Alex Osola (2:57)

One of the other things we saw in the numbers today was that business spending picked up a lot during the quarter. It rose more than 10%. What kind of businesses are doing that spending and what are they spending on?

Greg Dacko (3:07)

We have essentially a bifurcated landscape when it comes to business investment. We have firms that are extremely focused on AI investment and they're driving most of the momentum. In fact, if you look at the GDP data for the first quarter, you saw that there was a surge in business equipment spending on info and processing equipment, as well as a surge in intellectual property products. That's R and D, that's software investment, and that is all tied to AI. And those were the major factors that were driving business investment and in turn GDP activity.

Alex Osola (3:40)

Are there risks to the economy to have so much spending concentrated in one area?

Greg Dacko (3:45)

It is a risk, and I have spoken in the past about the three fragile A pillars of growth, affluent consumers, AI investment, and asset price appreciation. When you have three narrow pillars of growth, it is encouraging when you have a virtuous cycle. But if there is a shock to one of these pillars, it will expose underlying fragilities in terms of economic momentum. Outside of AI, we're seeing more hesitation when it comes to investing, when it comes to hiring, and that is curbing the underlying potential for growth in terms of private sector activity.

Alex Osola (4:17)

That was Greg Dacko, chief economist at EY Parthenon. Thanks, Greg.

Greg Dacko (4:20)

Thank you.

Alex Osola (4:21)

With the latest GDP numbers comes a sort of scary sounding milestone. The US national debt now exceeds 100% of gross domestic product. The government is spending $1.33 for every dollar it collects in revenue. It's not the first time the debt's topped gdp, and that number might bounce around a bit. There also isn't some special level where debt goes from problematic to catastrophic. But. But it is a symbol of the fiscal stresses on the US that have been building for decades. Investing columnist Spencer Jacobs says the debt is already weighing on the government's budget.

Spencer Jacobs (4:54)

It gives the government less room for maneuver. I mean, just think if there's a pandemic or a recession. You already have a large deficit, you already have a lot of borrowings. You can't just necessarily write a blank check and it squeezes the actual spending power of the government. You know, as more and more money is dedicated to just to servicing the debt, there's less money to spend on actual things the government does.

Alex Osola (5:19)

But Spencer says politicians keep spending the

Spencer Jacobs (5:21)

budget deficit as a share of GDP today is at a level that you typically only see during deep recessions, when the government is trying to sort of pump up the economy and get us out, not in the middle of a boom like we're having now.

Alex Osola (5:36)

In markets, the Dow led today's gains, closing up 1.6%. And the S and P and Nasdaq closed out one of their best months in years. The Nasdaq ended April with a gain of more than 15%, the biggest since early 2020. It was also the S&P's best month since 2020. It had a 10% gain. Several big American companies said AI spending is benefiting their businesses like Alphabet, Qualcomm and even Caterpillar. Data centers need the power generators Caterpillar makes. Not all tech stocks climbed, though. Meta and Microsoft slid on concerns about the cost of that AI buildout. And in other earnings, Apple reported sales and gross profit margins for its most recent quarter that exceeded Wall Street's expectations. IPhone's revenue rose more than 20% to nearly $57 billion. For more on the earnings, visit WSJ.com and Eli Lilly has raised its forecast for the year after a strong quarter. Booming sales of its weight loss drugs fueled strong revenue and profit growth in the first three months of the year. Sales of Mounjaro more than doubled, while zepbound sales rose 79%. Lilly is dominating in the anti obesity drug market and it's seeking to grow its share with its new weight loss pill. Its stock closed up about 10% today. Heads up that we dropped a special bonus episode earlier today. In the latest what's News in earnings, we look at what the rising cost of jet fuel has meant for the airline industry and for travelers like me who recently shelled out $400 a ticket for a round trip flight from New York to Atlanta. Ouch. Anyway, that's in your what's News feed now. Coming up, another insurer leaves the Affordable Care Marketplace and a big development in a hotly contested Senate race in Maine. That's after the break.

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Alex Osola (7:53)

Turning to Washington, the House has approved a long delayed measure to fund most of the Department of Homeland Security. It funds the Coast Guard, FEMA and tsa, and the bill now goes to President Trump for his signature. You may have noticed that absent from that list of agencies is ice. Republicans are going to try to get legislation funding ICE and Border Patrol. Separately, President Trump is withdrawing his nomination of doctor and health food advocate Casey Means to serve as U.S. surgeon General. She didn't have enough support in the Senate to get confirmed. The president said today that he would instead nominate Nicole Safire for the role. She's the director of breast imaging at Memorial Sloan Kettering Cancer Center, Monmouth, and a Fox News contributor. And turning to Maine, which is crucial to Democratic hopes of retaking the Senate, Janet Mills, the state's Democratic governor, today dropped out of the Senate race. She said she didn't have the financial resources to keep going. Her exit all but secures the Democratic nomination for progressive Graham Platner, an oyster farmer and Marine veteran. He'll face off against Republican Senator Susan Collins, who has held the seat since 1997. The business of Affordable Care act health insurance has been hit hard by the loss of some federal subsidies. Plans have gotten more expensive and people are dropping them. And today CIGNA says it's not going to offer those plans anymore starting next year. That's after Aetna dropped out of the market at the start of this year. Cigna's not a very big player in the ACA market, with about 369,000 people enrolled in its plans. Ana Wilde Matthews, who covers health insurance for the Journal, says Cigna's exit is a sign of trouble in the broader ACA business.

Ana Wilde Matthews (9:31)

Since the start of the year, a lot of people have just not paid and have been dropping out. Actuaries and insurers are projecting that overall enrollment could drop by maybe a quarter this year versus what it was last year, which was around 24 million. So what it really shows is just turmoil, a shrinking market and maybe an unstable market for the moment, Ana says

Alex Osola (9:52)

ACA premiums are expected to keep climbing.

Ana Wilde Matthews (9:55)

Insurers are right now actually making their filings with state regulators for their rates for 2027, and it does seem they're going to ask for significant premium increases in a number of markets. That said, very few people in the Affordable Care act marketplace actually pay the full premium. Most people still do get a subsidy and so premiums go up, but they do not bear the full brunt of that.

Alex Osola (10:18)

In other health care related news, the Justice Department is launching a new health care fraud strike force. The unit will focus on Medicare and Medicaid fraud. On the west coast, criminals targeting health programs have followed the growing number of people retiring out west, and they're costing taxpayers billions of dollars. And finally, and David, I'm going to

Greg Dacko (10:40)

ask you to take the down elevator. You're fired.

Alex Osola (10:43)

Could the Apprentice be coming back? The Journal has learned that Amazon is discussing a potential reboot of the reality TV show that made Donald Trump a household name. Amazon executives have talked about casting Donald Trump Jr. President Trump's oldest son, as the host of a new version of the show. An Amazon spokesman said there's been preliminary internal discussions about what's next for the Apprentice as a brand, but that the show isn't in active development. Spokespeople for the White House and the Trump family didn't respond to requests for comment. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansy with supervising producer Tali Arbel. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

Ana Wilde Matthews (11:26)

Foreign.

Miriam Gottfried (11:36)

Hey, this is Telus Demos and I'm Miriam Gottfried.

Alex Osola (11:39)

We're reporters at the Wall Street Journal and The hosts of WSJ's take on the Week. It's a weekly show that gives listeners a leg up in the world of markets and investing.

Miriam Gottfried (11:47)

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Alex Osola (11:58)

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