US Retaliates Against Iran Strikes; Investors Spooked by Warsh Hold

Bloomberg Audio Studios, Podcasts, Radio News.
Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the
stories we're following today.
Karen, we begin with retaliation in the Middle East.
The US has hit dozens of Iranian targets in a
two hour operation following Iron's surprise ballistic missile attack on
a US basin Jordan this week. President Trump had warned
the US would be hitting Iran quote very hard. Israeli
Prime Minister Benjamin Netanyah, who says he stands behind the president.
We're partners, we're allies. He's the senior partner. It's the
United States of America. Let's not forget. And I'm a
junior partner. But I'm the Prime Minister of Israel, and
when I have to stand up for the interests of
my country and the security of my country, I do so.
Israeli Prime Minister Benjamin Netanyah, who's spoke in an interview
with ABC News. We get the very latest from Bloomberg
Middle East correspondent to Birabu Omar in Dubai.
The US military did strike military targets, it stopped short
of targeting bridges, civilian infrastructure. So for the time being,
we're still seeing measured attacks on both fronts by Iran
and by the United States, but definitely not a positive
sign because we're seeing an escalation. That ceasefire that was
signed with a temporary ceasefire that was signed in Switzerland
seems to be a think of the past now.
Sein Bloomberg Sabier Albert Omar reports two liquefied natural gas
tankers were hit with drones off Egypt's Mediterranean coast around
the same time as the US attacks.
There has been no claim of responsibility well, Nathan.
As the war takes a toll on the US weapons stockpile,
the Defense Department announced two massive contracts worth about one
hundred and thirty five billion dollars to major US defense companies.
The Army reported a fifty nine billion dollar agreement with
Lockheed Martin to bolster production of Patriot interceptors. At the
same time, the Pentagon on veil contracts worth as much
as seventy six billion dollars for General Dynamics and Hunting
Engel's industries to expand construction of the US's top nuclear submarines.
It'sjern of the economy now Karen Bond investors are sending
a message following the Federal Reserves decision to keep interest
rates unchanged and the news conference from.
FED share Kevin Walsh.
We get the latest from Bloomberg's John Tucker, John and Nate.
It's not a good message. The market's questioning Worsh's credibility.
Investors sent the long bond yield to a nineteen year high,
stocks tumbled, the Dow falling over one thousand points. It's
because the worst FED didn't move even as Worsh acknowledged
an inflation problem.
Inflation remains elevated relative to the committee's two percent goal.
The committee remains resolute.
You've heard this before, but we will deliver price stability.
If there is an inflation problem. Towards the slocket Apollel
management is like a lot of investors asking this question.
Well, what are we waiting for?
We didn't get the answer for what executed are we
waiting for?
Which was, of course, was a certain way to try
to get some forward guidance.
Doesn't help Ors's credibility that three members of the Fed's
Open Market Committee dissented. If Worsh can take away any solace,
maybe it's from the fact that he hasn't been skewered
yet by President Trump. Inflation, by the way, has been
running above the FEDS target for five straight years. In
the New York Home John Tucker, Bloomberg Radio.
Let's turn two the equity markets now, Futures are higher
following a pair of big tech earnings start With Microsoft,
those shares are up more than seven percent in early trading.
The company's cloud unit grew forty three percent, its fastest
clip in four years, and that pace is accelerating. Analysts
say that suggests Microsoft's AI and computing services are making
inroads with customers. On the earnings call, Ceosachia Nadella told
analysts the company.
Is quickly increasing its data center capacity.
But also bringing capacity online faster than ever. Over the
last fiscal year, we've reduced doctor lifetimes for new GPUs
in our largest regions by nearly fifty percent. All up,
we add in a none of the gigawatt of capacity
this quota and remain on track to roughly double our
overall capacity in just two years.
And Ceosatynadela also indicated Microsoft would hold the line on
new capital spending this year well.
On the flip side Nathan shares a Meta They're down
almost nine percent. The Facebook and Instagram owner gave a
disappointing quarterly revenue forecast, and that's stepping up pressure on
CEO Mark Zuckerberg to ease investor concerns that the company
is not swiftly benefiting from its massive outlay on artificial intelligence.
Zuckerberg spoke on the company conference call.
Our investments at AI are accelerating every major part of
our core business. They're improving the experience for people using
our apps, driving better performance for advertisers, and helping our
teams build new experiences and ship faster. Second, we are
developing new personal agents that will be the foundation for
our next wave of products and revenue lines in the
months and years ahead.
Mark Zuckerberg and Meta reported its lowest free cash flow
in years, assign a ballooning expenses for AI bets, which
could amount to one hundred and forty five billion dollars
this year.
We also got some earnings in Asia Karen, including a
blowout quarter for Samsung Electronics. South Korea's largest company posted
a two hundred and fiftyfold surge in chip profits. Samsung
now expects memory shortages to worsen next year, reflecting the
relentless pace of the global AI infrastructure build out. We
get more from Bloomberg's Soul Bureau chief Cat Barton.
It was an absolutely historic quarter for them, record profits
for their semiconductive division. Obviously, their mobile phones and their
other electronics didn't.
Do quite so well.
They actually tipped into a loss, but the semiconductors are
doing so outlandishly well that it's carrying the whole company
at this stage.
That's Bloomberg's Cat Barton.
And despite the blowout, Samsung shares fell almost three percent.
Nathan, the big tank earnings continue today. Both Apple and
Amazon report after the closing bill, and we get a
preview with Bloomberg's Tom Busby.
Apple is expected to order another blowout quarter for sales
of iPhones and other gadgets, despite raising prices because of
a memory chip shortage. Services like Apple Music and iCloud
also expected to see gains. At Amazon, the big focus
is the Amazon Web Services cloud computing unit, but investors
will want an update on the billions being spent on
artificial intelligence and how it's AI development compares with Alphabet, Microsoft,
Meta and others. At Apple, Bloomberg consensus calls for revenue
of one hundred eight point eighty five billion dollars on
Ernix per share of a dollar eighty nine. At Amazon,
Bloomberg consensus calls for revenue of just over one hundred
and ninety seven billion dollars on Ernix per share of
a dollar eighty three. Tom Busby, Bloomberg Radio.
Okay, Tom, thanks, Let's turn to what's happening in Washington,
DC now on Capitol Hill. The Senate committee that's considering
Todd Blanche to be the next Attorney General abruptly called
off its confirmation vote last night. Two Republican senators are
still holding out support. One of them is Tom Tillis
of North Carolina. He says he wants Blanche to meet
with Jeffrey Epstein's victims.
For mister Blanche was willing to say that he would
meet with them and counsel. I understand the restriction of
the council has to be president. I expect that meeting
to occur before I'm willing to vote out of this committee,
and I'm trying to get to yes. But this is
a very important part of getting to yes.
Senator Tom Tillis spoke during last night's hearing on Blanche's nomination.
The other hold out, Republican John Cornyn, says he wants
changes to President Trump's settlement with the IRS over the
twenty nineteen league of his tax returns. Cornan wants to
ensure any bans on investigations into the President or his
businesses only apply to the Tax Agency and not the
Justice Department.
Well elsewhere on Capitol Hill, Nathan doctor Anthony Fauci declined
to testify in a Senate hearing on his role in
the US response to COVID nineteen and booking his Fifth
Amendment rights and Bloomer's. Amy Morris has details on the
volatile hearing from Washington.
I said said quietly, you are not recognized. Another word
and you're gone.
Republican Senator Rand Paul threatning to have Fauti's attorney removed,
which he eventually did, for trying to speak during the
hearing when he was not recognized. Fauci, in his opening remarks,
said the hearing was designed to push him into saying
something incriminating.
The only conclusion I can reach is that the sole
reason he is calling me before this committee is to
get me to say something anything that could vindicate his
repeated public pledges that I end up in his words
behind bars.
Senator Paul denied Fauci's assertion of privilege and said there
would be repercussions for not answering the questions. In Washington,
Amy Morris, Bloomberg Radio.
Amy, thanks and this programming no Bloomberg Radio is introducing
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Com slash Ask Radio.
Time now for look at some of their stories making
news in New York and around the world, and for
that were joined by Bloomberg's Michael Barr Michael, Good Morning,
Good Morning Karen.
In Massachusetts, Patrick Clancy took the witness stand to testify
in the murdered trial of his former wife, Lindsay. She
is accused of killing the couple's three young children in
their Duxbury home. In twenty twenty three, Patrick Clancy admitted
his wife struggled with depression before the murders.
Lindsay's mental health started to deteriorate.
And when you say that, sir, what is it that you,
as her husband, observed.
Just increased stress and anxiety.
Lindsay Clancy's lawyer says that she had killed her children
because she was suffering from severe postpartumental illness. Prosecutors say
she planned the killings. Hope is dwindling for any rescue
in southwestern Japan after Tuesday seven point one magnitude earthquake.
Reports say the death toll for now is New York
Governor Kathy Hockel says she's committed to getting it right
when it comes to the future of data centers in
the state and the nation. Hockel held a roundtable event
in Monroe County, joined by business and local leaders and
residents voicing concerns over protecting the environment and the energy grid.
Every part of the state is a different perspective.
In the capital region, we heard from business leaders and
local officials, environmental advocates, and.
Organized labor Long Island. The focus was on water.
Water is a more limited resource around Long Island, New.
York, wants to block building large data centers for up
to a one year. Global news twenty four hours a
day and whenever you want it with Bloomberg News Now
Now Michael barn this is Bloomberg, Karen.
Thanks Michael, all time now for our Bloomberg Sports update,
and for that we bring in John stash Hour.
Thanks Karin.
The baseball trade deadline comes on Monday, and then they
may keep hearing about is Detroit Tigers ace pitcher Tarrek Scouobell,
two time winner of the Cy Young Award. He started
yesterday in a Tiger game against Baltimore got a standing
ovation from Detroit fans because he may well get traded
before the deadline. San Jose Sharks have locked up their
twenty year old star Maclin Celebrini with a five year
extension with ninety four million dollars. That's your Bloomberg Sports update.
Stay with us. More from Bloomberg day Break coming up
after this.
Coast to coast on Bloomberg Radio, nationwide on Sirius XM,
and around the world on Bloomberg dot Com and the
Bloomberg Business app. This is Bloomberg Daybreak.
Good morning, I'm Nathan Hager. It is a tale of
two markets this morning. After a couple big tech names
reported earnings. Microsoft is soaring, Meta platforms sinking, and long
bonds are near their highest levels in nineteen years after
the Fed decided to keep interest rates on hold. Here
to help us make sense of what's happening in this
market this morning is Bloomberg Managing Editor Dan Curtis. Dan,
let's start off with Microsoft. Is it all about the
spending reining in? Apparently the spending for Microsoft? Good morning,
Good morning, that's right, So it's not.
It's the shares are up eight percent in the pre market,
and the company is raining and spending. But on a
very important note, is also monetizing on the spending that
it's putting out. So, just to put some numbers into context,
Microsoft's operating expenditures rose ten percent for a year on
year for the last quarter, and its free cash flow
was still twenty billion dollars. So the companies spent forty
one billion dollars in capex and Wall Street was expecting
a bit more than that. So again Microsoft spending a
bit less than Wall Street was estimating, but still beating
on the revenue.
A Zora growth, which is key to reading.
In on its AI performance, was up forty three percent
on the quarter, while of the best quarters in years,
and the annual revenue for that segment topped one hundred
billion dollars for the first time ever. The unit is
seeing efficiency gains, capacity delivery with demand still exceeding supply,
so a very strong story from the AIS side. There
also Copilot, another AI tool, paid seats for that more
than doubled sequentially to over thirty million, and user satisfaction
scores also doubled, so it's starting to see its AI.
It's AI strategy paying off here with capital expenditures that
are coming in lower than expected, and for the full year,
it's seeing capex of one hundred and seventy five billion dollars.
That's less than one hundred and ninety billion dollars of
the previous forecast. So again, this company is starting to
see revenue, starting to see monetization, and it's not spending
as much as Wall Street was expecting.
Is it an opposite side of the coin then, and
when it comes to what we got from Meta.
Yeah, basically, I mean those shares are down nine percent
in the pre market. The company reported its lowest free
cash flow in years, just around two billion dollars on
the ballooning expenses of its AI bets. Third quarter revenue
is seen coming in at sixty one to sixty four
billion dollars. The midpoint of that is softer than estimate,
raising the capex outlook and the revenue is not quite
what Wall Street was looking for. The twenty twenty six
full year expenses were raised to one hundred and sixty
five billion to one hundred and sixty nine billion dollar range,
not just capex but also higher costs due to legal proceedings. Now,
zu Zuckerberg is looking towards the future where AI agents
carry out tasks twenty four to seven for customers. The
build is expensive and the revenue isn't supporting the company yet.
He's also been exploring a new cloud business to run
out compute. He said, quote there's just nowhere near enough
compute for all of the demand. That said, it looks
like Meta doesn't need all that demand, So that could
also be a little bit of pressure for investors saying, well,
if there's a demand for compute, why aren't you using
it and why are you renting it out?
Just thirty seconds left here, Dan, But after the Fed
decided to keep interest rates on hold, it seems like
bond investors are disagreeing this morning.
That's right.
So we have the thirty year yield at the highest
level in decades, and a large portion of that's coming
from the tips rate. So the premi over kind of
the inflation outlook. So there's a lot of question marks
as to how much conviction Warsh has to fighting inflation.
As you said, the Fed has held three members assented
in favor of a hike, and Warsh said that the
bond market had done some of the Fed's work with
the tightening there. So markets walked away with that one,
you know, on the FED decision itself, Markets and moved
much during the conference was what really sparked move.
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