S&P 500 Hits Record on Vietnam Deal as Tech Climbs

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1:16Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead. with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenevec on Bloomberg Radio. In 13 days, earnings season in the U.S. gets underway. JPMorgan Chase kicking it off before the market opened, along with a few other big banks. That will happen on July 15th. It is also, what's so great about this, Matt, I love earnings season.

1:58And I feel like it's a gut check on companies. And I know sometimes we feel like companies manage expectations in a big way. But we also do hear from the C-suites on those analyst and investor calls. Yeah, absolutely. I mean, that's the most important part, right? It doesn't really matter once you get there how they did in the quarter they're reporting on. It really matters what the outlook is. Exactly. All right. And we're going to talk a little bit about outlook because our Michael McKee actually bringing this to our attention this morning, a survey out from the Atlanta Fed on the evolving impact of tariffs on CFOs outlooks.

2:27It was, as we said, I think published this morning. Mike is, of course, Bloomberg News International Economics and Policy Correspondent. He's right here in our studio. And joining us from Atlanta is Brent Meyer. He's Assistant Vice President and Economist at the Economic Survey Research Center at the Fed Bank of Atlanta. Great to have you here with us both. Brent, Mike did share your survey with us this morning. Lay it out for us and what you guys found out. Good afternoon. Thanks for having me. So basically, what we found is over the past few quarters, CFOs are seeing a darkening outlook. And it seems to be connected to firms that are the most heavily exposed to tariffs.

3:09They have a much heavier exposure on inputs and supplies coming from abroad. And their outlooks deteriorated markedly. So their expectations for GDP growth, say, in 2025, they're down about a percentage point from where they were at the end of last year. Their sales revenue growth projections are down. And then on the flip side, unit cost expectations and price expectations are up quite a bit. So, again, we see these things as sort of CFOs see things darkening materially as we move throughout the remainder of the year. On the other hand, they're coming from a pretty good level, right? We were talking with Nir Kesar earlier, who wrote a piece for Bloomberg Opinion and pointed out that profit margins for the S &P 500 Equal Weight Index are at a record high.

4:00So they do have some cushion into which to absorb tariffs if they have to. Yeah, potentially. And that's an interesting angle. So one thing we can look at is both firms' cost and price projections for the year, their expectations for the year. And one thing that we see here is that the sort of margin squeeze seems to be strongest on those that are more heavily exposed to the potential tariffs and the tariff picture. The other thing that's kind of interesting here is that firms that aren't directly exposed to tariffs seem to be pushing up their price expectations a little bit more than where their costs are coming from.

4:49So we might see margin compression on those that are most heavily exposed and at the same time on those that maybe aren't as heavily exposed to the sort of tariff picture seeing a little bit of increased margin or something. That's amazing. I mean, that is absolutely fascinating. Mike, what do you make? Mike, I'm going to bring in Mike McKee here. What do you make of that? So firms that don't really need to pay for it are trying to take price for it. Well, it doesn't surprise anybody, I don't think. And it will add to inflation questions, shall we say, not necessarily to inflation. We'll have to see how widespread that is.

5:29I'm curious, though, when you did your survey, the time frame on it, in other words, did anybody say we might feel a whole lot better come July 8th when we find out what the reciprocal tariffs are? uh so no we didn't ask that question it would have been a great question to ask next time we go in the field we'll definitely be able to pick that up um but the the survey was in the field uh during the first couple of weeks of june um so and we're comparing really uh what we wrote in this article compares to uh the end of last year so we can see uh as they move forward from say right around the time of the election through uh the first quarter survey and the second quarter survey the sort of march or deterioration on sales revenue growth and then the ratcheting up on the price picture.

6:23You know, Brett, we love the stuff that we get from the various regional feds. I think about the GDP Now Index that we get from, you know, you guys. And I'm sure stuff like this, you know, how it works into some of your thoughts about kind of where we're going. But as you are gathering information anecdotally, real data points, public, private sector, I mean, what's the picture that you are seeing in the U.S. economy right now? Oh, that's a good question. So if I take a wholesome approach and look across all our surveys and here at the Atlanta Fed, we also have a regional economic information network.

7:00So this is a group of folks that are chatting face to face with businesses on a daily basis. it's a picture of very heightened uncertainty a picture with basically there are a lot of clouds on the horizon we don't know exactly how things are going to play out but at the same time firms seem to be moving forward in a direction and expecting one to ratchet up prices as tariffs really hit their bottom line and then at the same time anticipating as they're raising price, seeing some of that bite into their sales revenue. Did they suggest any actions they're going to take? Or is this a case of what we've been hearing in terms of the Beige Book and other Fed communications that companies are just sort of sitting and waiting to make decisions?

7:54No, that's a good question, Mike. So there tends to be some dispersion here across maybe firm size. So larger firms that are a bit more agile, that are able to make different moves, it seems like they're doing so. Smaller firms, I think the picture is a bit cloudier there, but I think the bite from all of this action to date is likely to hit them a little bit harder. They're a little bit less well-connected when we're talking about reconfiguring supply chains and things like that. I wonder how this affects the labor market, because it seems that the larger firms, from what I'm hearing you say, are going to be able to deal with this better.

8:39And that is, I think, what has been our assumption. The smaller firms are going to have a much bigger problem, especially if they're exposed to international supply chains. But those smaller firms, don't they make up a massive share of U.S. jobs and job creation? Yeah, I don't know what it is off the top of my head, but I think it's a very sizable share of overall employment on firms that are less than 250 employees in size. And yeah, that's right. So I think if you're looking in the rearview mirror, the employment picture looks reasonably positive. I mean, we've seen some slowing, but not a whole lot of quick deterioration.

9:22As we look forward, those small firms, we're paying a lot of attention to how their employment realizations and expectations evolve over the next couple quarters. Mike, last question to you. I mean, it's a big day tomorrow, right, with that monthly labor report. I mean, any number that comes in weaker is certainly going to catch our attention. But what are you anticipating here? Well, I think we'll see a weak number for a couple of reasons. One, that's been the trend. And two, the seasonal factors suggest that that could be the case. But weak being a matter of definition, I mean, if you had 110 ,000, which is the forecast, that would kind of fit in with what the Fed thinks the regular replacement number needs to be to keep the unemployment rate steady.

10:11If we get anything significantly lower than that, it will put the idea of a July rate cut onto the markets agenda. but I don't think it'll do so to the Fed. We'd need a big rise in the unemployment rate for that. All right, gonna leave it there. Gentlemen, thank you so much. Really appreciate it. Of course, Brent Meyer, assistant vice president, economist at the Economic Survey Research Center at the Fed Bank of Atlanta, out there in Atlanta. And Mike, thanks for bringing this to us. Really appreciate it. You're gonna have a busy day tomorrow, right? You're here. I'm here. I'm here. Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter.

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12:19Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Hey, the Republican-led House and Senate are planning to cut the Supplemental Nutrition Assistance Program, known as SNAP, which could leave millions of Americans without enough food, despite its importance as a safety net. We should point out that there have been some carve-outs in the Senate bill, So maybe not all states are impacted the same way. But we wanted to get into this story. It's on the Bloomberg Terminal. It also can be found at Bloomberg.com slash Businessweek. With the details, let's bring in Bloomberg Businessweek writer Dina Schenker.

12:52She joins us in our Bloomberg Interactive Broker Studio. Dina, I think everybody knows what Snap is, but let's just kind of lay out some of the basics. What is it? Who qualifies for it? How many Americans use it? Give us a little bit of background here. Sure. Thanks so much for having me. So SNAP is a food assistance program. It's a safety net program. It is available to people based on their income level, either at or 100 percent below the poverty line. That's sort of the baseline. States can sort of make adjustments to that based on their cost of living. In 2024, there were more than 40 million Americans using SNAP, which is about 12 percent of the population.

13:32That is disturbingly high. Why are that many Americans? Yeah. So it's it's really it's crazy. What actually happened was that the numbers ballooned during covid and never came really very far down because people, you know, we talk about in a K-shaped economy. And this is a perfect example of some people have completely rebounded since covid. And as these snap numbers show, a lot of people have not. So is there any way of assessing and I was asking Mike Dornig this earlier and I'm afraid the answer is going to be no. But is there any way of assessing whether people are abusing these programs or whether those 40 million Americans actually cannot afford to feed themselves and their families?

14:16So the the way the bill is structured is based on state error rates. Now, an error can be an overpayment or an underpayment. And so the higher your error rate as a state, then the higher percentage of the costs you're going to have to shoulder under the new bill. So the error rates really vary. Actually, the highest error rate for 2023 belonged to Alaska, which had like a 60 % error rate. But I think it's really important to remember that as one of the people I spoke with pointed out to me, she said, listen, errors get made. To be clear, these are errors being made by the state administrative staff.

15:02These are not being made by the recipients. And also like. So the people who administer the program. It's the states making the errors. OK. Yeah. And as she pointed out, she said, like, we all make errors in our bills. I mean, has anyone I mean, I can say for myself, I've overpaid bills and then been like, oh, I have no money left in my checking account. I've underpaid and then had to pay late fees. And it's all just really by accident. So I think the idea of like freight fraud, waste and abuse, I'm sure somewhere somebody's doing something wrong. But it is not from anyone I spoke to. It does not seem to be, you know, like a really big issue.

15:44And one thing I will also add is that food banks, which are not part of the SNAP program, but often support some of the same communities, they're seeing increased demand, too. So it's the increased demand is very real. Yeah, it's I mean, I can imagine waste, fraud and abuse in Medicare and Medicaid, right, because people who run health care facilities are likely trying to take advantage of the system. It's harder to understand that somebody would try and claim food stamps if he or she didn't have to. It doesn't sound like it's that lucrative, for one thing. And it's also not I mean, it's a it wouldn't be a point of pride if you were using food stamps in a grocery store.

16:29So the problem, of course, isn't really the the fact that we are paying for 40 million Americans to use food stamps. The problem is 40 million Americans find themselves in that position. And I'm wondering if anyone's doing anything to address the cause of that. Well, not in this bill, that much I can say. I mean, there are all sorts of organizations out there, I think, that are really trying to help people meet their basic needs, as well as organizations trying to help people that are out of work find work. But remember that it's obviously it's a huge issue. So I didn't mean to put you on the spot there because it starts with like childhood nutrition, education, love.

17:17Like there are a lot of issues, right, that lead to unemployment and poverty. And there's also a lot of people, you know, are in jobs that don't they have jobs like a teacher who needs to take. This was an example that was related to me who needs to take unpaid leave because she had a complicated pregnancy and birth. And now she needs to go on food assistance because that's the only way. And the husband has probably left. That part of the story, I have to say, didn't get. But we've talked a lot about people who just have a bad turn in their life. They lose a job. They've got debt or something.

17:55And all of a sudden, they find themselves in a really, really bad way. And it's just, it is. But Matt, I agree with you. It's kind of staggering. We're supposed to be, what, you know. The wealthiest nation in the world, right? And then yet we're dealing with these kind of statistics. So basically, though, Dina, like what happens to these people if they're not going to be able to get this assistance? I agree with what you were talking about, Matt. Like we have to figure out what's the root cause of this. But for now, they need food. Right. For now, they need food. And how many are kids? So one estimate said that about two million households, SNAP using households, have children that will that will at least lose some benefits.

18:35Yeah. The the bills cut the benefits in a variety. I have to say, like almost every conversation I had, I found out another way that they were cutting benefits. They are expanding work requirements. They are basically completely defunding. They are completely defunding a nutritional education program that really helped low income families. And the biggest change is that they are shifting a portion of the cost to the state. So what used to be a completely federally funded benefits are now being switched to the states. But the states, unlike the federal government, they have to have a balanced budget.

19:14So how states are going to come up with, you know, tens of millions, hundreds of millions, sometimes more than a billion dollars, depending on the state and how many recipients they have is really nobody knows. Like, that's the answer is that nobody knows. By the way, how much money are we talking about being saved in spending? because it goes up against$4.5 trillion in tax cuts. So the cost shifting, which is going to be the biggest portion, will save about$40 billion. So a small amount of those. Peanuts relative to. Exactly. And I should say that the average SNAP benefit is about$6 a day per person.

19:54So we're here in New York City. How far would$6 get you in food today? Especially if you live in a food desert. I mean, you basically would have like one fast food meal. Yeah. I mean, oh, but you can't spend it at a you can't spend it on hot prepared. Right. OK. Yeah. But you're going to go to a store that takes food stamps and they won't have any fresh produce. And your only choice is like hot talkies. Right. So I mean, you're you're not going to have a lot of options and your family. I mean, if it's these cuts with the people that I'm speaking to and when they watched this pass in the in the Senate, they're they're just devastated i think there's a big question of like what are what are we going to do um for every um meal a food bank provides um nine come from snap so what happens when that number is drastically cut and people really don't know and i'll just throw one more number and god forbid the economy slows right are we going to a recession i mean and prices food prices are are expected to go up as well so um yeah one more number i'll throw in is that in this country about 40 % of our food goes to waste.

21:02And so it is just, the whole picture is just mind boggling that we could have all these people who don't have enough food. We could have all these people throwing away food. I mean, it's really, it's crazy. It makes no sense. It makes no sense. To have that much waste and then to see, you know, so many people going without food. And yeah. It's pretty sad. It's awful. Dina Shankar. It's a great read. Check it out at Bloomberg.com and on the Bloomberg Business Week's, Business Week writer, I should say, Dina Shaker. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m.

21:38Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. If you're driving, pull over because you're going to want to listen to this story. Beneath layers of waste landfills around the United States have been reaching scorching temperatures and neighbors have been getting sick. This is today's Bloomberg Big Take, where Bloomberg's Laura Bliss and Rachel Dottle write for many of the more than two million Americans who live within a mile of a landfill. What all of this means is that they're living within a mile of a potential time bomb with little way to know when it might go off.

22:12You can read this full story and more from the Bloomberg Big Take. It's on the Bloomberg Terminal and also at Bloomberg.com slash big take. Let's head to our San Francisco Bureau and to Bloomberg Businessweek editor and writer Laura Bliss. Laura, sobering story, what is America's hot garbage problem? Yeah, thank you so much for having me. The landfill that you mentioned in L.A. County is a great example. And pockets of buried waste in this landfill have been rising to temperatures over 200 degrees for the past three years. That's about 40 percent higher than the EPA safety standard. Um, California regulators suspect that what's causing this is, um, too much oxygen getting into this landfill, which is a problem known to start fires.

22:58This goes against federal regulations. Um, the landfill operator says that's not the case, says nothing is on fire. Um, and as I found out, these landfills that have been overheating, um, are a phenomenon that we've seen across the U.S. over the last 20 years. And there's real debate. There's real controversy. within the industry and between regulators about what's causing them and what to do about it. Laura, first of all, I read your story this morning, the first thing I read on the Bloomberg, and I could not put it down. And I'm the type of reader who typically goes through the first four paragraphs.

23:35I'm from the Matt Winkler School of Bloomberg, and then I'm done. So fantastic job writing this. One question I did have is, isn't it pretty easy to determine whether something is on fire or not. I mean, it seems like you could gauge that pretty quickly. You would think so. You would think so. And a challenge with these incidents is that, you know, the temperature climbs, you know, this is happening several feet below the surface of the landfill. And so you don't necessarily see smoke. You don't necessarily smell, you know, what you might think of as a burning smell. You know, these events can manifest in a lot of different ways.

24:18And it's because actually that you don't necessarily see those, you know, classic fire symptoms that the industry is saying, well, this is not a fire. We think it's something else that's going on here. But as the story shows, and thank you so much for reading it, I mean, you know, regardless of what we call it, you know, residents are getting sick and there's a lot of challenges in really addressing the problem and kind of getting to the root cause. Exactly. What's crazy is like people are getting caught up. Is it a fire? Is it not a fire? And there's all these terminology, subsurface oxidation, smoldering events.

24:53But it's an important distinction because you write the distinction isn't trivial. Federal regulations explicitly forbid operators from running landfills in a way that starts fires. Why is that so important, especially when you so clearly write that people who are living nearby, they and their families are getting pretty sick. Absolutely. I mean, it's been a well-known issue in the industry for years that these fires can create really dangerous and toxic situations. And among the few regulations that are out there at the federal level for landfills, don't start a fire is absolutely one of them.

25:30And one of the concerning things that I found is that one of the key rules that environmental engineers and safety advocates say, you know, was really there to prevent fires was actually rolled back. And so, you know, as far as like, what is there to do about it? That is something that a number of scientists highlighted for me, that we need the return of some of these rules, for example, to stop too much oxygen from getting in. Because as we all know, right, that can start fires when you mix that with hot enough temperatures. And the point is, it starts fires, but it also gives off really dangerous gases, right?

26:07And talk to us about what's happening to people who live nearby. Yeah, I mean, so just to take the Chiquita Canyon landfill as an example, I mean, we see elevated levels of benzene, you know, a known carcinogen, carbon monoxide, other toxic gases that are known to cause the kind of respiratory, neurological, cardiovascular symptoms that people are reporting. Hand tremors, headaches, nosebleeds that won't end. People are having cancer also and wondering, is what's going on with the landfill having to do with my diagnosis? So what can these people do about it? I mean, as I was reading your story, I had a feeling of like frustration in my chest because it's so hard to prove causation.

26:58Right. People are getting sick who don't live near the landfill also. And these corporations have seemingly endless pools of money for litigation. I think of Dark Waters. I think of Aaron Brockovich. You know, what can the houses who is the couple that you that you write about in your lead, what can they do about it? Yeah, I mean, it's a great question. There are like, I think, over a dozen mass torts moving through the legal system right now of residents trying to take legal action to represent themselves. Los Angeles County is also sued. You know, at the state regulatory level, there have been a lot of enforcement actions.

27:38And I think what a lot of these efforts are all kind of pushing for are funds from the operator to fund the relocation of residents to get out of this danger zone. And so I think that is what a lot of people are pushing for at this point. But, you know, there's also I write about in the story, Pilar Schiavo, who's an assembly member in California, has a bill that she's, you know, I think is awaiting a hearing in the state Senate that would basically just attach more penalties to landfills in the future that exhibit these symptoms that cause these kinds of problems for people. What do the companies say?