Five Things You Need to Know to Start Your Day: Americas

Markets await the Fed’s rate decision and commentary later today. Meanwhile stocks remain in focus as earnings season continues. [View in browser]( [Bloomberg]( Good morning. Stock futures are pointing lower as markets await the Fed’s rate decision and commentary later today. Meanwhile stocks remain in focus as earnings season continues, with Mastercard and Pfizer among companies reporting. Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Fed in focus The main focus for markets today will be the decision from the [Federal Open Market Committee](when it concludes its two-day policy meeting. It’s expected to keep interest rates steady for the sixth time in a row and indicate they’ll stay that way until there’s an improvement in inflation. The committee is also likely to reveal plans to slow the pace at which it’s currently unwinding its [$7.4 trillion]( balance sheet. [Stock futures fell](ahead of the decision while the dollar rose, with thin global trading amid European and Asian holidays. Stock reaction While interest rates aren’t expected to move, the stock market is. Traders are [pricing in a bigger reaction after the announcement]( than at any point in the past 11 months, according to Citigroup, with options positioning implying the S&P 500 will move 0.95%. That’s down to concern that the Fed will keep rates higher for longer to tame inflation, as well as rising geopolitical uncertainty and a generally mixed earnings season. Amazon’s AI boost Speaking of which, investors have been busy digesting Amazon’s latest results and its shares are up in pre-market trading. The Seattle-based company is the latest in a string of tech companies to[benefit from rising AI demand,]( with its cloud unit posting the strongest sales growth in a year. Still, its sales forecast for the current quarter fell short of estimates, reflecting concern about the main e-commerce business as consumers continue to spend cautiously. More Tesla cuts Consumer frugality is also continuing to pose challenges for electric vehicle producers. In what will come as a blow to an array of automakers planning to tap into its public charging stations, [Tesla has decided to eliminate almost all of its Supercharger group](, which will slow the growth of the network. The decision to cut the nearly 500-person group was made by CEO Elon Musk in the last week and comes in addition to the more than 10% staff cut ordered in mid-April. Coming Up… In addition to the Fed decision today, there are a few pieces of key economic data we’ll be watching, including ADP employment data and the ISM Manufacturing index for April. Earnings remain in focus, with Mastercard, Qualcomm and Pfizer among the companies set to report. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - [UK house prices](unexpectedly fall for a second month - NYC [police break up Columbia protest](as clashes erupt at UCLA - [Ozempic maker Novo Nordisk]( has Denmark's economy hooked - Investors cut bets on [local-currency bonds](as central banks pressured - Why[violent swings in the yen](may become more frequent And finally, here's what Joe’s interested in this morning Good morning and happy Fed Day. At 2PM ET we get the latest rate decision, and then at 2:30 it's Powell's press conference. This particular meeting feels weirdly underhyped. The only real big question is whether the run of hotter-than-expected inflation prints causes the Fed to edge away from its cutting bias in some way. We'll see. In the meantime, we've been getting tons of earnings. So here are some recent comments from corporate executives about the state of the economy as said on the quarterly earnings calls: Starbucks CEO Laxman Narasimhan: - "In a number of key markets, we continue to feel the impact of a more cautious consumer, particularly with our more occasional customer. And a deteriorating economic outlook has weighed on customer traffic and impact felt broadly across the industry." - "In this environment, many customers are being more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent." Amazon CEO Andy Jassy: - "Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premises infrastructure to the cloud to save money, innovate at a more rapid rate and to drive more developer productivity. The pandemic and uncertain economy that followed distracted from that momentum, but it's picking up again." - "As the results show, customers are shopping but remain cautious, trading down on price when they can, and seeking out deals." McDonald's CFO Ian Borden: - "Four months into the year, I think what we can say is clearly 2024 isn't going to be a typical year for the broader industry. I say that because we're certainly seeing, as you heard in our upfront remarks, that the macro headwinds have been more significant than I think we even anticipated coming into the year. And we continue to see those macro headwinds as we have started quarter two. And, frankly, many of our large international markets and the U.S. and I think we expect in the U.S. that we're going to start the quarter roughly flat from a comp sales perspective from what we can see so far." McDonald's CEO Chris Kempczinski: - "If you look at margins in the U.S. today, restaurant level margins for franchisees versus where we were in 2019, we've just now rebuilt franchise restaurant level margins back to where we were in 2019. So the pricing that's been taken over the last several years was all taken as a means to offset what we were seeing around quite high labor inflation and quite high commodity food and paper inflation. So restaurant margins are now back to where we are -- where we were again in 2019 in the U.S., which then says to me that we do have the ability to be thinking about what we do from a value proposition going forward." - "(We) do continue to see there's certainly labor inflation. Much of that is coming out of what happened in California. And on a national level, you could probably see we're expecting high single-digit labor inflation. Again, much of that from the bleed-over of what California introduced. And then on food and paper inflation, I think that's come down to much more historical levels, so we're back at more historical levels on what we see from food and paper inflation going forward." Domino's CEO Russell Weiner: - "(Our) growth in the US came through positive order counts across all income cohorts in both our carryout and delivery segments. We saw the largest growth in our lower income cohorts that are undoubtedly benefiting from the renowned value that we're offering." - "Clearly, customers want value and we are driving it profitably for our franchisees. Now as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2019. As part of that, you can expect around six boost weeks. As a reminder, these boost weeks are a proven customer acquisition tool that drives both short and long term benefits for our brand." Restaurant Brands CEO Joshua Kobza: - "I'd like to address the consumer environment. As we've all seen, sales across the restaurant industry have been slowing for a few quarters. In our own data, we've seen consumers become a bit more sensitive to price, resulting in moderating check growth. This is why driving traffic is so important and why I'm so pleased to see our brands deliver better traffic than most of the industry this past quarter." Trane CFO Chris Kuehn: - "While we're only one quarter in, our exceptional bookings, revenues, and backlog in our commercial HVAC businesses strengthen our conviction that 2024 will be another year of robust top line and bottom line growth. We're raising our organic revenue guidance by two percentage points to 8% to 9% from 6% to 7% prior." Trane CEO Dave Regnery: - "Customer demand continues to increase as the need to address climate change becomes more urgent. We need creative solutions and game-changing innovation to bend the curve on global warming, and that's where Trane Technologies lead." I'll close it out there and obviously this is just a small slice from a few different companies I looked at. Can't promise they're representative of anything more than the company itself. But on that last one, Trane, this is one of those old-style cyclical companies that's suddenly become a secular winner, because there's so much CAPEX going on, and so much need for heating and cooling equipment, with all of these new facilities going up. Check out the long term chart.  Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? 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