One and it continues to gain weight against other currencies and nymex crude. . 43 at the moment and it has been up and down and we are looking at 82. 36 per barrel for west texas intermediate crude. Jon some of those Energy Stocks is what we are looking at with crude on the move but other macro stories we are tracking is the moodys downgrade of some regional banks. M and t bank shares are down about 2. 5 . Youve also got this overarching theme from ups about volumes right now being weaker and that raises concerns about the economy. Ups shares are managing relatively well, off about half a percent today. Wanted to remind our audience that eli lily, the potential for their weight loss treatment in the early sales pictured there is getting people excited and the stock right now is 13 . Going any other direction, beyond meat down about 15 on the day in the reality perhaps the economy or the inflation story, people making decisions on what they want to pay for, maybe a little less on plantbased protein products. That seems to be the message from beyond meat. Matt we have a reporter roundtable on the headlines of the day and Michael Mckee joins us on yields in the treasury auction and solanli basak on downgrades and ed ludlow. We just saw the three year auction and we will get tens and 30s later this week, over 100 billion worth of auctions. How did todays go and what are we expecting to come . Mike janet yellen and company of the treasury got good news today because there was a lot of demand for the three year note. Treasury has up to the auction size for the first time in over a year. There was some question about how this would play out given how much debt the u. S. Is putting forth. We get a nice stop through on the three year note yield issued at four point 398 which is lower than last months four point 416. Four point 416. Primary dealers take down a record low of 10. 3 while indirect bidders take down a record high of 74 . A lot of people out there want to own these three year treasuries. Direct is at 15. 4 . Matt very cool, indirect bidders, the highest since 2003. Thank you so much for joining us. Lets get to where u. S. Bank stocks which are down after moodys downgrading ratings for small and midsize banks. Michael collins reacted earlier, staying positive on the group. One of our biggest overweight in our portfolios are the Big Money Center banks which have been regulated and now the big super regional banks will be a little more tightly regulated and that is a tailwind for bond investors. If these things underperform and the credit spreads widen, we are typically stepping in and buying them. Matt sonali basak is here with more. One of the questions ive been hearing today is why now . Sonali we know these ratings reviews always come with a big delay with what is actually happening. They look at these longerterm pictures for the banks. Its very important that a lot of these notes from moodys had said the capital picture when you look at the new rules being put up by regulators will be net positive for many of these banks which is reflected. However, you see the market reacting strongly to the news of the day and it makes sense because once you are downgraded, it certainly has an effect in terms of counterparty risk that is being taken off. You have 10 banks that were downgraded including m and t more than 200 billion dollars in assets but you also had a group in review for downgrade and another 11 that had negative outlooks. That uncertainty is sending every bank in the Kbw Bank Index down on the day. The entire index is down about 14 on the year. Its the news that the Banking System did not need on top of all the structural headwinds that had been there for a while. Some of these issues are idiosyncratic. One very interesting part of this is u. S. Bancorp. If you look at the moodys note, they cite an acquisition of another bank lowering their capital relative to the rivals. You think about the future m a in the industry, that kind of action, you have to wonder whether it will make people think twice if it has impact in terms of future deals of capital levels. Jon thats where i was going to go because if youve got a situation where there is lingering concerns about real estate exposure or funding costs or regulatory headaches and ultimately, regionals have to pay more for their deposits, inevitably, i would imagine they would be consistent questions about what their business looks for in the face of having to pay more for those deposit. Sonali ive been thinking about how to push the story forward. When you think about the commercial real estate portfolios and the issues the banks are facing, one early answer has been pushing this activity to the private markets. You seen private Market Participants come in and buy assets from these regional banks , cooling some of the pressure with these loans are worried about. The other thing thats happening on the site is that a lot of ratings are coming out not about the banks but the nonbanks. You are seeing a lot of them being rated bbb. So youre not seeing the same types of four different types of worries in the nonbanks. You are seeing everyone being treated relatively equally here. You look at the risks they are taking on loan markets so than the market pushback, you have to wonder how much lending contracts from here. Jon i know youve got some continued questions you will be asking and thank you for breaking it down for us. We also have some electric carmaker news. Lucid shares are higher and rivian is rising awaiting numbers from that company. Tesla is also in the headlines this week after an executive shakeup. Lets bring in ed ludlow who has been tracking all of this. Maybe we start with the lucid story where you have this trust me messaging from the company on ev production numbers for the year but the bigger question of can this truly be a competitor to the likes of tesla which was the big hope. Ed exactly so, the shares are up and you wonder how much of that is a relief rally type response. The commentary from the ceo is that they will build more than 10,000 electric vehicle units this year but remember, thats at the bottom of the previously guided range, 1014,000 range and even then they previously said they were guiding to the lower end of that range so its a low bar. There is a sense of relief. This is a company that is losing more than 500,000 per vehicle than it builds. The story would lose it has been one of them talking about superior factory technology, the energy dense density of the packs being higher and higher performance and efficiency. Theyve not been able to achieve scale where the financials make sense and they can have economy of scale. The other key piece of news was that a letter of intent from the saudi government to buy 100,000 evs from them over 10 years has become a full commercial agreement but there are caveats within that. We are still waiting on them to get going on this and ramp up production. There was nick knowledge meant that they got work to do to find customers because their vehicles have been at the very high end and theyve had to cut prices as a response. Matt very expensive but you can get over 1000 horsepower in those vehicles. Rivian comes close, 850 or their power or thereabouts and they are coming out with earnings tonight so what should we expect . Ed its interesting, they continue to stick with their guidance for 50,000 units this year which is split across the two consumer evs, the pick up on your screen and the suv and the delivery van they make for amazon. In an interview, the ceo told me that amazon vans are roughly 20 of output but many have wondered how conservative that guide is because on paper, its worth more. Two specific things to look for, one is cash burn. Its possible they will expand their 1. 56 billion dollars and we wanted to see the operating loss narrow. The second thing is the 80,000 the suv cannot be eligible for the federal tax credits of their questions about how much traction its all well and good having a waitlist in a number of preorders which are no longer disclose been finding new customers at that price point is hard and we know that because tesla import had to cut prices on vehicles that are much lower price point than that. Matt thanks very much, ed ludlow covers the ev makers for us off the west coast. Coming up, we discuss the state of the Restaurant Industry after sales for top eisenberger king were double the wall street expectations. This is bloomberg. Youve nean angry rhino. Baby i hear one every night. Every night. Okay. Ill work on that. Save 50 on the sleep Number Limited Edition smart bed. Plus, 36 month financing on select smart beds. Shop now only at sleep number. upbeat music awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Jon this is bloomberg markets. Time for our stock of the hour. Restaurant brands are higher today and this is the houma brands like burger king and tim hortons, popeyes and even with cautious consumers, burger king benefiting in particular from a couple of things they have focused on including remodeling their stores and introducing some cashier ads. Matt very interesting stuff especially in light of the chicken news that tyson was trading down on yesterday. Whats bad for the producer may be good for the distributor. Rbi cobbs joins us now. Great to have you on the program and thanks for joining us. We all of that chicken but prices are dropping. Whats the story in the sector . Thanks so much for having me on the show. Its a pleasure. We all love that chicken from popeyes and the popeye business has been doing really well. We had a good quarter where we grew all over the world with popeyes and we grew about 4 under same store sales in the u. S. We had good news that came out of the kitchen behind me. We launched things like mango lemonade and a delicious strawberry biscuit. We made a lot of guest happy and had good results as well. Jon thats part of the chicken story but we know if you look at the tim hortons business and the burger king business that there has been some momentum there. You had this campaign reclaim the flame which is not just advertising, its very much a big investment in the business and technology and in what the stores look like. How confident do you feel about narrowing the gap with your rivals through those investments . As you mentioned, there were probably too big highlights, the tim hortons business in canada had a terrific quarter and samestore sales were up over 12 which is a remarkable thing and it came from what we are focused on growing food and the cold beverages and we had a really great quarter at burger king in the u. S. We launched reclaim to flame plan about a year ago so theyve been doing a really nice job. Weve been working on investing about or hundred Million Dollars to mobilize the brand and were doing that alongside our franchisees and investing in a combination of more advertising and improve facilities. Youve probably seen the whopper ads on tv and thats great but were also reinvesting in facilities and upgrading technology and the equipment the restaurants and remodeling some of the restaurants that are more dated. We have a long road ahead but we are pleased. With the product so far matt how much of the Raw Materials cost affecting your bottom line . There is a chicken glut in this country, bringing prices down. On the other hand, the cattle supply is tight right now so be prices are high. How is this all affecting the money you make . Thats a great question. Last year, we saw more inflation on a lot of the input in our business and that started to moderate more this year. Its different across each business segment but we have seen some moderation this year and our outlook is to see more moderation on input costs and thats one of the things combined with the strong samestore sales that has allowed us to increase the profitability of franchisees. That select blood of the Restaurant Business is the earnings of the franchisees of the restaurant and thats been a big focus to make sure we improve with strong results because thats what allows the franchisees to reinvest and stamp the restaurants and reinvest in the restaurant and remodel them. We are pleased with the results we are seeing in franchisee profits this year. Matt what are the biggest costs . Does it have anything to do with be prices or is it more of a labor issue . We are really focused on growing the business all around the world, we are looking to spend money on Big Investments we think can drive our franchisee business around the world so we are investing in things like the facilities where we wt to upgrade and have modern and beautiful facilities like the kitchen you see behind me in those are the big investment items we are focused on to drive the business forward together. Jon thanks for the time today and good to see you. Thats the breakdown of the quarter. Coming up, we will talk about market moves and the new Exchange Traded fund. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. My cpa told me i wouldnt qualify for the erc tax refund, so i called innovation refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. Jon this is a day where youve got global concerns. We had to worry about the demand story coming out of china, in europe, questions around taxation of Company Profits and of course weve been talking about the story of banks, regional banks in particular. Moodyss decision to downgrade some of them so right now we are looking at the s p 500 off about 0. 8 . For more, wet are joined by theengler investment ceo, Nancy Tengler who Just Launched an etf today. For those trying to figure out if we are in some kind of Inflection Point for the markets after a strong start to the year, whats been your assessment . I think we needed to take a breather. The market ran pretty hard and fast since january and since october. Weve been saying since june that we thought we needed a correction. We have a brief selloff in early july and this looks like a market that was ready for some bad news to take advantage of. I think the Bank Downgrade is a little late. The new regulations on the big banks to me all smack of we just implement the regulations we had in place which were not being implemented or at least enforced with Silicon Valley bank on the west coast. Lets step back and take a look so we are making everything that much harder for businesses which were starting to pull out of the sort of malaise of last year. Jon whats challenging at a time like this as well, especially when you have these new themes and technology which fuel a handful of stocks in a big way this year, people look at those run ups and they wonder whether those names start to hit any speed bumps. Even in your etf, you are focusing on a longterm that might play into technology because of some of the realities with the economy including the tight labor market. Exactly, if you go back and look, historically when weve had tight labor markets, spending on technology has risen dramatically as a percentage of gdp. That has worked its way through two stocks. Our theme in thetglr is companies that are embracing the digital red revolution, someone like pepsi who says we are a technology that happens to sell snacks and beverages and then the suppliers of those solutions. The Technology Names, the tip companies and Software Computing companies we can own, ones that pay a dividend, we own in this strategy. The important thing is these are companies that are growing their dividends. This is not an elected utility portfolio. The companys focus on growth studying the dividend as a portion of what they think longterm sustainable earnings power is. Matt i spoke earlier with all spring and they like Big Tech Companies right now for the Growth Potential and in some ways as a safe haven. You see that in the market all year long. Do you see that as well that some of these companies can give you dividends you hope they will hold or raise and be kind of safe haven companies in case of a recession . Absolutely, what you want when you go into a Slower Growth environment is companies that can deliver liable earnings growth. We said last fall we were at her adding to the portfolio so it was technology and new Consumer Discretionary names. That has worked out nicely. Weve been trimming back almost every Technology Name and portfolio but we are still overweight tech and thats in these large dividend payers. Thank growers and payers, broadcom, oracle, microsoft and even though the yield is low, theyve been decent about growth at about 10 annually. We added a semiconductor and that has a 3 yield and strong dividend growth. Those of the places where you want to hide in a slowing growth environment. Its traditional to think staples but we have added to short cycle industrials as the manufacturing pmis are starting to bottom and work their way out. You are right, it is not only a growth play but a safe haven play. Matt i want to ask about the cost. You have 95 basis points as your Expense Ratio and you want to get that down on your etf. How do you keep the cost down in an active etf like that . We need to grow it, obviously and that gives you a lot of flexibility. Growth solves a lot of problems. We are in general, even in her High Net Worth business, our fees are competitive and i write about this in my book because these are the biggest erode are of total returns. You have to pay to get Good Management but we are conscious of that and were always reassessing how we can cut costs at our firm and how we can pass that along. Matt thank you so much for joining us. For jon erlichman, i am matt miller, this is bloomberg. Things like changing tax rates or filing returns. Avalarahhh ahhh romaine out of stocks and back into bonds. Live a bloomberg headquarters, im romaine bostick. Katie and i katie greifeld. It is a much different dynamic than what were looking at 24 hours ago. An s p 500 off 0. 8 . Had been down off 1 but clearly deeply in the red. Nasdaq 100 the tech is taking the brunt of the selling pressure. A bid into bonds. The 10year above 4 . It was below that earlier and curre