The Wednesday edition of Morning Brief is getting investors set for a busy day of trading.

The ADP employment report for May showed private employers added 152,000 jobs last month, less than the 175,000 economists were expecting. UBS Global Wealth Management Senior US Economist Brian Rose says that despite the weaker-than-expected report, "things are looking good for the soft landing scenario that the Fed has been aiming for."

Some big news out of Big Tech. Alphabet (GOOGL, GOOG) announced its new Chief Financial Officer will be Anat Ashkenazi, who currently serves as CFO at Eli Lilly (LLY).

Brad Smith and Madison Mills recap earnings from Hewlett Packard Enterprise (HPE), Campbell Soup (CPB), Dollar Tree (DLTR), and CrowdStrike (CRWD). They also discuss a bid from some financial giants to create a stock exchange based in Texas.

For more expert insight and the latest market action, click here.

This post was written by Stephanie Mikulich.

Video Transcript

It's 9 a.m. here in New York City.

I'm Brad Smith alongside Madison Mills.

This is Yahoo Finance's flagship show the Morning Brief Stock Futures.

Moving upside here on the back of a fresh read on the labor market.

You're looking at gains across the major indices with the S and P up two 10 of a percent of 5, 10 of a percent that comes after private payrolls growth showed signs of slowing in the month of May.

We're going to get to the three things you need to know this Wednesday morning, your road map for the trading day.

Yahoo Finance JD how and JW.

We have more good morning investors reacting to that latest jobs data odds for a F rate cut this fall rising as softer than expected jobs data released this morning.

Fuel hopes.

The private sector, 80 p jobs report showed 152,000 and jobs created in the month of May versus expectations of 100 and 75,000 on account of weaker hiring and manufacturing and leisure and hospitality sectors.

This report coming ahead of the government's all important jobs report due out this Friday an alphabet appoints a new CFO, the tech giant is tapping Eli Lilly's Chief Financial Officer Annette AJ Kazi, who will put an end to her two decade long relationship with the Pharma giant to take on the role of CFO and senior vice president at both Google and alphabet effective July 31st alphabet has announced that its current CFO Ruth Porat will start a new role, president and chief investment officer next month and we're watching chairs of Hewlett Packard Enterprise.

The stock is surging 15% in the pre market trading after seeing a strong revenue performance in the second quarter driven by strength and H PE SA I server sales H PE also issued optimistic guidance for the full year on the back of its results.

Stock is expected to post its best trading day since 2016.

Well, good morning everyone.

Our top story stock futures rising after the latest jobs data came in weaker than expected for the month of May.

100 52,000 private payrolls were added last month versus the 175,000.

That Wall Street was expecting the April figure was also revised lower.

Now this is a further sign of a softening in the labor market and investors are hoping this could push the fed to cut rates sooner rather than later here.

Uh A few interesting nuggets within this report and one of them is where job changers, those who are looking to perhaps make a hop, get a higher pay grade and perhaps be able to outpace inflation there.

We've only seen that move higher by about 7 8% 7.8%.

Essentially in the median change in annual pay there.

You compare that to job stayers where it's at about 5% right now.

So that one of the interesting nuggets that uh we were able to pull out from this report and that is what so many of the guests have come on.

Our shows have been saying is the critical piece to watch what is happening in terms of the wage gains because that is what determines the course of inflation, which determines what the fed is going to do.

Moving forward.

Having said that one of the guests we're going to speak with later had said that if we got a softness in the A P print that was going to lead to a little bit of a sell off in yields, we saw that very briefly and then immediately another return.

So I'm curious to see what folks have to say about the market reaction and the volatility of that reaction that we continue to see in response to this day.

And what does that mean moving forward here?

Because the labor market is still showing more signs of cooling that private payroll growth slowing in May.

This after job openings in April fell to a three year low.

So to break down what today's data signals for the broader economy we have Brian Rose.

He is with U BS as their Global Wealth Management senior US economist.

Thanks so much for being here with us this morning.

Brian.

I'm curious from your perspective, what was the single biggest data point that stuck out to you from this A P print?

So this is uh nothing too surprising, you know, I I don't think we should make such a big deal out of a small uh you know, shortfall compared to consensus forecast.

Ad P has not been very useful in forecasting the monthly payroll prints, which is what will really move the market overall.

I'd say it's around around the levels that, you know, we've been seeing recently and Brian just some further color on this as well here, job gains slower and may do to a steep decline.

As AD P had noted in manufacturing, you also did see leisure and hospitality show weaker hiring.

What does that give us in terms of a sense on the sector front of where we could see some, some lows in this near term?

Yeah, so uh manufacturing is a relatively small part of the overall labor market and hasn't been a big driver of the, you know, employment gains in recent years.

But leisure and hospitality is huge.

And of course, we had a tremendous number of job losses when the pandemic hit and then uh you know, rapid recovery and lots of jobs being added in leisure and hospitality.

But that has slowed in recent months.

So a lot of those job openings have now been filled.

So we're seeing uh you know, less uh less jobs being created and this is an important driver of the overall slowdown in payroll growth that we've seen in recent months.

And Brian, I guess the reason why I focus on both of those sectors is because on one end you get the pulse of the consumer and where they might be spending into the experience economy.

And then on the other end you get a pulse on the consumer and where they might actually be spending into and companies on the manufacturing side saying, ok, we're actually going to perhaps not be as aggressive in our own production as we have needed to in the past because of where consumers are prioritizing their purchases.

Is there a read through on the consumer because of what we're finding in this ad P report?

Well, you have seen, um, you know, some shifting back towards services and spending, right?

When the pandemic hit and people were stuck at home, there was a huge shift in spending towards goods.

And then, um, you know, we've been sort of back and forth, but recently the services has been uh you know, where people are spending, right, the leisure travel especially.

So you see lots of people flying and things like that and on the good side, you know, overall overall pretty, pretty soft demand and this is in line with say the pre pandemic trend, which is a lot more emphasis on experiences on services consumption and less on, you know, on buying stuff.

If you just look at manufacturing output, it's not very strong, right?

It's on a very flat profile.

So we shouldn't be expecting a lot of job gains, uh you know, in manufacturing.

All right.

Well, Brian, let's cut to the chase here.

The big question that I know my mom's gonna have watching.

This is, is this softness in the data, the sign of something nefarious or is it just the softening that we were all kind of hoping for, to cool off the economy just enough for the fed to get its goldilocks wishes to come true.

Which of those two is it, is it softening or something more nefarious?

So things are looking good for the soft landing scenario that the FED has been aiming for.

I think it's become clearer in in recent weeks that fed policy really is restrictive that the current level of interest rates is weighing on activity uh helping to slow the economy and over time, this will help to bring inflation down, which is what the feds have been aiming for.

Uh The Fed does face a tricky situation though.

You know, I think there's a sense that if they leave rates at this level for too long, it could trigger a recession.

So the fed is trying to balance the risk you know, they want to start trimming rates at some point this year.

They're just waiting for the inflation data to improve a little bit further and then they'll, they'll start to, to cut.

But there's a real question as to whether those rate cuts will start in time to make it a soft landing rather than something of a, you know, more serious downturn.

And there are, there are some downside risks if, uh you know, inflation stays sticky and the fed has to delay the rate cuts.

Then you know, the the downside risks will build.

All right, good notes there and great perspective.

Brian, thanks for joining us ahead of the opening bell here and on the back of this ad P print where the national employment report showed private sector employment increased by 100 52,000 jobs weaker than expected.

Brian Rose of U BS.

Appreciate your time.

Thanks very much.

Let's switch gears here.

Alphabet, appointing a new CFO chief financial officer.

The tech giant is tapping Eli Lilly's chief Financial Officer, Anat Ashkenazi who will put an end to her too long or too weak.

Uh Excuse me, two decade long.

Yes, my goodness, two decade long relationship with the former giant to take on the role of CFO and senior vice president, both Google and alphabet effective July 31st alphabet has announced that its current CFO Ruth Porat will start her new role as president and Chief Investment Officer.

Next month All right.

Let's bring in Yahoo Finance's tech editor Dan Halley on the tech side and health reporter on the health side.

I'm Julie Kim Lani.

My goodness, two decades long, decades long, maybe I was just so flabbergasted by him.

I know who stays in a job that long anymore.

And health to tech, I mean, it's, it's a really interesting story that is an interesting switch.

That's the part that's surprising to me quite frankly looking at her career and how long she's been with the company, the things that she has done is built up really a health care giant working on the manufacturing side R and D side overseeing CFO S of the various departments in the company.

And so that has built up a commercial business and could be the reason why Google is looking at her or brought her on board.

In fact, prior to being at Lily, she also has some experience in financial services in Israel, which is where she is from.

I have had a chance to speak with her before and I know that she did kind of jump into the role mid pandemic in 2021.

That's when she was assigned to the role of CFO after her predecessor was caught in some allegations of improper relationships with an employee.

So she was really shoved into this role mid pandemic at a time where Lily was really top of mind for treatments.

Remember that antibody that they had out on the market for COVID.

And then, uh, at the same time, that's when the GOP one boom really started.

So she's overseen all of that and really seen the rise of Lily, which is up, I think, like 600% in the last five years alone.

So, really looking at a strong business being built.

All right.

So Dan gotta switch gears here and ultimately figure out, all right, what does this mean as well for, for Google for alphabet?

Yeah, I mean, look, this is uh a big deal.

She's coming in at a point where, you know, alphabet Google, they're spending billions of dollars trying to build out their generative A I capabilities.

Uh They're adding it to search hasn't done quite that well so far.

Uh They had to roll back that update with uh A I overview and then they had that issue with uh their uh what was it, the Gemini Image uh generator app.

So this is something of a, a kind of period of upheaval almost at Google.

Uh They had those layoffs recently.

Uh I think we reported them on what Monday today is Wednesday.

Uh It feels like a year ago for some reason.

Uh But this, this is a period of, of huge change for the company where they're investing, they have to get uh more servers online as more people start to use generative A I.

Uh Right now they say uh they have the A I overview in the US, they seemingly, according to a New York Times report, paed back the amount that they offer that uh when it comes to search.

Uh, but it's still something that's available and they say they'll have it to billions of people by the end of the year, that's gonna take a lot of resources.

And so they have, uh, a ton of the earmark.

Now for that Capex, she's gonna have to oversee that and make sure they stay on target.

Yeah.

And that's certainly something really important to watch when it comes to the Capex piece in particular.

But Dan, while you're on set with us, we got to talk chips huge week for chips this week specifically, of course, NVIDIA A MD, whatever.

But Qualcomm also having some additional chips news today.

What do we know?

Yes.

So they're rolling out their, their new uh A I PC chips that they've announced there.

Uh Basically uh in Taipei to kind of do a lab uh at Computex.

They're uh essentially saying look, you know, we have this chip, it's going to beat Intel uh and A MD.

And they also have uh the firm Neuron that they're backing uh that is rolling out its own A I PC chip.

Uh This is uh also part of an A I uh server that's, that's, you know, instead of having to deal with hyper scalar companies can purchase a kind of GP TE server for their own use on Prem on Prem just means on premises because everything in tech needs a fancy phrase uh on premises just means that your data stays local.

It doesn't go up into the cloud to Google Microsoft Amazon.

Not that they would necessarily look at that data, but if you're dealing with highly secure kind of information and you just don't wanna risk it having to go out into the internet, you can do it on Prem.

And so that's what this uh neuron company does backed by Qualcomm.

Uh It seems as though Qualcomm's really uh kind of having itself quite a week with the announcement of its its chips.

It's kind of the victory lap that it's doing.

Uh really they're coming out and trying to take on Intel and a MD uh and kind of, you know, stick it in their eye and say, look Apple's been eating your lunch when it comes to uh putting out good chips for devices that people want.

Um Now we're gonna do that.

And so Intel and A MD have responded, we just have to wait for all this stuff to come to market to know who's actually got the lead here.

But Qualcomm looking pretty darn good.

Well, and also you mentioned Intel, Intel getting $11 billion in investment from Apollo for an Irish chip fab.

Um that is according to reporting originally from Bloomberg News this morning and we should mention Yahoo, the parent company uh Apollo is the parent company of Yahoo rather.

What do we know about Intel's role in that?

And to what extent that's a big deal?

$11 billion sounds like a lot.

But is it a lot in the short term of chips for, for a fab?

Yes, I mean, look, that's, this is, uh, their fab 43 I believe, uh, in, in Ireland and, uh, Intel will maintain a majority ownership of it.

Uh Apollo will essentially have 49% Intel, 51%.

Uh And so Intel will uh more or less end up buying some of its chips from itself uh through this deal, but it does allow them to free up uh some cash to go ahead and invest in other areas that they need to build out.

So this is just part of their strategy where they're trying to be more flexible.

Uh They're clearly trying to increase the number of fabs they have, obviously, they got some of that government funding from the Chips Act.

Uh And so this is just one of the, the leverage that they're pulling to try to build that out.

They want to uh get the uh position.

They say they're about to get the position as far as leadership in overall technology capabilities.

Take that away from TS MC.

Uh That's what Pat Gelsinger has been uh pointing to.

They have their Foundry uh program that they're doing where I mean, right now, they're just Intel chips essentially.

But they have Microsoft as a customer as well as other customers that they talked about but have not uh let people know very much about.

Uh and then uh they're going to end up uh pushing that forward.

They're not going to take the lead as far as capacity to build chips.

TS MC is just leaps and bounds ahead, but they'll be building out more and more and this is all part of that huge chip, a push that the US is doing turns out every other country is doing it as well though.

So we'll have to see how much of an edge that gives the US if anything but it should increase our capacity overall.

Really good point.

Dan, thank you so much for joining us and Angelli.

Thank you as well for joining us on the breaking news this morning.

We appreciate it moving on to another big story.

We're watching Hewlett Packard shares surging after the company lifting its full year guidance, getting a boost in the second quarter here in the quarter from strong demand rather from its artificial intelligence servers which are powered by and video.

No surprise there.

All of this comes together, right?

Strong and video demand leading to a lot of A I usage leading to a lot of server usage.

Great news for Hewlett Packard, the stock is up 16%.

That is the biggest gain Brad for this company since 2016.

So this is a huge boon for them.

They were anticipating.

A revenue Wall Street was anticipating rather a projected 2% decline in year on year revenue and they ended up seeing a 3.3% increase.

So a huge overview there.

Yeah, absolutely.

And you look out to the revenue guidance that they're looking at for their fiscal Q three as well, 7.4 billion to 7.8 billion.

So it signals that they're continuing some anticipated or anticipating some continuing growth there.

They also in that A I systems revenue, they saw that more than double sequentially to over $900 million.

So that uh a massive figure as you think about how many consumers of the HP Enterprise Solutions are really trying to figure out how they can best implement A A I strategy whatever that may look like right now.

Um And so H pe certainly benefiting from, but I mean, this still comes back to the server revenue business here, $3.9 billion of that 7.2 billion total figure for the quarter.

And it starts to paint this picture of a kind of non ending ability of demand to continue to go up and up and up and when there's not necessarily going to be continued supply.

So H Pe Super Micro Dell, so many of these companies that are going to benefit from the A I server rally Super Micro, really outperforming those names that I just mentioned and H pe kind of just getting in the race here when you look at those stocks year to date, really H pe under performing the others.

But this could be a sign of more growth to come for the company and just some brief color from the call, Antonio N CEO of the enterprise A I demand.

Well, H pe ceo Antonio Neri, who actually we're going to have a discussion with, I'll tease that in a hot second.

Anyway, on the call, he talked about three segments that are essentially gonna be driving demand, model builders, sovereign clouds and enterprise customers don't be surprised if you hear him talk about more of that with regard to H pe Sa I demand strategy here.

So stay tuned for that aforementioned in interview, executive editor Brian Si's interview with H Pe Ceo Antonio Oi.

That's coming up in our three pm hour of market domination.

You do not want to miss it.

Well, we're just getting started here on morning brief dollar tree shares.

They are sinking after announcing it's exploring a potential sale of family dollar more on that next.

Plus we'll get another check on the pulse of the consumer from lululemon earnings after the bell.

Today, we're going to break down what the company could do to impress Wall Street later on this hour.

Plus a leadership transition at alphabet.

As we were continuing to really evaluate here this morning, you can stay tuned for our 10 am hour of catalysts where we'll speak with an analyst about what investors need to know and we'll give you an update on where the stock is moving.

Post that announcement.

Stay tuned.

Deep peace.

You're watching Yahoo Finance time for some trending tickers dollar tree shares.

They are slipping after disclosing it is exploring a potential sale or spin off of family dollar as the company struggles to counter weaker demand.

The company also saying it will close an additional 150 family dollar locations by the end of 2024.

You're taking a look at shares right now pre market down by about 1.9% here.

And the company as they've released this news, it came in tandem with their earnings.

So you can really kind of compare how family dollar same store sales are uh going up against the dollar tree segment, same store sales net growth in this most recent quarter of dollar tree segment that was up by about 1.7% family dollar segment only up 1/10 of a percent here.

And so all of these things considered, it's really this multi year journey to help the company fully achieve potential.

The CEO saying and announcing a comprehensive review of the portfolio for family dollar including plan closure of about 970 un performing stores.

So this kind of continues in trajectory with what they had already announced there.

Yeah, it's tough and the story behind a company like this as you talk about so much on your show, Wealth Brad is that this could be a sign of a consumer segment in this economy that is really starting to crack under the economic conditions now, just because that might be a lower income consumer, we may not be seeing it in the broader economic data that we break all the time.

But these earnings give you a really good insight into which segments of the economy are starting to crack.

And this could be a sign that that lower income consumer is starting to crack.

Now, from the stock perspective, we are getting some analysts notes in bullish investors according to vital knowledge, pointing to decent eps and margin performance in Q one for this name here.

But the EPS forecast trimmed only because of tornado damage.

That is according to the company, the question is why are other companies not reporting similar damages there?

So remains to be seen how much that is going to impact dollar tree moving forward.

But another company name that we're watching in the Consumer Space, Campbell Soup, that company shares after reporting third quarter net sales grew over 6% from a year ago.

Are moving to the downside here.

The company is nearly 15% jump in food and beverage sales offsetting its 2% decline in snacks.

Now, interesting to see the meal and beverage sales coming in above estimates at 1.27 billion.

That above the estimate of 1.2 billion snack sales though, as I mentioned, coming in a full percentage point down, the estimate was that they would be nearly a full percentage point up.

So that is clearly a big miss here.

And interesting to see that given that again, this is a name that you do this kind of the opposite story of a dollar tree because sometimes you expect Campbells to do well when people are switching to things like a soup for example, and top economic times, but maybe cutting back on snacks transitioning over to meals.

Yeah, pantry staple here.

A good Camden New Jersey company.

Shout out to East Philadelphia, everybody.

The real ones know.

But all the end at the end of the day, it really does come back to what they're looking at and some of the sequential volume improvement that they're trying to deliver here plus organic net sales.

And that's what the company's president and Ceo Mark Klaus, who's a good friend of Yahoo finance as well.

Talked about in this most recent uh quarter here.

Also got to remember that they just finally were able to integrate Sass Sos brands.

I'm still gonna forever have questions about the pronunciation of that, but they're also already saying that that's bringing some of the incremental growth as they continue to navigate the pace of consumer recovery as you were mentioning a moment ago here.

Absolutely.

Moving on to another share that we're watching here shares for a crowd strike jumping after raising their full year earnings and revenue guidance and seeing subscription revenue climb 34% from a year ago.

Now, this cyber security company also giving better than expected forecasts for the second quarter.

Here we are starting to get in some analyst commentary.

I think this is really interesting from Morgan Stanley.

Yes, they say that they delivered another strong Q one beat to made a tough spending environment.

It was funny hearing the analyst quotes from this call, constant people just saying, congratulations, you're doing great despite the fact that everyone else in this area is doing poorly.

So lots of compliments for the CEO on the call, which was interesting, but Morgan Stanley pointing to an upcoming catalyst for this name, the potential S and P 500 inclusion inclusion announcement, which is coming up on Friday, which I had not necessarily priced that into the crowd strike story, the importance of getting that inclusion in the S and P moving forward.

So that'll be interesting to watch some, some big targets for this business too profitably scaling the business to $10 billion in that annual recurring revenue.

And beyond here, looking forward uh that annual recurring revenue currently sitting right now at about $3.65 billion as of the end of this quarter.

So uh some large goals, however, they've got a long lead time, at least that seems that's what it seems like the analysts are willing to give them here this morning.

Absolutely.

We are just minutes away from the opening bell right here on Wall Street after the private payroll report coming in softer than expected.

We will be watching how the trading day goes here.

The NASDAQ still up 5, 10 of a percent holding on to those games.

But in the free market here, the down the S and P also on the upside, we're going to continue to cover all the market moves right after the break.

That's a look at the opening bell in the New York Stock Exchange and at the NASDAQ where you've got great groups ringing the opening bell.

NYC Pride 2024 at NASDAQ and at the Nyse Centuri who the great folks from Centuri ticker symbol CTR I do they have an alibi.

We'll find out during today's trading session.

All right, let's take a look at the market activity here out of the gate.

Dow Jones industrial average right now, up by about 2/10 of a percent NASDAQ composite about the same on a percentage basis out of the jump this morning.

And then the S and P 500 you're seeing that higher by about 4/10 of a percent.

A quick toggle over to the sector activity would give us a look at those 11 S and P 500 sectors here this morning.

Mattie.

Yeah, Brad.

I'm curious, can we pull up the S and P 500 year to date really quickly.

I wonder because I, I'm, I'm asking because I wanna see our interactive is being a little bit weird.

But the reason I'm asking is because I'm wondering whether or not we're gonna start to get near new all time high territory throughout the week here.

Obviously, the 5300 mark was the latest all time high that we were very excited about.

We're seeing market upside today.

Final 10 minutes of the day are usually the most important for the market, but so far so good.

Maybe we could eke out another all time high.

Maybe we're seeing 5400 in the next couple of weeks here depending on how the economic data goes.

I always love to break a new all time high.

So that's just me hoping for that.

But we're gonna get to it with an expert here who's not just looking for all time high hats.

We've got Yahoo Finance's Jared Blicker taking a look at what's moving in markets, Jared.

How about a study?

In contrast, we have us markets at all time highs.

But if you check out the Wi Fi interactive behind me, I'm going to show you what happened in India over the last few days and we've been talking about this just because I was writing about this overnight.

Really caught my attention that the Indian market sailed from a record high, but then it wiped out the entire gains of the year in one fell.

Sloop Swoop, excuse me.

And you can see it's bouncing back today.

Got a little bit of a lag on the Wi Fi Interactive, but we'll deal with that.

I want to check out the US bond market because it looks like the 10 year T note yield and the US dollar index themselves are at critical levels.

You can draw longer term trend lines on the, on the 10 year T note yield.

And I'll get this up here in a second.

We are just kind of breaking to the downside there.

So arguably if we close here today, we will have already broken that.

And if you take a look at the US dollar, it's kind of in a similar situation, but more at a horizontal level here, you can draw this a few ways, but there we go at those critical levels.

So let's go to see what is happening in the sector action.

We already checked out the sectors, but we're going to do take a little bit of a dive into some of the industry groups here and tech still in the forefront along with communication services thought we'd head over to the NASDAQ and take a look at Apple here looks like in videos at another record high, but here's Apple.

Uh we do have W DC C worldwide developer conference going on next week and that's going to be pretty critical for because it has been in this one year trading range.

See if I can get a chart up here.

If not, that's ok.

It's at the upper end of a one year trading range and a catalyst.

Guess what that could help you break to the upside or bring you back down to the lower end of that trading range guys.

All right, Jared.

Thank you so much as always for breaking down all things global stocks for us.

We appreciate it now, major indices here in the states in the greens still as investors are digesting the latest private payroll data coming in softer than expected.

We're seeing continued moves to the upside ahead of the market open, the NADA of just five tens of percent now pushing over 7/10 of a percent, the S and P nearing 410 of a percent of gains as well.

All three indices are climbing here after a slew of weak economic data.

So to break down what investors should be watching in today's trading day, we got Michael around he State Street Global Advisors, Chief Investment strategist here, Michael.

Great to speak with you.

How excited should I be about a potential new all time high as I'm looking at these markets continuing to move to the upside this morning, I think you're going to be getting fitted for another record breaking hat.

So I think ultimately, what's happening here is you can see that tech continues to drive earnings growth.

Just look at what's happened in the last couple of days, Hewlett Packard enterprises, crowd strike excellent results, driving technology.

Then you pp go to today, Campbell's soup dollar tree, somewhat kind of differentiated from that standpoint, struggling a little bit.

So tech continues to drive earnings growth, it continues to drive the market higher while the economy cools inflation cools and now all of a sudden 10 year yields are falling.

This is exactly what the markets were hoping for and what they want to drive markets higher.

So what's the last thing the markets want to see right now?

I think that we're really flirting brad with this notion of it's a kind of a game of chicken and eventually bad news will become bad news.

We're just not there yet.

So what they don't want to see is two things they don't want to see the economy flirt with that recession.

They don't want a recession.

And the other thing they don't want to see is inflation continue to remain sticky.

I think they breathe a sigh of relief.

They being investors when P Ce came in kind of more stable and some of the inflation measures began to kind of show signs of decelerating again.

So I think the two things they don't want to see is a recession and sticky inflation.

So provided we don't get those.

I think the markets will continue to move higher.

I want to kind of get your guide to how we should be reading the market moves that we're seeing off of these data prints because just two weeks ago, it was oh no, we're way too hot.

Huge market move off of that now.

Suddenly it's all good.

Who exactly is trading on these data prints?

And why did the moves appear to be so big but also so volatile and flippant?

So I think the big thing is this kind of ambiguity around monetary policy.

So everybody in terms of market participants, whether it be algo traders or retail investors or professional kind of asset managers, all continue to struggle with the direction of real interest rates.

And all you've really needed to know to predict short term movements in the stock market is how are real interest rates are rising or falling and ultimately, when they're falling, you see greater breadth, more participation, small cap acts a little bit better cyclicals value, et cetera.

Uh Ultimately, when real rates are expanding or increasing, it tends to be more reliable growth, more of your mag seven more of your tech names and you see a little bit more downside volatility.

I think that that's really been the key to market action for a while.

Now, the the ebb and flow in real interest rates.

Well, one of the other keys to market action is the A I hype that's taken hold in the market, specifically semiconductors, they're up around 21% a year to date.

Do you think this momentum can continue.

I do think it can continue.

You think about this.

Now, semiconductors are kind of the key ingredient to the global economy.

They go into so many of the products and services that we now use that they're, they're kind of this key critical ingredient growth rates remain incredibly high usage remains quite wide.

So from my perspective, we wrote back in kind of November of of 2022 that we like semiconductors for a lot of those reasons, they were coming off an incredibly difficult year, their first negative year in a decade yet 75% of them brad are profitable.

So despite the fact that valuations are a bit stretched, these companies make money and they go into everything we use both from a consumer perspective and a business perspective.

So I do think that it can continue, I do think that you will see some broadening, right?

And now we're seeing some competition for NVIDIA that's going to play out, right?

So folks are going to try to take market share from NVIDIA.

So the relative winners and losers may change over time, but the industry should do pretty well.

OK. Well, on tech, I know that you wrote in your notes, you prefer equal weighted tech.

So I've got to show equal weighted tech versus the NASDAQ here.

And you know where this is going, how do you justify equal weighted tech when you've got the top five stocks, all of them tech names.

Now counting for 27% of gains in the S and P 500.

So I think that's the thing is that's what's happened.

We want to understand what could happen going forward.

So if you believe that inflation will cool, the economy will still expand, ultimately, we won't enter recession, that kind of so called soft landing and interest rates and real rates will begin to fall.

You should see a broadening of the market.

And so ultimately, we should see greater participation, not only from the broader market but also within tech.

So I think that that from that standpoint, I think that that would be helpful.

I think Jared just before this segment was talking about Apple, sequential revenue growth in Apple for the last several quarters has been declining and ultimately, the stock has struggled to move higher.

So I think from my viewpoint, you want a broader kind of exposure to tech companies that are growing more reliably.

And I think that moves beyond just the top five names.

I mean, the mag seven has become somewhat of the fab four.

I think ultimately, you're going to see some broadening of of growth, you see crowd strike today, you see Hewlett Packard enterprises.

So I think that you'll see better growth in broader tech.

Therefore, you want some equal weight, you mentioned Apple and WW DC.

That is gonna be the next major event for that company.

And it's really gonna be a critical kind of nexus or, or question mark of when consumers can expect some of this game changing technology and generative A I to make it to their fingertips.

And what kind of staying power it has, how much of that kind of mindset is also needing to play into the trading thesis around it as well and the broadening.

Absolutely.

So I think that we really need to move kind of from A I the possibilities to A I to the practical implications of A I.

And I think Apple is going to be kind of a key figure in how that plays out.

So they're looking to adopt A I technology within consumer products as quickly as possible.

But there is some element of a lag effect.

In fact, Bill Gates has this quote around the notion that as it comes to new technology, we tend to overestimate what can be accomplished in a year, but underestimate what can be accomplished in 10 years.

I think that kind of rightfully explains where we are in A I.

And that's why I think the early builders of the infrastructure, the foundation are the winners.

But what I expect Brad going forward is that those that through trial and error, figure out how to use it more effectively, more profitably either kind of from a growth perspective or from an operating efficiency perspective, those will be the winners.

And I think right now, as you point out at the conference and ultimately kind of from what Apple's trying to figure out and others and consumer products, once the winners and losers will become more evident as we move forward.

Well, using that bill gates quote as a measuring stick, I I still have three years left on the clock for the number of Blockchain mentions we had back in 2017, Michael Aroni, who is the State Street Global Advisors, Chief Investment strategist Michael.

Great to see you this morning.

Thanks Brian, thanks all your markets action straight ahead.

Stay tuned.

You're watching morning Breath to surprise election results this week from opposite ends of the world.

This reminding investors of what political uncertainty can do to markets in Mexico.

Claudia Scheinbaum becoming the first female president there winning in a landslide election on Monday.

The presidential win was expected but the surprise coming as her party nearly obtained a super majority in Congress makes Mexican markets roiled on concerns over that expected outcome.

Meanwhile over in India, Prime Minister Narendra Modi won a third consecutive term that was priced in but it was a much tighter general election than anticipated.

So as a result Indian stocks plunging in its currency, the will be experiencing its most volatile session in over a year here.

Now, emerging markets struggling as the S MC I Emerging market index is on track for its steepest fall in seven weeks off of all of this news.

So to break it down, we have Patrick's wife.

He's the chief economist at P Day Asset Management.

Thank you so much for being here with us, Patrick.

Now, I'm curious over half of the world's global leaders are up for re election this year.

So this is only an issue that's going to continue to be on top of investors minds.

How much volatility should folks be pricing in because of these elections?

Yes.

So first, thank you for having me.

And you're absolutely right in pointing those two major elections in the uh in the space.

And what's so our global view would generally be that uh well, we we focus less on the immediate implications of the elections and more on the fundamentals and what could be the impact of those elections on precisely those fundamentals that in our view remain strong in both countries that you, that you mentioned if we just take.

Well, the Indian example, for, for example, we we do think that while the immediate reaction is overdone because while there are various conditions that uh people and for foreign investors tend to underestimate in India, uh one of the first, one of the first element is that, well, Maine, you know, main game changing policies that had been implemented in India in the early nineties were done under government coalition.

And the second one is that India is well, is a very federal structure and with most decisions taken at the state level.

Um and um and the the the third, the third one being that, well, Modi has been personally committed to fiscal edition, which is key in India.

So we don't think that policy priorities have changed much and we remain very structurally positive on the Indian markets and to talk about India, it's excellent inside Patrick.

And when we think about the global elections, is there any one election that jumps out where there could be a massive pivot or continuation in some cases of de globalization that could then provide even more inflationary pressure?

Right?

Um Well, on, on that, you know, on, on that, on that aspect, I do think that um well, regarding the globalization itself, I think it's essentially happening uh on goods as we know.

So with uh with the risk of having more import tariffs and trade wars globally, so that has this is happening.

But at the same time, I think we do have a much bigger force at work, which is the globalization of services that's taken place with more and more, you know, jobs, service jobs being tele migrated and taking place in the sphere.

So if you if you just compare, so the risk of having higher inflation due to a higher price of goods versus the decline in the price of services that start to be internationally traded, our view would be that well, it's, it's you could even think about potential disinflation globally.

Thanks to that increased competition on the service side.

Well, I guess I still am stuck on how investors should price in the volatility.

Patrick.

And I know you're looking at it from an economist's perspective, but give me a sense of what degree of economic volatility we could be seeing particularly in the US due to these elections.

Obviously, we're heading for our own election here, but sticking with the global perspective here for a second to what extent could the global re elections that we are seeing across the world start to impact the US economy at all?

And what would that look like?

Right.

Uh Well, we can take, well, we can take 11 example again in Ye Ye space so that we had, we had South Africa for example, uh which was also uh which was also a surprise in terms of uh the result of the election.

Um And again, what it creates because we didn't have a clear majority there.

Uh And we will have a few weeks of uh of uh of uncertainty before having a coalition.

And therefore, of course, of course, that leads to, that leads to more market, market validity, volatility, sorry, rent depreciation, et cetera and uh putting the rent under, under pressure.

So for, for the US, uh again, I uh well, the bullet it will come from its own election as we, as we all know.

Uh and uh and with high uncertainties there and with potential very disruptive policies that could be uh that could be implemented by having Trump for uh for a second term.

And this, and this is again, well, the main risk for global volatility.

But, but I do think that it's extremely likely to come more from the US than from the rest of the world.

You know, I I it's interesting here as we've got a fresh decision out from the Bank of Canada that's reduced their policy rate by 25 basis points.

I mean, the these are some of the broader things that you discuss and that you write about in your column as well.

Uh What did you just get your reaction to this decision out of Canada?

Well, out of, well, it's uh it was I'm not covering uh Canada myself, but my my colleague was, was expecting that move.

I think we do, we do think, you know, globally, all, all all central banks are facing pretty much the pretty much the same kind of the same kind of business cycle.

So what we, what we do have on one side is uh inflation that remains rather sticky due to uh price of services that are rather rather sticky.

And uh on the on the other side, we do, we do have um uh an economy which in like, well, like in the US remain resilient, but with strong demand on services um that we would generally expect to soften.

So reducing that pressure on um uh that pressure on uh service inflation and therefore, what central banks should actually look at is uh how tight they are in real terms.

And um and maintaining that restrictiveness sufficiently long to make sure that indeed we do have uh inflation going back to going back to target.

So, but meaning when, when, when I say mean, maintaining restrictiveness obviously in terms, so that still allows central banks to actually cut their nominal rate in line with declining inflation.

And I think this is what we're going to observe in uh in most major economies uh uh this year.

So with, with the fed likely to uh likely to cut rates in the second half, we do expect them to cut twice for the ECB three times.

Uh And despite, you know, inflation only only going gradually down.

But, but I think what matters is rerate there, Patrick's Weel, who is the chief economist at PTA Asset Management.

Patrick, thanks so much for taking the time here and giving us some of your insight.

Yeah.

Thank you very much for having me.

Absolutely pleasure guys coming up Wall Street is a buzz with talk of a new stock exchange.

We'll tell you where the exchange could be headquartered after the break.

Wall Street is abuzz with the talk of Lulu Lemon ahead of the retailers Q one results after the bell today.

And let me tell you stakes are high stock is down right now, around 40% so far this year in 2024 the company struggling in light of increasing competition from brands like Alo Alo.

I always say A I know we gotta investigate this.

We'll workshop it and vio there's no conf in there, analysts are forecasting stain store sales growth of less than half of what we saw in Q one last year and there you're taking a look at some of the estimates.

One of the huge things that I'm keeping a close tab on here going into the earnings where we're essentially looking at.

And according to data from options, A I A potential move to the upside or downside of about 10% post earnings here, the trade down that we've seen from some consumers when it comes to the business of stretchy fabrics and that leisure apparel and footwear.

And so that particularly could be one of the things where we hear more about what the mindset of the consumer is that is continuing to engage with Lule.

It could be one of two things.

It could be that a trade down to perhaps an Athleta impacts them.

Um or it could be that those who are on the higher end of the income spectrum continue to spend into what they might deem as a luxury type of ath leisure purchase as well.

So uh one of two sides there could prevail here.

Yeah, it's interesting.

This is another look at the consumer.

We love to get this at the end of earning season.

We start to get a really good look at some of these consumer driven names, but with a name like Lululemon, it's not just about trade down, right?

We're seeing that these consumers aren't going to an old navy, they're going to alo slash alo, whatever it is.

I have their leggings to be told to be truthful.

So.

Oh, we hear all OK, we hear Alo.

OK. What I've been calling it.

So it is really important with Lulu Lemon.

That is it an issue with their price mix, their product mix?

Right?

Is it something that they're doing with their marketing?

Because these consumers are not bucking under the weight of inflation, they're going to competitors.

And that is never what you want to hear as an executive.

So something we're gonna have to continue to watch with the Lululemon story that stock continuing to struggle, move to the downside this morning, but turning now to the Lone Star State Txse, an index that you might have not heard about because it's not existed yet, but that Txse group has raised 100 and $20 million with participation for more than two dozen investors.

Those include some heavyweights, Black Rock and Citadel in an effort to create a National Stock Exchange headquartered in Dallas, Texas.

The group intends to submit registration with the SEC later this year.

And Brad, we were talking about this this morning and you have great insights into this because of your background in major indices in the US here.

But you mentioned that Citadel and Blackrock big backers are potentially able to make some of these moves successful for new indices, which maybe would not necessarily be successful.

Otherwise, we've seen those backers be able to fuel other major exchanges including MMX which handles between two and 3% of the stock market's volume, that's according to CBO data.

So will this be successful because of that backing or are they still going to struggle to get companies to move over to their exchange?

Yeah, so with that, I was mentioning the type of sway that they might have in deals that they are working on pre IPO or underwriting.

There's also of course, the remembrance here that it's not just the New York Stock Exchange and the NASDAQ.

In fact, the New York Stock Exchange wasn't even the first US Stock Exchange.

It was the Philadelphia Stock Exchange and I will continue to remind everyone as the native Pennsylvanian that I am that it was the Philadelphia Stock Exchange that came just a couple of years before the NYSC.

However, it's the consolidation that we've also seen of exchanges in the past that also has added to the power that the Nyse and the NASDAQ had the NASDAQ have acquired over years.

The Philadelphia Stock Exchange, the Boston Stock Exchange, these have all been strategic moves in order to make sure that it even in the order routing, there is more flow that they can perhaps offload to different exchanges as well.

So all of those things considered, it's not unheard of to hear of a new exchange.

But this is more interesting when you have big backers, like the ones that were pretend, see, um, from Citadel and large institutions that are able to slosh the money around here too and it comes down to the taxes and the fees and can this new index potentially sway people with lower fees?

We will see now coming up, we've got fresh data on the services sector right at the top of the hour.

We'll break that for you and track the market reaction and take a deep dive into A I regulation with a CEO that's coming up next on catalyst.