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Squawk on the StreetSOTS 2nd Hour: Big Tech on Deck, RFK Jr. Confirmation Hearing, and Fed Expectations 1/29/25
Squawk on the StreetSOTS 2nd Hour: Big Tech on Deck, RFK Jr. Confirmation Hearing, and Fed Expectations 1/29/25
SOTS 2nd Hour: Big Tech on Deck, RFK Jr. Confirmation Hearing, and Fed Expectations 1/29/25
Update: 2025-01-29
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Carl Quintanilla, Sara Eisen, and David Faber discussed the latest for stocks on a busy day for earnings (with Meta, Microsoft *and* Tesla after the bell), plus another Fed decision on deck. Within the hour: Goldman’s Head of Corporate Credit broke down why he’s ‘bond bullish’, the team talked what to expect out of Tesla with one analyst forecasting growth ahead (plus the key figures to watch for Meta and Microsoft), and debated key commentary out of T-Mobile and Starbucks driving both names higher. Plus, another downgrade for Apple, this time out of Oppenheimer – the analyst behind that call joined the broadcast to tell us why. Also in focus: Robert F. Kennedy Jr’s confirmation hearing on Capitol Hill; Trump’s Funding Freeze confusion; and why markets expect a pause from the Fed today.
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Transcript
00:00:00
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00:00:57
Learn more at capella.edu.
00:00:59
Good Wednesday morning, welcome to another hour of squawk on the street.
00:01:05
I'm Sarah Eisen with Carl Kantonia, David Faber, live as always from Post-Mine of the New York Stock Exchange.
00:01:10
Take a look at stocks here in the early going.
00:01:12
We're down on the S&P 500, about 2/10 of a percent, so nothing extreme, like we saw earlier in the week.
00:01:17
Nasdaq down half a percent, giving back some of yesterday's gains.
00:01:20
The Dow remains higher by 51 points.
00:01:23
It's all about the bond market today.
00:01:24
It's Fed Day.
00:01:26
And we've seen this follow-through on buying a bond, yields lower, 4.5 on the 10-year, two-year, just below 4.2.
00:01:33
We'll talk about what to expect from the Fed meeting in just a bit.
00:01:36
>> Anytime it's a very big morning on Capitol Hill, Senate Finance kicks off their confirmation hearing for Robert F.
00:01:41
Kennedy, Jr., to become Secretary of Health and Human Services, and President Trump's Commerce Secretary, Pic Howard Luck, that testifies before Senate Commerce, Science, and Transportation.
00:01:52
At his hearing, we're going to bring you the headlines as they happen later this hour.
00:01:56
>> Particularly watching those pharma and food stocks.
00:01:58
We are 30 minutes here into the session.
00:02:00
Here are three big movers we're watching.
00:02:02
T-Mobile gaining, beating estimates, thanks to continued growth and wireless subscribers and home internet customers, stocks of 8.5 percent.
00:02:10
Starbucks also in the green, despite a sales decline.
00:02:13
Many on the street calling the numbers better than feared, with more than eight firms raising their price targets on the name this morning, where highlights from the CEO in just a bit.
00:02:21
And then watch Big Tech today with Microsoft, Meta, and Tesla.
00:02:25
I'll set to report results in just a few hours, more on the Mag 7 names coming up.
00:02:31
But guys, it's Fed Day, and not a lot of drama expected in today's Fed announcement.
00:02:35
The Fed is expected to pause for the first time since September, after about 100 basis points of cuts that started in September.
00:02:43
The question going into today that I have and that I think investors have is March on the table.
00:02:48
The market is upping the odds of a March rate cut.
00:02:53
You don't get one fully priced in until June, and then another one in December.
00:02:57
But all the turmoil in the market around deep seek and the potentially deflationary implications of that, along with the fact that we've heard the bias from several Fed members over the last few weeks that they're still kind of in cutting mode,
00:03:10
even if the market has moved on.
00:03:12
We also saw progress on the last CPI report on inflation, all of that adding up to the fact that we're going to get a pause, but how likely is Fed Chair Powell going to signal that he's ready to cut sooner rather than later?
00:03:24
And I think the biggest question hanging over everything is tariffs.
00:03:29
What do they look like, and will they be inflationary?
00:03:31
We've heard from a number of Fed policymakers over the past few weeks on how they view tariffs, and this is really going to be key to determining the Fed's policy.
00:03:40
I don't expect Powell to be able to say anything definitive today, but okay, here's the St.
00:03:44
Louis Fed President, will it be a one in done, or will it be two years of sequential a sequence of tariffs in many different sectors of the economy?
00:03:52
If it's over two years incrementally every month or every two months, it gets harder to parse out.
00:03:57
And then remember what Fed Governor Waller told us, he's not too worried about him, listen.
00:04:04
I don't think tariffs are going to have a significant impact or persistent effect on inflation, but we'll just have to wait and see what actually happens.
00:04:14
In the last one, I just showed Kushkari, Minneapolis, the challenge becomes that there's a tip for tat, and one country imposing tariffs and then responses, and it's escalating, that's where it becomes more concerning and frankly, a lot more uncertain.
00:04:25
We just don't know.
00:04:26
We don't know.
00:04:27
Even the President of Mexico, Shine Bounds, on the tape saying she does not think we'll get tariffs at least on February 1st, which is when the President suggested might be a self-imposed deadline.
00:04:38
Meanwhile, the dovish voices like Waller, there is this parlor game that maybe they're trying to curry some favor with the President who wants the Fed to cut.
00:04:46
I know.
00:04:47
As soon as people start getting dovish, everyone says, "Oh, they're political.
00:04:50
They want the Fed."
00:04:51
Look, I'd like to think that the Fed folks are above that, right?
00:04:56
And they're looking purely at the economics of that.
00:04:59
Waller, the change was interesting.
00:05:02
The fact that he came on this show two weeks ago saying, "I'm looking for cuts, multiple cuts as many as four this year.
00:05:10
I'm looking for cuts in the first half of the year if we continue to see inflation."
00:05:13
He's got an economic case.
00:05:15
We've seen now, after six months, a sort of stagnant progress of inflation starting to start to happen.
00:05:22
Yes, we got a very strong labor report last month, but a lot of that could have been give back from the storm.
00:05:26
So let's see where the Fed chair stacks up on all this, not willing to go on the political argument just yet.
00:05:32
Although I know Fed chair Powell has got to be prepared for these attacks, from attacks or questions from the president and the executive branch on making policy, just since the last meeting.
00:05:42
Right.
00:05:43
President Trump has ramped it up.
00:05:44
We'll get ECB tomorrow, and we just had Bank of Canada cut 25 as expected and in QT.
00:05:50
Everybody's in a weaker economic position than the U.S., and so they have more ability to cut.
00:05:55
And they're also considered on the losing side of the tariff front, especially in Europe.
00:05:59
That's why the ECB is expected to cut more than the Fed.
00:06:02
It's not for the right reasons, though.
00:06:03
It's because their economies are in worse shape and because they're expected to get hit by tariffs.
00:06:09
Yeah.
00:06:10
Germany just cut their GDP forecast for the year from 11 to three tets.
00:06:13
Yeah.
00:06:14
I mean, look, you know, we always do this on Fed day.
00:06:16
We show how it's affecting you, how it's affecting consumers and home buyers and purchasers of automobiles.
00:06:25
There's still pretty high rates out there, David.
00:06:27
I know you like this one.
00:06:28
So we go back to the first before the first rate hike.
00:06:32
Back in March 2022, when you were paying 4.29, and that was elevated because there were expectations of a rate height coming on a mortgage.
00:06:39
Guess what?
00:06:40
We're back up to above 7 percent on 30%.
00:06:42
Not good for the housing market.
00:06:43
That's for sure.
00:06:44
Not good for the housing market.
00:06:45
That's for sure.
00:06:46
Not good for the housing market, that's for sure.
00:06:47
Not good for the housing market, that's for sure.
00:06:48
Not good for the housing market, that's for sure.
00:06:49
Not good for the housing market, that's for sure.
00:06:50
Not good for the housing market, that's for sure.
00:06:51
Not good for the housing market, that's for sure.
00:06:52
Not good for the housing market, that's for sure.
00:06:53
Not good for the housing market, that's for sure.
00:06:54
Not good for the housing market, that's for sure.
00:06:55
I had to make a case that they're still in easing mode, look at what's happening, people are still feeling these high rates and they want to preserve this economic recovery.
00:07:04
So that's going to be in the background.
00:07:07
The question is how much is already baked in.
00:07:09
Let's get more on the Fed, potential move in rates, how it may play out in the market.
00:07:12
Our next guest is in charge of corporate credit at Goldman Sachs, advising America's biggest companies on their multi-billion dollar financing.
00:07:19
Johnny Fine is here, Goldman Sachs, global head of investment grade debt.
00:07:22
Welcome.
00:07:23
Good morning.
00:07:24
Thanks for having me.
00:07:24
What do you expect?
00:07:26
No change.
00:07:26
I think that the outlook is simply too uncertain from a government policy perspective.
00:07:31
I think if I'm Chair Powell today, then given the data has been fairly benign as of late, I mean, no hurry to do anything.
00:07:39
And given the mosaic of potential policy outcomes that could drive inflation and growth over the next several weeks and months, if I'm a betting man, I'm going to say he's going to take a watching brief,
00:07:50
see how this develops and see what the impacts are.
00:07:53
Right, I mean, I highlighted tariffs as one of the big wild cards on inflation.
00:07:56
Bond Market is trading tariffs as inflationary.
00:07:59
Correct.
00:07:59
Is that right?
00:08:01
I don't think so.
00:08:02
I think there's many other things in this mosaic that are going to be more important than tariffs.
00:08:06
Tariffs tend to occupy a lot of column inches, a lot of chat in the market overall, a lot of airtime.
00:08:13
But overall, I'm not so sure that we should be as focused on tariffs as a risk, as perhaps the market is.
00:08:21
And the reason for that is the, firstly, it's a one and done as opposed to a continuous bleed through into.
00:08:28
Well, we don't know exactly, right?
00:08:30
Likely, it's a one and done.
00:08:31
And other way, it's a step function as opposed to a demand, excess demand-driven level of inflation.
00:08:38
Additionally, the impacts on the foreign exchange market generally mean that the dollar will strengthen as a function of tariffs being imposed, which itself is tightening from a financial conditions perspective,
00:08:52
and ultimately demand is reduced with higher prices anyway, which then questions how much of this tariff actually is passed on in terms of increased prices.
00:09:00
So all of these things together, for me, I think the tariff fear is overblown.
00:09:05
If I'm the market, I'd be more focused on the other elements of policy making, including impacts on the fiscal outlook and on the labor market as well.
00:09:15
Is the labor market being deportations in the like?
00:09:17
Yeah, I think it's deportations, and I think it's probably also the fear of deportations as well.
00:09:24
Because I think that probably stops those that are here on an unauthorized basis showing up for work.
00:09:31
And it makes employers nervous to have those employees show up to work as well.
00:09:37
You can remember, around about 4% by estimates of the labor force in the United States is unauthorized.
00:09:43
Around 20% of that workforce is in the construction market.
00:09:47
About 10% in food services, about 10% in other kind of low-skilled service areas of the economy.
00:09:55
So if we start to see an absence of workers in that aspect of the economy, then sure, wage pricing inflation, I think, starts to become very much on the front burner.
00:10:04
So are you bond bullish or bearish?
00:10:06
I am actually bond bullish.
00:10:07
I think that certainly when we were at 480 a couple of weeks ago, I think the market was pricing to worst on all of these factors.
00:10:16
Pricing to worst on the fiscal outlet we were talking about treasury options and treasury supply.
00:10:21
And whether or not the incoming treasury secretary, Scott Besson, would change the mix of funding instruments from treasury.
00:10:28
We'll find out more about that next week.
00:10:30
We were concerned about that embedded in even higher term premium in the long end than we had seen prior.
00:10:37
Bear in mind, we saw term premiums at that point hit 65 basis points in 10 year treasuries.
00:10:42
That's the highest level in a decade.
00:10:44
I think they were pricing a lot of these outcomes to worst.
00:10:47
And what makes me more bullish is that as I think that we understand more about how these policy initiatives are going to unfold, some of them will be to the market's worst expectations.
00:10:58
Many of them will not.
00:11:00
And so as a result, I suspect that yields will come modestly lower as the year plays out.
00:11:05
We did hear from Besson last week where he said failure to extend the TCJA would result in an economic calamity in his words.
00:11:13
Does the bond market agree with him?
00:11:16
It's one of those things where there's so many things within the plummings of the financial system that are potentially calamitous, but are very, very easily fixed,
00:11:26
very, very quickly.
00:11:27
That I don't think that the bond market is going to kind of create a lot of issues with respect to challenges in the repo market, challenges in commercial paper, markets overall.
00:11:37
That's not in anyone's interest, it's not in the Fed's interest.
00:11:40
So I'd expect that to be addressed pretty quickly.
00:11:43
Sorry, excuse me, something I keep an eye on acquisition financing.
00:11:46
It moves out of your investment grade area more into high yield, but spreads are very tight.
00:11:50
So even though rates are high, spreads are very tight.
00:11:53
And so high yield financing still may be not bad in terms of, you know, is that going to continue in your opinion?
00:11:59
So it's actually a fixture, not only in the leverage finance markets, but it is a big fixture in the investment grade as well.
00:12:07
Decent backlog in IG, there's a couple more that have been on the tape this morning.
00:12:11
I would expect that to continue to be a fixture and you're right.
00:12:15
Even with elevated input costs in terms of cost of capital, I think companies that we speak to around the world, whether they be IG rated or high yield rated,
00:12:27
are finding investment options either in their own businesses, or they're finding acquisition opportunities external to their business.
00:12:34
So attractive that the numbers still work even with those higher input costs of capital.
00:12:40
All right, Johnny, thank you for the update.
00:12:42
Always good to have you, especially on a Fed day.
00:12:44
Great to see you.
00:12:44
Thanks for having me.
00:12:45
From Goldman Sachs.
00:12:46
As we had to break, here's our roadmap for the rest of the hour.
00:12:49
That rate announcement due at 2 p.m.
00:12:51
Eastern from the Fed.
00:12:52
Many expecting a pause will help get you ready.
00:12:55
Plus we've got another downgrade for Apple this morning.
00:12:58
That's of course ahead of the company's earnings tomorrow.
00:13:00
We're going to speak with the analysts behind that call.
00:13:02
And it's going to be a busy evening Tesla, Microsoft and Meta reporting earnings after the bell.
00:13:07
We'll talk about what you need to know and what the street is saying as the S&P's holding 60/50.
00:13:12
Don't go away.
00:13:14
What's at stake when administration change from the first 100 days and beyond, EY brings insights on the issues that matter.
00:13:22
Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability.
00:13:29
No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth.
00:13:35
EY.
00:13:36
Navigate the geopolitical and economic landscape with confidence.
00:13:41
Dear Toyota, I need a word with you about your crown family.
00:13:45
Suddenly, I love traffic.
00:13:46
Rush hours my happy place.
00:13:48
In the comfort of my crown, I feel on top of the world.
00:13:50
This is strange though, right?
00:13:52
The captivating Toyota crown family.
00:13:54
Toyota, let's go places.
00:13:56
Is it time to reimagine your future?
00:14:01
The right business skills may make a difference in your career.
00:14:04
At Capelli University, we offer a relevant education that's designed to focus on what you need to know in the business world.
00:14:10
We'll teach professional skills to help you pursue your goals.
00:14:14
Like business management, strategic planning, and effective communication.
00:14:18
And you can apply these skills right away.
00:14:20
A different future is closer than you think, with Capelli University.
00:14:24
Learn more at capella.edu.
00:14:26
Quick check on tech stocks, the tech select sector spider fun, ticker XLK within inches of new all time highs after the sector's best days in July.
00:14:39
That said, a mixed story for its top three holdings year to date.
00:14:42
Apple and Nvidia firmly in the red now.
00:14:44
Though Microsoft's holding onto its gains, we're going to get new numbers from Microsoft and meta after the bell.
00:14:49
And then Apple tomorrow feels a lot more high stakes for these numbers to come out.
00:14:54
For sure, definitely on the CapEx.
00:14:56
Sarah's right Tesla tonight after the bell as well.
00:14:58
Our next guest says the company has plenty of growth opportunities ahead to keep him positive on the stock.
00:15:03
Let's bring in Canada, core genuity analyst, George Gina Reacus, has a buy rating and a 404 target.
00:15:08
George, always good to talk to you.
00:15:10
Thanks for the time this morning.
00:15:12
Thanks for having me, Carl.
00:15:13
I've been a lot of whispers about buy site estimates on growth, being closer to 10 than 20.
00:15:19
And some expectations that musk will have to address that somehow tonight.
00:15:23
Absolutely.
00:15:24
So there are a few key things that we're watching.
00:15:26
First like you mentioned, 20 to 30% growth in deliveries.
00:15:31
Let's see if they'll do that.
00:15:32
But we will say that the new model, why looks spectacular and they have promised a couple new models.
00:15:38
Obviously margins are really important.
00:15:41
But the sneaky, really interesting thing that we're looking for is Elon Musk's thoughts on deep seek.
00:15:48
And what that means for Tesla's massive investment in data centers and in video chips.
00:15:54
And it's really also, as a part of that category, very, very important, our FSD take rates, full self-driving.
00:16:01
How many people are opting to buy the AI software, the autonomous software that Tesla's off-rate?
00:16:08
And I assume you believe that this re-rating in the cost element of all of that is positive, is bullish for the industry,
00:16:19
for tech at large, and for Tesla in particular.
00:16:21
It's really important to your point.
00:16:24
But we would argue actually what's even more important than the power and the GPUs needed to build AI infrastructure is the ultimate viability of the AI business models that are in theory geared to justify the dollars being allocated to power them.
00:16:39
You know, like Tesla has voraciously been consuming in video chips and is the leader in real world AI.
00:16:45
But we would argue that FSD take rates are a really good proxy on the broader success of AI business models.
00:16:53
And so far, those FSD take rates are okay, not great.
00:16:57
And we are very bullish on autonomy, long term to be clear.
00:17:01
But if you recall, the downfall of many communications related stocks in 2000 was largely due to the fact of businesses failing to justify the significant capex they were building out.
00:17:13
So it's really important to know not only how much they're investing but how viable the business models are.
00:17:19
And FSD is an AI business.
00:17:21
But the investing does it to have you changed your models or the way you thought of think about capex and what this company has to spend and what their margin profile looks like going forward because of this development?
00:17:33
Not yet.
00:17:34
I mean, we're a little bit skeptical of all the claims that DeepSeek has made as our others.
00:17:40
You know, first of all, we don't know exactly what models that were using underneath the surface i.e., you know, Chad GPT.
00:17:47
So we'll wait and see until the dust clears.
00:17:50
But we continue to believe strongly that you need a lot of GPUs to power them and a lot of power.
00:17:55
You know, we cover a lot of power related stocks as well.
00:17:57
And we haven't changed our thesis there.
00:18:00
Finally, George, I mean, it's no secret.
00:18:02
Musk is being talked about a lot.
00:18:06
We're looking at his approval ratings.
00:18:07
We're looking at his political activity both here and in Germany.
00:18:11
Is it even worth having that discussion?
00:18:13
If, in fact, the valuation on the stock is when it comes to autos, at least the consumer response is not the most important factor?
00:18:21
Well, look, you know, my mom always taught me not to talk about politics and religion at work.
00:18:27
So I'll stop there.
00:18:29
But I will say that, you know, we have to see an improvement in U.S.
00:18:33
and European order rates for Tesla.
00:18:36
China really carried the day in 2024.
00:18:39
It was really, really good growth there.
00:18:41
And we'll see, ultimately, what will a consumer approval be of the new vehicles?
00:18:45
You know, the new model, while, like I said, looks spectacular.
00:18:48
Allegedly, some of the order rates are through the roof.
00:18:51
And what else does Elon Musk and Tesla have to deliver in terms of new models?
00:18:55
They've promised some new exciting stuff that are lower cost in 2025.
00:18:59
And we'll see.
00:19:00
I'm certainly excited to see them.
00:19:01
George, appreciate it.
00:19:04
Do we even notice on the call for sure?
00:19:05
I was assuming he's we're going to hear from him tonight, George.
00:19:09
Any reason to doubt it?
00:19:10
But he said once that he wouldn't be coming on conference calls anymore.
00:19:14
That was a couple of years ago.
00:19:15
But he continues to be on there.
00:19:17
I doubt that he won't be.
00:19:19
George, you're against the countercord.
00:19:21
Thank you.
00:19:22
It does have some other stuff going on.
00:19:24
It's busy, man.
00:19:25
Speaking of tech, keep an eye on the cloud stocks today.
00:19:28
F5 networks popping higher after smashing estimates with double-digit revenue growth for its software business.
00:19:34
That stuck up 9%.
00:19:35
After the break, more on a different name-gaining post-result Starbucks.
00:19:39
Should you believe the turnaround story?
00:19:41
And where are we in that in that process?
00:19:43
We're going to discuss next.
00:19:45
What's at stake when administration change?
00:19:49
From the first 100 days and beyond, EY brings insights on the issues that matter.
00:19:55
Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability.
00:20:01
No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth.
00:20:08
EY navigate the geopolitical and economic landscape with confidence.
00:20:13
At Capella University, learning the right skills could make a difference.
00:20:18
That's why our business programs teach you relevant skills you can take from the course room to the workplace.
00:20:23
A different future is closer than you think, with Capella University.
00:20:27
Learn more at capella.edu.
00:20:29
We introduced the Starbucks brand to the world.
00:20:33
You know, second, we got to make sure our partners are supported the way they need to be supported.
00:20:38
It all starts and ends with them.
00:20:40
I think this testament of 90% promote within has really resonated with our teams.
00:20:46
And then also the idea of making sure that we simplify the process.
00:20:49
Bring order to mobile order.
00:20:51
You know, the third thing we said we were going to do is obviously bring back the idea of a coffee house vibe.
00:20:57
Starbucks Chief Brian Nichol with us last time.
00:21:01
We're talking about the turnaround plans for the company as they reported a top and a bottom line beat.
00:21:05
Same stales did decline for the fourth straight quarter.
00:21:08
Down four was a little bit better than the down five four we were looking for.
00:21:11
Down seven in the quarter before that.
00:21:13
I mean, baby steps was the word that Nichol used.
00:21:15
And that's how the analyst reviewing the quarter.
00:21:17
But they're optimistic that there was enough progress.
00:21:20
It is like reading Trump's executive orders to go through some of the changes that they're making.
00:21:25
They're making a lot of changes.
00:21:26
Just some of the highlights.
00:21:27
They're reducing food and beverage 30% to try to sort of speed up service and improve service and simplify the menu.
00:21:34
They've stopped charging upcharging for non-dairy milks.
00:21:37
For instance, to try to bring back customers, especially those that are not on the loyalty program.
00:21:41
David, they're doing a lot of things.
00:21:43
And it's adding up to, I guess, better declines than expected.
00:21:48
Yeah, lesser declines.
00:21:49
I'm going to get everything to about four minutes.
00:21:51
But it does, you know, I did ask a question about margins because it does appear they're going to need potentially more staffing.
00:21:57
I mean, he's working through a lot of things, Sarah.
00:21:59
And it's clear the turnaround is going to take time but investors seem to be willing to give him that time right now.
00:22:05
Because of his track record, think at Chipotle.
00:22:08
And the fact that he's come on now and he's talking about some of those changes, I thought it was also notable that the vote of confidence he gave in China.
00:22:16
Because part of the thesis is that they would look at separating the Chinese business.
00:22:19
He didn't sound like that's where he was going.
00:22:21
He called it a gem, echoing Kramer.
00:22:24
As long as they don't get rid of the pink drink, this is my kid's favorite.
00:22:27
They have this huge market in children who make their parents pay for very expensive drinks after school because they all need sugar.
00:22:36
And the pink drink is very popular.
00:22:37
Pink drink, because that's what it's called.
00:22:38
It's like, I don't know if it's on the menu or not, but it's called the pink drink.
00:22:41
Yeah.
00:22:42
It's strawberry.
00:22:43
It doesn't have any dye in there, does it?
00:22:45
I mean, I don't know.
00:22:47
I don't know what's in there, honestly.
00:22:49
We're also keeping on shares of T-Mobile, another CEO that joined us as well.
00:22:54
They're up sharply, you can see that right there.
00:22:57
Earnings, cash flow, free cash flow, subscriber additions, or less every metric you looked at was strong.
00:23:04
We did speak with CEO Mike Severt, specifically about where they're seeing that strength and whether it can continue in 2025.
00:23:12
The consumer for our business is firing on all cylinders, but business is starting to come up and contribute way more as well.
00:23:21
And so you don't have a soft spot looking across top 100 consumer markets, smaller markets in rural areas, and then now across multiple segments in business.
00:23:30
And they're all contributing.
00:23:31
So we went ahead and guided our highest post-paid net additions for the start of the year ever, and we moved our service revenue expectations up from prior expectations.
00:23:41
It's been a lot of success for this company over now, a significant amount of time.
00:23:46
You can see what the stock has done over the last five years, and if you wanted to compare it to the likes of a Verizon or an AT&T or even our parent company, Comcast, it would be a sharply different picture as they have been aggressive in terms of rolling out fixed wireless.
00:24:01
They have been adding numerous wireless customers over a long period of time.
00:24:05
They're now getting aggressive in terms of fiber about to close a couple of acquisitions later this year that will give them presence there.
00:24:11
And also even in a partnership, sir, with Starlink, which we also talked a bit about that will give people the opportunity to use their phones in rural or remote areas when they have emergencies and things like that even said they beta-tested and actually turned on during the wildfires in LA when people were not able to connect to the network.
00:24:31
It's interesting, as you might have thought that they would be competitors with a Starlink, but now that they're partnering.
00:24:35
You know, just when you don't think a telecom company can move 8% and grow in a saturated US phone market.
00:24:41
This company continues to surprise.
00:24:43
And by the way, it's not been taking it at the expense of the others.
00:24:46
I mean, AT&T shares are up 8% this year.
00:24:49
They had a very strong response to that quarter even Verizon.
00:24:52
Doing fairly well.
00:24:54
Me time a big afternoon in store for us with the markets.
00:24:58
Another decision on rates.
00:25:00
Of course, the press are with Chair Powell.
00:25:01
Blockbuster results from Tesla, Meta and Microsoft tonight.
00:25:06
As we're holding on to some gains on the Dow, but the S&P is still circling 60-49 back in a moment.
00:25:11
We take you to Senate Finance where there's already been some heckling in response to RFK Juniors opening statement.
00:25:19
Let's listen to some Q&A.
00:25:20
For example, you have a history of trying to take vaccines away from people.
00:25:27
In May of 2021, you petitioned the Food and Drug Administration to not only block Americans from having access to the COVID vaccine, but to prevent any future access to the life-saving vaccine.
00:25:42
Are you denying that?
00:25:43
Your name is on the petition.
00:25:45
We brought that petition after a CDC recommended COVID vaccine without any scientific basis or six-year-old children.
00:25:59
Most experts agreed today, even the people who did it back then, at COVID vaccines are inappropriate for six-year-old children who basically have a zero risk from COVID.
00:26:11
That's why I brought that lawsuit.
00:26:13
I don't want to emphasize that.
00:26:16
Mr.
00:26:16
Kennedy, the facts.
00:26:18
I don't.
00:26:18
The facts.
00:26:19
[applause]
00:26:26
The committee will be in order.
00:26:27
[applause]
00:26:29
And to the audience.
00:26:30
[applause]
00:26:33
Senator Connelly has passed the law for its second, Mr.
00:26:36
Kennedy.
00:26:36
To the audience.
00:26:37
Comments from the audience are inappropriate and out of order.
00:26:41
And if there are any further disruptions, the committee will recess until the police can restore order.
00:26:48
Please follow the rules of the committee.
00:26:52
Mr.
00:26:52
Kennedy, you may proceed.
00:26:53
I also want to point out a year, recitation of what happened in Samoa is absolutely wrong.
00:27:02
We'll get to that in a moment.
00:27:05
Right now, we're talking about the petition that you filed to block Americans from having access to the vaccine and to prevent any future access to the vaccine.
00:27:16
Those facts are on the record.
00:27:18
My third question to you is, you made almost $5 million from book deals, mostly promoting junk science.
00:27:26
In 2021, in a book called the measles book, you wrote that parents had been, quote, misled into believing that measles is a deadly disease and that measles vaccines are necessary safe and effective.
00:27:38
The reality is, measles are, in fact, deadly and highly contagious, something that you should have learned after your lives, contributed to the deaths of 83 people,
00:27:48
most of them children in a measles outbreak in Samoa.
00:27:52
So my question here is, Mr.
00:27:54
Kennedy, is measles deadly, yes or no?
00:27:57
The death rate from measles historically in this country in 1963, the year before the introduction of the vaccine was 1 in 10,000.
00:28:10
Let me explain what happened in Samoa.
00:28:11
In Samoa in 2017 or 2015, there were two kids who died following the MMR vaccine.
00:28:21
And the vaccination rates in Samoa dropped precipitously from about 63% to the mid-30s, so they never been very high.
00:28:30
And in 2018, two more kids died following the MMR vaccine and the government in Samoa banned the MMR vaccine.
00:28:38
I arrived a year later when vaccination rates were already below any previous level.
00:28:47
I went there, nothing to do with vaccines.
00:28:51
I went there to introduce a medical and thematic system.
00:28:53
I would digitalize records in Samoa and make health delivery much more efficient.
00:28:59
I never gave any public statement about vaccines.
00:29:03
You cannot find a single Samoa who will say, "I didn't get a vaccine because of Bobby Kennedy."
00:29:10
I went in June of 2019.
00:29:13
The measles house break started in August.
00:29:15
Oh, clearly, I had nothing to do with the measles.
00:29:18
Not only that.
00:29:19
Your Kennedy center.
00:29:20
Not only that, if you let me finish that.
00:29:22
If you have had some time, if you let me finish.
00:29:25
If you let me finish, there are 83 people died when the tissues samples were sent to New Zealand.
00:29:33
Not most of those people did not have measles.
00:29:37
We don't know what was killing them.
00:29:38
The same outbreak occurred in Tonga and Fiji and no extra people died.
00:29:43
There were seven measles outbreaks in the 13 years prior to my arrival.
00:29:48
I would like to get my time back.
00:29:49
The nominee wrote a book saying that people had been misled into believing that measles is a deadly disease.
00:29:58
He's trying now to play down his role in Samoa.
00:30:01
That's not what the parents say.
00:30:02
That's not what Governor Green says.
00:30:04
It's time to make sure that we blow the whistle on actually what your views are.
00:30:08
At least we're starting.
00:30:09
We need to move on.
00:30:11
I support the measles vaccine.
00:30:13
I support the polio vaccine.
00:30:15
I will do nothing as HHS Secretary.
00:30:17
That makes it difficult or discourages people from taking the vaccine.
00:30:22
Anybody who believes that on a look at the measles book you wrote saying parents have been misled into believing that measles is a deadly disease.
00:30:31
That's not true.
00:30:31
We need to move on.
00:30:33
Senator Grassley.
00:30:34
Welcome.
00:30:36
I'm going to do like I did in my office.
00:30:41
I'm just going to make some points to you.
00:30:44
I got about seven.
00:30:46
I want to quickly get done.
00:30:47
And then at the end, I'm going to ask if you disagree with anything I say.
00:30:53
And then address those things you disagree with.
00:30:56
I'll make sure I save time for you to do that.
00:30:59
A key responsibility of each member of Congress is oversight.
00:31:04
Oversight allows us to hold bureaucrats accountable to the rule of law.
00:31:09
And it helps keep faith with taxpayers.
00:31:11
I expect HHS to provide timely and complete responses to congressional oversight.
00:31:18
Number two, PBMs, something you and I just want to give you a taste there of the spiciness of this confirmation hearing.
00:31:26
RFK Jr., before the Senate Finance Committee, Democrats hammering him over previous remarks against vaccines.
00:31:32
You did just say, hear him say, as HHS Secretary, if I'm confirmed, I will not go against the measles vaccine, which was one of the questions that Democrats had.
00:31:42
We're going to continue to monitor, of course, keep you abreast of any news from the RFK hearing.
00:31:47
We've also got to talk about the upcoming Fed decision and earnings results from three of the magnificent seven names all coming this afternoon.
00:31:55
Tesla, Meta, Microsoft, Steve Kovac and Julia Borsten here with more on what investors should be watching out for.
00:32:00
Steve, we'll start with you.
00:32:02
Yes, Sarah, the dynamics of this Microsoft earnings report has just really changed in the last week or so.
00:32:08
We've found out last week with that Stargate announcement that Microsoft is no longer that exclusive cloud partner for OpenAI.
00:32:16
And that Stargate project is really where a lot of the resources are going to go.
00:32:20
At the same time, deep seek is kind of raising all these new questions about these AI capital expenditures that have been under scrutiny from investors since probably last summer, since they talked about,
00:32:31
not just Microsoft, but Google and so many others, talked about the enormous amounts of money that they're playing to spend.
00:32:38
And then today, we got another wrinkle in the story with OpenAI saying that they probably suspect that some of this deep seek stuff was actually trained on OpenAI,
00:32:48
using the OpenAI APIs in an improper way against the policy there.
00:32:53
So that is still being played out as well.
00:32:55
And but the numbers still remain here.
00:32:57
The fiscal year 2025 cat-backs from Microsoft, $80 billion, they are sticking with that.
00:33:02
That's the number that they plan to spend through the end of their fiscal year in July.
00:33:07
And then the numbers to watch for it are the Azure growth, the previous quarter.
00:33:12
Azure had grown 33%, and 12% of that came from artificial intelligence.
00:33:17
OpenAI is a big part of that.
00:33:19
Of course, we're going to be looking for what that number is today, and also moving forward if the growth rate will continue to accelerate, especially for AI processes.
00:33:28
And then OpenAI, those losses that OpenAI is suffering continues to suffer to hurt Microsoft too.
00:33:35
They are expecting one and a half billion dollar hit to income this quarter, Sarah.
00:33:39
Steve, appreciate that.
00:33:42
We're going to be talking a lot today.
00:33:43
Meantime meta is also set to report this afternoon with AI and deep seek, sure to loom large, our Julia Borstens here to talk about what might be important.
00:33:51
Certainly cat-backs guidance or at least a reiteration of it will be interesting, Julia.
00:33:55
That's right, Carl, AI, it's costs, it's payoffs, and the future of open source will be the key factors driving meta's results.
00:34:02
And also, it's stock after earnings today.
00:34:04
Now meta shares are up 67% in the past year, and up about 8% in the past week.
00:34:09
It's a rare mega cap tech stock that has benefited from the surprise explosion of deep seek.
00:34:15
Its success has seen as validating meta's open source approach to AI.
00:34:19
And because meta is seen as a key beneficiary of AI, both in terms of its ad business and also its consumer chatbot.
00:34:27
Now CEO Mark Zuckerberg just last week pre-annouting the company's 2025 cap ex-outlook, saying it'll be 60 to 65 billion dollars in cap expending as it builds its AI infrastructure.
00:34:39
So now analysts are hopeful that deep seeks lower cost will eventually spell savings for meta.
00:34:45
JMP with a buy on the stock saying with AI becoming more efficient, it is increasingly likely that 2025 is meta's peak AI cap ex-year as it digests its AI investments from the last few years.
00:34:57
So the question is how meta's AI investments are paying off this quarter.
00:35:02
While earnings per share projected to grow 27% from the year earlier quarter, revenue growth is expected to slow to 17% this quarter down from 90% last quarter,
00:35:13
and it's projected to continue to slow to 14% next quarter.
00:35:17
So we'll see whether those AI tools plus monetization of messenger and WhatsApp and ads coming to threads can rev up growth, guys.
00:35:25
All right, Julia.
00:35:27
Meanwhile, the stock has had a very nice run even this year, even despite the bit of a decline today, up almost 15% so far.
00:35:34
Just a few hours away from another Fed decision, Steve Lisman's in Washington, DC.
00:35:40
Of course, he's getting ready for the Vignus conference.
00:35:43
Steve, any expectations here beyond what we sort of already kind of seem to know?
00:35:47
Well, I think things are changing as we speak, David.
00:35:51
dramatic analysis from the Trump administration in just the past 24 hours.
00:35:54
When it comes to federal workers and spending, have underscored the Fed's expected decision to pause and wait for greater clarity before considering additional rate cuts.
00:36:03
The Fed's already had to weigh the effects of potential tariffs, tax cuts deregulation and deportations.
00:36:08
Now it's got to fold into the mix a potential decline in government spending.
00:36:13
Some portion of two million federal workers looking for jobs unclear about any of that.
00:36:18
The federal workforce X census and postal workers.
00:36:20
It's 15% of all jobs out there in 2023.
00:36:24
Federal spending X defense and Medicare.
00:36:26
They were 12% of GDP potential major changes to both.
00:36:29
It's got to figure into the feds thinking about the macro economy.
00:36:32
So keys to the Fed outlook today will be whether the Fed chair and the Federal Reserve itself affirms this direction of rates still being down, especially as confidence that inflation they think is still headed to the 2% target.
00:36:43
And of course, Powell will do his fiscal policy dance around questions from journalists.
00:36:47
He does not want to answer in that context.
00:36:49
President Trump's recent demand that the Fed lower interest rates.
00:36:52
Maybe the least of Fed chair Powell's concerns.
00:36:55
He can ignore that.
00:36:56
Would he and the Fed can't ignore it?
00:36:58
What might be coming from the Trump administration next couple months?
00:37:00
Trying to figure out what it all means.
00:37:02
Could come in the next couple days or the next couple hours.
00:37:04
Real quick, guys, the GDP now, then if that GDP now just went down to 2.3% from 3.2% in part because of that big trade number we had this morning,
00:37:16
which is likely people bringing things into the country before potential tariffs take effect.
00:37:21
Carl?
00:37:21
Yeah, I thought it was a misprint at first.
00:37:23
That's a very interesting, interesting revision.
00:37:26
Steve, thanks a lot.
00:37:27
Vizzy Day, Steve Liesman.
00:37:29
A lot more school, I'll go the street after this.
00:37:30
Don't go away.
00:37:31
Welcome back.
00:37:34
We continue to get a stream of headlines out of Washington, D.C.
00:37:38
overnight, including some of the confusion as well around that federal funding freeze.
00:37:43
Emma Javers, keep in track of it all.
00:37:45
What do we got him?
00:37:46
Good morning, David.
00:37:48
The White House says they expect 5 to 10% of the federal workforce to accept their offer for what they're calling a deferred resignation.
00:37:55
They say that could save the taxpayers as much as $100 billion annually over the long term.
00:38:00
The deal on the table is if you resign by next week as a federal employee, you can collect full pay and benefits and retain your pension until September 30th, even though you will do no work.
00:38:12
The new Department of Government Efficiency posted this morning that employees, quote, can take the vacation you always wanted or just watch movies and chill while receiving your full government pay and benefits.
00:38:23
That comes as the White House is beginning to fill in the details of an abrupt federal payment freeze that went into effect yesterday.
00:38:31
Officials here now say this is not a blanket stop work order.
00:38:34
Instead, it's an effort to identify and eliminate programs that are not politically correct in the MAGA era, such as diversity efforts or efforts around transgender issues.
00:38:44
Now, all of that coming, as Press Secretary Caroline Levitt says, the deadline of this Saturday still holds for potential new tariffs on China, Canada, and Mexico.
00:38:53
So we'll be watching for the details today on how that might roll out, David, and just one other detail here that those Medicaid portals, payment portals that shut down yesterday,
00:39:04
the White House said they were aware of that, and that those portals were now going to be up and running.
00:39:09
So they seem to have gotten some of the kinks out of that federal funding freeze overnight.
00:39:14
Guys, back over to you.
00:39:15
You know, Amy, whether it's the funding freeze or the buyout off for the federal employees, I think there is some question here in terms of the presidential authority, or whether it exists to do those things,
00:39:27
or whether it's Congress's place.
00:39:28
What do we know, and what do we expect in terms of how that ends up?
00:39:32
Well, I think there's going to be a lot of litigation around this, first and foremost, David, and I can tell you, I just spoke with Alina Habba, the presidential advisor here, former Trump attorney.
00:39:41
She said she's not working on this directly, but they're confident inside the building that they have this pretty well buttoned up in terms of the lawyers, the role that OMB is playing, the role that the Office of Personnel Management is playing.
00:39:54
They feel like what they're doing here is going to withstand legal scrutiny.
00:39:57
Nonetheless, it is going to come under scrutiny.
00:40:00
There are going to be lawsuits filed.
00:40:01
There have been already, and more of that is to come.
00:40:04
So this will be fought out in the courts over time.
00:40:07
A federal judge yesterday putting a stay on that spending freeze until Monday, so they can work out some of the logistics on the lawsuits here that are expected to be in process already and more to come.
00:40:20
What departments will get affected by this most, and for the Democrats that are calling out, you know, access to services that Americans rely on,
00:40:31
is there true to that?
00:40:32
Well, the administration is saying so far that no direct benefits to individuals in the United States will be affected by this.
00:40:40
They're simply looking to target programs that they feel are not in line with the President's agenda.
00:40:48
Like I said, that's diversity, equity, and inclusion efforts.
00:40:48
That's things around oil and gas that was spelled out in the memo that they sent to federal employees, transgender issues, all of that will not be affected.
00:40:55
In terms of all that will be affected, in terms of the overall approach with the federal workforce, they don't really know Sarah how many people are going to accept this.
00:41:05
They think between five and 10 percent, but it's a blanket offer.
00:41:08
And if they get a bigger share of the federal workforce accepting it, then they expected, you know, that could have a problem on their hands in terms of operating the government over the long run.
00:41:17
They seem confident, though, that you can call a significant number of federal employees without damaging efforts to run the federal government.
00:41:26
So interesting.
00:41:28
And of course, very similar to the fork in the road memo that Elon Musk sent to Twitter employees, right, when he first took control of that company.
00:41:36
Elon's fingerprints are all over this one too.
00:41:39
And we saw the Doge Committee, the new Department of Governmental Efficiency, putting out a statement on social media today offering frequently asked questions to federal employees about this.
00:41:49
So clearly, Elon's Doge is right at the center of this effort to cut the federal workforce by a dramatic amount.
00:41:54
Okay.
00:41:55
Amy, thank you.
00:41:57
Amy Javers and DC for us.
00:41:59
Apple set to report earnings tomorrow afternoon.
00:42:01
Shares have been underperforming the broader tech sector at least so far this year, down about 6%.
00:42:05
And a number of analysts seem to be losing their appetite for the stock.
00:42:10
Our next guest is the latest in what has been a string of downgrades for the name, saying he's going to a hold on weaker outlook, slower replacement, trying to share loss.
00:42:19
Oppenheimer's analyst, Martin Yang joins us now.
00:42:22
Yeah, Martin, no shortage of analysts who share your opinion and have done so over the last few weeks.
00:42:29
You know, why was this in your sense the right time still to downgrade based on overall demand for the iPhone?
00:42:37
I think incrementally what we saw last week, the dramatic shifts and performance improvement, deep sea, AI applications like that make us more convinced that appalling intelligence is not going to be a major driver for a new iPhone cycle.
00:42:56
Things are shifting so fast.
00:42:58
And then the consumer app for AI is very fragmented.
00:43:03
So appalling intelligence doesn't have what it takes to lift iPhone replacement in upcoming 12 to 18 month in our review.
00:43:11
Martin, I want to put you on hold for a second if I can because we've been monitoring the hearing with RFK Jr.
00:43:19
And we want to go back to it as the questioning continues.
00:43:22
Mr.
00:43:24
Kennedy, in my final question, did you say on a podcast and I quote, I wouldn't leave it abortion to the states.
00:43:33
My belief is we should leave it to the woman.
00:43:36
We shouldn't have the government involved even if it's full term.
00:43:40
Did you say that, Mr.
00:43:42
Kennedy?
00:43:42
Senator, I believe that every abortion is a tragedy.
00:43:46
Did you say it, Mr.
00:43:47
Kennedy?
00:43:47
This matters.
00:43:49
It doesn't matter what you come here and say that isn't true.
00:43:53
That's not reflective of what you really believe that you haven't said over a decade after decade after decade because unlike other jobs we're confirming around this place, this is a job where it is life and death for the kids that I used to work for in the Denver public schools and for families all over this country that are suffering from living in the richest country of the world that can't deliver basic health care and basic mental health care to them.
00:44:22
It's too important for the games that you're playing, Mr.
00:44:26
Kennedy.
00:44:27
And I hope my colleagues will say to the President, I have no influence.
00:44:31
I hope my colleagues will say to the President, out of 330 million Americans, we can do better than this.
00:44:40
Thank you.
00:44:40
We need to move on.
00:44:41
Senator Cassidy.
00:44:43
Mr.
00:44:44
Kennedy, President Trump has sworn to protect Medicare.
00:44:51
Republicans are exploring reforms to Medicaid that could help pay for Trump administration priorities.
00:44:58
With this context, what will you do about dual eligible?
00:45:03
About dual eligible.
00:45:05
Well, dual eligible are not right now served very well into the system.
00:45:11
Those are people who are eligible for both Medicaid and Medicare.
00:45:17
And I suppose my answer to that is to make sure that the that's all right.
00:45:26
We will continue to monitor that confirmation hearing, of course, for RFK June.
00:45:32
You're Martin, want to come back to you apologize for that interruption.
00:45:35
You know, you were talking about apple intelligence and not a particularly positive way.
00:45:42
What is it that you feel like it's lacking that therefore consumers are simply not interested necessarily in upgrading to get a hold of it?
00:45:51
Yeah, as a combination of two things.
00:45:53
One, the capabilities showcase as of June last year, in today's sense, seems to be outdated.
00:46:03
And then there are also reports on during the beta testing, or currently one feature, such as the summarization of news headlines,
00:46:14
are not performing to to expectations, making errors in headlines and then making errors in the summarization of the whole articles.
00:46:26
So I think those things small things accumulate together will lead to a pretty pretty big disappointment when it comes to open open access of apple intelligence.
00:46:40
What would the multiple have to move down to for you to be interested in having it as a buy again?
00:46:44
I think multiple have to be down another 20% for me to get more interested.
00:46:49
Okay, Martin, thank you.
00:46:53
No, it was short, but appreciate you taking some time, Martin Yang from Oppenheimer.
00:46:57
Of course, we are keeping an eye on shares of apple and so many of the other companies that we've already discussed this morning in terms of earnings coming, not just apple, but meta as well, which has been a very strong performer, although down today,
00:47:08
should note, Nvidia shares after a rebound yesterday from, of course, Monday's historic sell-off are down again and not insignificantly Nvidia down about 4.7% as the market continues to grapple with the implications of deepseek,
00:47:25
not to mention Alibaba's latest model, which it says actually exceeds the performance of a deepseek's latest model, and just the entrance overall to the Chinese into a market that they were thought to be lagging in,
00:47:37
given their lack of access to the chips that seemingly are behind it all.
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