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- [00:01]
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Luke Vargas
Tech leaders pledge up to a half a trillion dollars in US AI investments during Trump's term. Plus Pentagon pick Pete Hegseth faces new accusations over his drinking and an update on the state of the Gaza ceasefire four days on.
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Marcus Walker
So far, there is indeed a pause in the fighting. Aid agencies have also taken the chance to rush in more aid, but of course the big question is how long will this pause continue and will it turn into a winding down of the war?
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Luke Vargas
It's Wednesday, January 22nd. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of what's news, the top headlines and business stories moving your world Today. President Trump's Defense secretary pick Pete Hegseth is facing new allegations from an ex relative who told US Lawmakers that he regularly abused alcohol leading to erratic and aggressive behavior. That sworn statement by Hegseth's former sister in law resurfaces allegations about his drinking, which Hegseth brushed off during his confirmation hearing last week, calling them a smear campaign coming from anonymous sources, even while telling senators that he would abstain from consuming alcohol if tapped to lead the Pentagon. It's not clear if the new allegations will have any effect on Hegseth's confirmation, which the Republican controlled Senate is expected to vote on later this week. The leaders of OpenAI, Oracle, SoftBank and Emirati investor MGX are pledging to invest up to a half a trillion dollars in AI infrastructure in the US including data centers over the next four years. The joint venture known as Stargate is the latest high profile initiative timed with the start of the Trump administration. And in remarks at the White House, SoftBank CEO Masayoshi sun sought to tie its unveiling to political change in Washington.
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Luke Vargas
People familiar with the matter say the initial hundred billion dollars committed to Stargate includes projects already announced and initiated under the Biden administration, including a data center In Texas, where construction be last year, Softbank shares closed today up more than 10%. In Tokyo, Oracle is rising in off hours trading, as are Nvidia, Microsoft and ARM holdings, who were named as technology partners for the Stargate project. We report that President Trump's threat of imposing 25% tariffs on Canadian and Mexican imports is part of a strategy to push for an early renegotiation of the U S Mexico Canada Trade Agreement, which is up for review in 2020. That is according to people familiar with the matter, who say that Trump is particularly focused on changing automotive rules under the pact and forcing car plants to move from Canada and Mexico back to the U.S. both countries have threatened to retaliate against U.S. tariffs, with Canada considering an export tax on oil that could make gasoline more expensive for Americans. Trump said this week he aims to impose tariffs on the two countries on February 1. He also said yesterday that he's weighing slapping tariffs on the European Union as well as an additional 10% levy on Chinese goods, triggering a fall in stocks in China and Hong Kong today. And in other market news, shares of Netflix are up more than 14% in off hours trading after the streaming service beat Q4 revenue and profit projections. And it's shaping up to be a busy earnings morning with Procter & Gamble, JJ and Abbott Laboratories all reporting results before the opening bell, while pipeline operator Kinder Morgan and lender Discover Financial Services will post results this afternoo. Coming up, reporter Marcus Walker joins us from Israel to discuss whether the Gaza ceasefire could pave the way for lasting peace. And we'll take a look at the winners and losers from the Journal's latest ranking of US Airlines. That's after the break. Let's turn our focus now to the Middle east, where a six week Gaza ceasefire between Hamas and Israel is now in its fourth day. The deal had been a long time coming, but does it actually put the two sides any closer to formally ending their war? To consider that and many other questions about the current state of play, I'm joined now by Wall Street Journal reporter Marcus Walker, who's in Israel this morning. Marcus, you and your colleagues are reporting that fighting has paused since the deal came into effect and that much needed aid is indeed rushing into Gaza. So some positive early indications there. But we've also seen how fragile this deal has been. And if Israel hopes to recover all 33 hostages in Gaza that were meant to be freed in the first phase of this deal, the situation is going to need to hold. And in fact, for another five plus.
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Marcus Walker
Weeks, it will be And I'm sure that every Saturday that more hostages are released from Gaza and more detained Palestinians are released from Israeli prisons will be a wobbly process as both sides accuse each other of breaking the fine print. But things will really get difficult on day 16 of this deal when they're supposed to start negotiating the second phase, which will be about arrangements that really bring this war to an end. If that collapses, then this will only be a brief pause.
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Luke Vargas
Is there any sense, Marcus, of what that phase two, longer term part of this deal could look like?
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Marcus Walker
Well, some of the key features of phase two have been written down in the deal. They include an Israeli withdrawal, for example, from the Gaza Egypt border area. So some of it we know. But there are big open questions. Above all, there's this big question about who governs Gaza next. And really we have no more than slogans there. And finding an answer for that could be crucial for establishing whether the war resumes at some point.
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Luke Vargas
Right. And Marcus, how much flexibility both sides are going to bring to discussions about longer term arrangements is very much bound up in who sees themselves as the winner and loser of this conflict. A question you've been trying to tackle in some of your recent reporting.
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Marcus Walker
Indeed, ultimately, whether this pause in the fighting becomes an end to the war depends not so much on the fine print of the deal, which I think is more something that both sides use as an alibi if they want to go back to fighting, but rather on the overall political calculation. And the overall dilemma for Israel, for Netanyahu politically, is that he is under pressure from his right wing allies and there's dissatisfaction on the right of Israeli politics because they have clearly, invisibly not been able to stamp out Hamas, which was his number one war aim, endlessly repeated and visibly. Hamas is really the only political show in town in Gaza. They've come back onto the streets wearing their balaclavas in a show of force directed as much at the Gazan population as anybody else, showing that there is only us, we are back in charge.
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Luke Vargas
That was very visible at that first hostage handover, was it not?
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Marcus Walker
Absolutely. And Hamas was able to spin that whole process for a propaganda win, which has caused much frustration in Israel. The difficulty for Netanyahu is that Trump wants Israel to wrap this up. He said so many times he has bigger fish to fry in the region. He wants to broker a normalization of relations between Israel and Saudi Arabia. The Saudis say they can't do that while there's a war going on in Gaza. So Netanyahu is caught between some internal political pressures and these wider international diplomatic opportunities for Israel, but also pressure from the Trump administration. Right.
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Luke Vargas
So lots of political machinations to follow on the Israeli side. Marcus, I have to ask, where does all of this leave the Palestinian cause?
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Marcus Walker
The Palestinian national cause and hopes for an end to the occupation in the west bank and for self determination are probably in their worst place for many decades because they are facing an Israel that's in no mood to give concessions. And Palestinian politics is now caught between two very unappealing alternatives. On the one hand, you have Hamas, whose attack on Israel has just triggered the complete levelling of Gaza. And on the other hand, you have Fatah, the secular nationalist movement that controls the Palestinian Authority in the west bank, which is deeply unpopular and seen as discredited. It's seen as corrupt and authoritarian and as having delivered nothing for the Palestinian cause in the last 20, 30 years. And there seems to be no emergence of a third alternative. Now the Palestinian Authority is trying to convince international partners, including the us, that it should be involved in governing Gaza. So far, we've heard nothing sympathetic towards it from the Trump administration. The Arab countries that would be financing the reconstruction of Gaza are open to it, but only if it reforms, because they see the Palestinian Authority as corrupt. So at the moment, the PA is pretty friendless at an international level, but at the same time, nobody wants to work with or deal with Hamas so that Palestinians find themselves isolated in the bigger picture, which is, of course, the game at a regional Middle Eastern level, is Trump wants a normalisation of relations between the Saudis and Israel, and many countries want that in part in order to orchestrate a containment of Iran. The Saudis want some sort of gesture by the Israelis towards a restoration of negotiations, but nobody really expects Saudi Arabia to truly go to bat for the Palestinians.
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Luke Vargas
I've been speaking to Wall Street Journal reporter Marcus Walker with us in Israel today. Marcus, thank you so much, as always, for the update.
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Marcus Walker
Thank you.
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Luke Vargas
And finally, Delta has once again taken the crown in the Journal's annual ranking of US Airlines, with Southwest coming in a close second. Journal travel reporter Allison Poli says our scorecard, which ranks nine major carriers on seven metrics, shows that 2024 was a pretty smooth year for travelers.
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Allison Poli
The airlines lost fewer bags, more than three out of four flights arrived on time, and cancellations were flat compared with 2023. However, bumping and tarmac delays were the weak spots. This tells us that the airline industry is operating better overall than it was in recent years. We all remember specific meltdowns where carriers stranded passengers and lost tons of bags. Those still happen, but for the most part, airlines are doing a lot better. They've right sized their schedules, which means they're able to run flights effectively given the number of flights and number of passengers that they have.
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Luke Vargas
As for the losers, Frontier came last in our ranking, with American Airlines and Spirit claiming the seventh and eighth spots respectively. And if you'd like to check out the full breakdown of each carrier's performance, we've left a link in our show notes. And that's it for what's news for this Wednesday morning. Before we go, a quick heads up that we've got a special bonus episode coming your way later today in what's news in earnings. We'll be digging into the latest reports from big banks for signs of what's in store for these economy. That will be in the feed around midday. And then we'll have our usual PM show tonight. Today's show was produced by Daniel Bak with supervising producer Christina Rocca. I'm Luke Vargas for the Wall Street Journal and as always, thanks for listening.