunity to buy a lot more paper and we had a dozen loans from last year until now. a lot of banks, as you read, even those national banks, they have challenges across the real estate book. it's causing them to look at selling the paper. scarlet: can you be more specific about the deals you can get or are available if you were to buy an office building, say, in buckhead, what kind of deal could you get? greg: it depends on the

location. there are submarkets. if there's a building that is trading at a huge discount because it's well located with great amenities or you are buying an office building on the wrong corner, the discounts could be 50% to 70%, depending on the tenants in place and when the tenants are leaving the building abigail:. we would be remiss if we didn't ask you about hospitality, it is the bulk of your equity portfolio. last week sean told us that luxury is doing well that you are right in the middle. what does this say about the consumer? greg: without question we are seeing bifurcation today with consumers, i would say that the consumers that are focused more on the luxury segment and have a lot of liquidity, they continue to travel and spend money, but on the lower side when you look at the challenge from the higher interest expense, inflation, it's really impacting their ability to continue to spend the

dollars, so you have seen pullback in travel and in them spending money elsewhere in the economy as well. the segment we are focused on is the midscale segment. like hampton inn, marriott courtyard, so forth, they continue to do well and we continue to have positive growth across the portfolio. revenue per room is growing but it is lower single digits, so we are not seeing what sean is seeing. scarlet: really appreciate you joining us today, peachtree ceo greg freeman, and abigail doolittle, who specializes in real estate for us. in the meantime, let's get a quick check on where things stand with equities. session lows for the s&p and nasdaq and for the russell 2000 as well. there you can see a decline of 1.2% with most of the stocks lower. 357 decliners. 100 and 46 advancers. this as we await earnings from

apple and amazon and before the big jobs report tomorrow at 8:30 a.m. and right now investors are factoring in three full rate cuts for 2000 24. more bloomberg, just ahead. ♪ with so much entertainment out there wouldn't it be great... ...if you could find what you want, all in one place? show me paris. xfinity internet customers can enjoy the ultimate entertainment experience and save on some of the biggest names in streaming, all for just $15 a month. get the fastest connection to paris with xfinity.

>> from the world of politics to the world of business, this is "balance of power."

live from washington, d.c. >> they are free. welcome to the fastest show in politics. americans released in the biggest prisoner swap with russia since the cold war. happening today, it broke in the last hour right here on bloomberg. kailey leinz, some emotional moments as joe biden announced a swap from the white house with family members at his side. kailey: emotional indeed, at one point joined by the daughter of one of the hostages, singing happy birthday to her, what a birthday to have your mom come home after a year in prison in russia. joe: this has been one that we have talked about a lot. her husband and her other daughter spent time w