, Lisa Abramowicz and annmarie hordern. Live from new york city, good morning. For audience worldwide this is bloomberg surveillance alongside Lisa Abramowicz. Your equity market on the s p 500 down yesterday just a touch down this morning by one third of 1 . Cpi upside surprise, pce coming up a little bit later. A lot of people are saying thats the big data point but how do you trade the market that seems to be driven by its own sentiment. That seems to be with the lack of conviction i read all the notes overnight i have to say the headline of the day frankly is momo fomo or own no. You can translate that later in the program. Ultimately over the last few weeks the last few months this market is repriced aggressively. And the fed hasnt had to adjust at all. President williams sounds like a president williams we heard about a month ago. Three times seems about right for fed rate cuts this year. They havent changed their message. Market kicking and screaming. But heres the real question is the market consistently pricing in a much slower path of rate cuts now. Are they consistently pricing in a complete nirvana soft landing or people starting to figure out what it means if it if the economy is not slowing down. Jonathan there was a man in the 1990s who once said its the economy stupid. Its not the 1990s anymore and its not just about the economy. Immigration is coming up as the big concern in swing states. Amh and 2024 every state is a border state. Annmarie we are seeing pressure from blue states on this white house to do more when it comes to the southern border. President biden will be the southern border today. Both are trying to lean into this because our polls show more respondents are starting to track immigration as their top issue. Still the economy remains front and center but immigration will be one that they need to grapple with. One point on the economy for the pole. Perception is done better. 31 of swing state voters say the National Economy is heading in the right direction. The big problem is they are not giving the president credit for how they are feeling about the prospects of the economy even if they think its getting better. Are they can be at the same place in the border . If you look at how president s travel we are lucky they will be far apart for a lot of reasons. The reason i ask is i wonder how far the message will be. Whether the baltimore would be the same message just couched in very different language. We can talk about this a little bit later. 82 say biden is too old. 51 say trump is too old. Thats a four year age gap that needs to explain somehow a 30 point spread. Its amazing. Lisa we can get into this with respect the doctors notes from President Biden as well which basically said not a lot and placated no one and theres a question about whether its just visibility, whether we are just seeing biden much more than we are seeing trump and whether trump is more energized or if there is some sort of cognitive differential people are trying to get their hands around. There is a Perception Gap biden has to climb. Annmarie biden was at walter reed and his physician said he is fit for duty, robust 81yearold yet when you heard from the special counsel report they said he was an older man so it felt like this physician was almost pushing back on the special counsel report and whether its foreign policy, of the southern border or the economy this is the trickiest part for the campaign grade jonathan equity futures on the s p negative by one quarter of 1 . This is how we are set up going into that data later this morning. Down one quarter of 1 . Yields are higher on a 10 year. 4. 3 053 on the 10year. Marvin of state street ease ahead of todays inflation data. President biden a donald trump old dueling events of the southern border and u. S. Trade representative catherine on tensions between the worlds two largest economies. We begin with our top story ahead of core pce data. Marvin lowe of state street warning we could be in a higher for longer world saying if no landing is the case the fed should be addressing a structural different economy and investors need to consider high term premiums at higher long yields than before the pandemic. Marvin, before we jump into that lets talk about what youre expecting. Marvin certainly the numbers are going to move in a different duration than we saw at the end of last year. For the most part pce is a combination of ppi and cpi. It will come in for that type of number. The markets priced it but its going to result nothing in terms of those that think we are going to be potentially facing inflation concerns as we go into the summer. To those thinking its one data point type so we are not in a solve anything more or break through the ranges weve been in for the last six weeks at this point. Jonathan there was a big disconnect between what the market was priced for and what was implied at the dot plot and what they are doing in 2024. Weve close that gap aggressively. Whats the big disconnect youve got your eye on . The big disconnect at this point still is once we start cutting we will cut aggressively towards a normalized world that looks a bit like it did before the pandemic. Ultimately neutral rates around 2. 5 and this glide to disinflation whether its on the Services Side and certainly on the good side of things with deflation. Its going to reestablish itself at least in the second half of the year. There isnt a sanguine view once they continue in earnest because things are turning back to normal. All of this is very confusing and difficult. Adding the data, what was this coming up from the u. S. Labor department the story bloomberg broke about these letters sent to super users of the data basically having this, the rates for singlefamily detached homes from december 2020 three to 2024. They tried to retract it. What does this mean to you. Im not a superuser. I read from bloomberg myself. Probably the most contentious cpi that this Owner Occupied number. Its an attempt to try and figure out what inflation for those was that own a home. There is a change in the weight between singlefamily and multifamily. Multifamily being under more pressure and all of us to watch the singlefamily world are trying to realize that inflation hasnt come down. Weve always struggled with how to interpret that number. What this says to me is youve got this bifurcation within just having calculated thats not changing because the Housing Market still remains high. If that confusion continues out there that inflation confusion will remain out there and ultimately we price cpi based on this very heavy weight. They should argue we get more inflation volatility which really if you expect inflation to guide down to this really stable number it might be a little bit optimistic. Given that, you talk about a world in which 5. 5 is not a restrictive rate and the potential for that something very few people are thinking about. How much likelier is that right now than it was say six months ago in your view. Marvin it was always out there, it was whether or not you wanted to go down that diagnosis. The goods deflation we saw in the second half of the year made everything great. We always knew that Services Number wasnt responding as aggressively. Weve got some decent prints coming out but Overall Service inflation remains fairly high and weve got a disconnect between what the job numbers are saying, of the official monthly numbers which look pretty robust and the view that all of a sudden the jobs market is right. Within the next three to six months we will get a sense of how much of the structural change in the employment market has a longlasting effect and whether we think about higher yield premium. The economy could be very different where it is now than where it was in 2019. Jonathan if thats the case in the future what would you do with equities right now . Marvin ive said it often despite its duration argument. Growth in an economy thats for the most part aging is going to be a very attractive portfolio so those mag sevens do have a moat that they can defend. Cash flow positive companies are something that wind up being attractive if yields are to remain higher. Does it mean the bond market is a no vote if you want to hedge just go to bitcoin . Im certainly not a bitcoin fan boy. I will leave that one out there. Treasuries continue to have volatility particularly on the long end. You from hedge perspective we talk about curb trades and things like that. Its that type of nuance right now. Thank you marvin. Appreciate it. We can talk about bitcoin, the inflows have been phenomenal. I think its 520 million the other day which was a record. We heard fund manager saying the way that they hedge is with cash and bitcoin. I do want to point out there was a small story on the bloomberg yesterday talking abut how leverage in Crypto Assets is surging again. Including bitcoin, i dont know its deja vu all over again. Just short of 63 k on bitcoin. Plenty of bitcoin checks through this morning. Lets get an update on stories elsewhere this morning. Heres your bloomberg brief with dani burger. And illinois judges bar donald trump from appearing on the primary ballot. Its the third state to impose the band for trumps role in the january 6 insurrection. Trump has until friday to appeal and is already appealing a similar colorado ruling for the u. S. Supreme court. Way watcher shares are falling a lot 23 percent. Oprah winfrey said she would leave the companys board if shares continue to fall the stock is set to heads level on record. The departure is just the latest. Weight watchers is trying to stay relevant in this ozempic era. The influential talkshow host said she will work with the company in elevating the conversation around obesity. She served on boards since she struck a deal with weight watchers. Shares of paramount on the other hand are rising in the premarket grade the company predicted significant Earnings Growth this year. It helped investors overlook a 6 sales drop as a result of shrinking ad revenue on traditional tv channels. The company saw subscriber growth Beat Estimates on its paramount plus streaming service which it expects to be profitable at least domestically next year and thats your bloomberg brief. Up next, abide in an trump supporter shut down. He would rather weaponize this issue that actually solve it. With four more years of biden, the hordes of illegal aliens across our border will exceed 40 to 50 million people. That conversation next. Good morning. The future is not just going to happen. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. Jonathan inflation data just around the corner. Equity on the s p 500 treasuries a little softer. Yields are higher. Under surveillance this morning, biden and trump possible order shut down showdown. He would rather weaponize this issue than actually solve. With four more years of biden the hordes of illegal aliens stampeding across the border will exceed 40 to 50 million people. Medicare, Social Security, health care, Public Education will buckle and collapse. Jonathan President Biden then donald trump hitting the campaign trail planning tooling trips at the u. S. Mexico border. A top issue in the latest bloomberg morning console pole. Trump maintaining his lead over biden across seven swing states. Former policy advisor to senator Mitch Mcconnell joins us for more. Wonderful to hear from you. Can you frame for us how different these addresses might be a little bit later today from these two leaders. You saw a great preview of it. Trump talking about tens of millions of people coming across the southern border. Not a particularly realistic number. Biden is on the defensive here. This is a huge issue in the campaign. Immigration numbers have been very bad from the perspective of people coming over the border. I think hes going to be on the defense of the entire year plus he has to worry about the split in his own coalition from some democrats who think the republican approach is inhumane and independent voters who want to see the u. S. Government do something about the flow of illegal migrants. This is a huge opportunity for president former President Trump. Its one of the reasons he won in 2016 and if biden can change the narrative here he will be in more trouble. Annmarie he could use an executive order. Do you think they will come out with some sort of executive order. I dont know how they dont. One opportunity, the politics of an executive order are quite good. It doesnt necessarily do much to change whats actually happening on the ground. Hes knocking to do the types of things trump did. It allows them to draw attention to what he did in that clip which is point out republicans had a chance to get a border deal and turned it down because of politics. Hes trying to flip the narrative by taking action whether or not it is effective. Thats something that will help politically. Annmarie polling shows responded still think biden is responsible for the border but more people are stunning to lay blame on republicans in congress and the Trump Administration. Do you think biden has between now and november to close that gap and put more blame on republicans for tanking that border deal . I think those are inside baseball arguments and they dont really play into voters that much. Hes making the process case that i to bill and republican stopped it. The incumbent president bears the blame for whats going on in the economy and society and hes good have to bear that plane even if republicans do have a role in that. You of course worked for senator Mitch Mcconnell. Yesterday said hes backing down from his leadership position. The president came out with a very friendly nice response about him talking about their time that they worked together about american democracy a selected route representatives coming together. Is this part of our politics overseeing mcconnell step aside . This is a passing of the torch to the next generation and the next generation is a lot more aggressive, a lot more confrontational and a lot less willing and able to get things done then leader Mitch Mcconnell. I think thats a real shame for the country because mcconnells whole thing his entire time in office is how does he drive to put wins on the board. That is not an attitude you see among the Younger Generation of lawmakers who come to washington either to start trouble or to make statements to help their own political ambitions. Mcconnells only ambition was to become leader at that start to book the American People. Thats outlook that outlook is an outdated perspective. Lisa does Mitch Mcconnell have more or less power now that hes announced his departure day . I hate to say it but i think thats the wrong question. I dont think is anything its got to be happening in the year. Thats done already. Getting a government funding deal shutting down the government later this year. The ukraine question is all on the shoulders of Speaker Mike Johnson so mcconnells announcement yesterday just recognizes the reality the 22 for is not to be particularly active year in United States congress. Some people are speculate what role President Trump will have in picking a new leader for the senate. Whats your view on that at a time were a lot of people are talking about this slew of different senators with the name john but could potentially rise to the helm who are not necessarily in the marks on the fringes. Trumps role here is going to be massive. If you the president elect in the United States in november of next year he will select the next leader. He will be the dominant leader in the party. If he is not it is a very different situation and thats where you see the dynamics among johns you are talking about who are eyeing to succeed mcconnell. If trump is in there you can never pretty broad range of outcomes. This another generation of leaders, potential leaders in the senate who are not today in huge positions who will be vying to be trumps person inside the United States senate and the range of outcomes its really early on the succession race. What is the ideology of the Republican Party and former President Trump . What is it anymore . This is a populist conservative right wing movement. Unified behind a quasipersonality cult of donald trump. I dont house you think about it. The goal of the parties to win back the white house, the guy whos going to win back the white house is donald trump. He has pushed the party in a very uncomfortable directions but most elected officials are now comfortable with. For example the parties populist turn against International Trade. And thats who they are right now. Against mergers and acquisitions. We used to characterize the party as being somehow business friendly. Some now suggesting they are not. We spoke to Speaker Mccarthy in the last month or so and i tried to address this question with him and he did not answer. About whether his party has left him behind. We caught up with nikki haley and i got the same feeling this isnt her party anymore, its changed and maybe its not turning around. When i speak to my friends, traditional conservatives, old school republicans, they kind of want another party. What are the chances we get one . None. The u. S. System is built itself around two Major Political parties. Theres a lot of social science reasons for that and structural reasons. Its difficult for independent candidates to get on the ballot and third parties just dont have the coke versus pepsi brand appeal of republicans and democrats. Its why theres no independent or thirdparty governors in this country right now. The Republican Party is moving in a populist direction on trade, labor issues, immigration and thats where they are going to be for at least the next five to 10 years before a new leader comes along to force a new political realignment. Forgive me for asking because i know youve been closed to senator mcconnell, do you think its a failure of leadership beyond former President Trump that they were not able to make their message, their policies that much more popular within the party and ultimately for the electorate as well. This is a democracy and the voters ultimately decide what they want and what they want is donald trump and you can blame that on failure of messaging but the fact of the matter is the republican commitment International Trade has had implications in communities across this country that have been pretty devastating and i think thats there should be a cost associated with policies associated with the bush years of the Republican Party and those costs of, now in the political system, thats where we are. Jonathan thanks for catching up with us. I think for the people who are hopeful get that third party its just not happening. Lisa rf annmarie rfk rates popular amongst conservatives and republicans and this was the number. Among the people who dont want to see trump or bidens favorability rating has approved when we started this in october to 45 . If he is on the ballot he will be polling pulling from both of these candidates. Jonathan people in the middle a place they dont want to be, people centerleft feel like the people who are far right are pushing them further left, its a place they dont want to be. It seems the extremes of the two parties shaping. Lisa im curious about where the money from businesses is going to go for this particular election. Jonathan you see that in the polling by the way repeatedly. Coming up would you believe it chinese equities on my screen right now up by 9 this month. This month alone for february we are talking about that. How am i going to find a doctor when im hallucinating . What about zocdoc . So many options. Yeah, and dr. Xichun even takes your sketchy insurance. Xichun, xichun, xichun youve got more options than you know. Book now. captivating music the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. i think hes having a midlife crisis but it cim not. Ssed on to the next generation. You got us tmobile Home Internet lite. After a week of streaming they knocked us down. To dial up speeds. Like from the 90s. Great times. All i can do say is that my life is pre i like watching the puddles gather rain. Hey, your mom and i procreated to that song. Oh, ew i think youve said enough. Why dont we just switch to xfinity like everyone else . Then you would know what year it was. I know what year it is. Jonathan stocks on the s p 500 negative one quarter of 1 . Stocks pulling back by 0. 2 on the nasdaq 100. The small caps up by 1. 5. Twoyear, 10 year, 30 year. Still in and around 470. Yields picking up across the curve going into this data up by four basis points on the twoyear. The expectation is its likely to come in hot and what i keep seeing as if it comes in at 0. 3 0. 4 month over month thats not to be good for the fed. They are knocking alike that and in march is what it like gets less noisy. And it becomes a much more inflationary picture potentially if this retains prayed retains. Jonathan look at the low and the high of the yield prayed last month of the high was 470 prayed are we seeing stocks wake up to that . Why are they treading water right now. Is it because theyre waiting a particular enthusiastic. Our people actually short or they basically just going to sit there and go like this until they can figure out whats happening. Lisa better earnings, thats what seems to be driving everything that we are seeing with respect to the confidence in equities. Jonathan want to look at dollaryen. The chance that we close at 150. We have not had a close below 150 in about two weeks. We are negative one half of 1 . A stronger japanese yen off the back of some commentary from a boj board member who gave a subtle hint with the emphasis that they may move away and start hiking Interest Rates. Its never too subtle. This is the comment prayed the bank expands price target is finally coming into site. They are going to hike in march. This is where the market goes for that commentary. Theyve been so tepid on any kind of guidance whatsoever. Just a little bit of a break. Trying to inject a little bit of insight here. We did bitcoin a little bit earlier. The rally has been phenomenal. Typically you would say the etf news would be a solemn news event. I dont even know of an understanding of this. But people dont have a diversifier because its not i think Jonathan Stubbs was saying that. Bitcoin is one of his assets that are uncorrelated to the rest of the market. I dont know what they are correlated to but to me this sort of popped out of nowhere and seems to be on a Freight Train moving back to some of the other types of trading. That train went through station 63 on the screen again. Under surveillance this morning investors looking at the fed inflation gauge. Thats just terrible. Bloomberg survey expecting the number to double from a month earlier to 0. 4 percent plus another look at the u. S. Consumer with personal income spending data. 200 10 k the estimate for jobless claims. We will hear from president s bostic, gold spa he and williams prayed claims will be super important. How strange it is we keep getting notices from Different Companies about layoffs. We heard this from company after company whether its bumble, one of the Bigger Companies that came out yesterday we saw some issues with salesforce for seeing something with respect to guidance. All of these companies we saw coming in quite significantly. All these companies a keep trimming jobs. Why are they not showing up in the numbers prayed annmarie sony, macys its across the board. Consumers are now very concerned with the labor market more than they have been. Its always about inflation and now they are worried about job prospects so that is something i think you are right for jobless claims is important. Suggesting maybe claims have been a little bit misleading and taking our attention away from the weakness we are seeing elsewhere. Specifically in retail sales. Low initial jobless claims previously stronger data support the consensus for now activity is solid. We see a soft landing is a leak like least likely outcome and expect activity to weaken. Its a key test that we see downside risk. Everyone is saying watch the data, then they say the data is messy, it is wrong if its waiting things differently and its misleading because you have to look elsewhere. It creates the frustration of why we are sort of hitting our heads against the wall. We are 30 minutes in. How riled up or you going to get . They talk about data dependency it always winds me up because the question is what data are you dependent on. How much weight do you put on that data point. And they never seem to go into the detail of any of that. When they do it is usually pretty vague. We dont know. I look forward to 830 when that data drops prayed leaders striking a deal to avoid a Government Shutdown. It extends funding for Government Agencies one week to march 8. It now sits at march 22. Hardline republicans already condemning the agreement setting up for another fight with Speaker Mike Johnson prayed are we moving on . We are moving on from this potential shutdown but they set up more data were we can shut down. This is the fourth time since october they voted or are about to vote on another continuing resolution. The issue will be more of the politics because speaker johnson is already getting a ton of flak from the hardline saying we did not want to see another continuing resolution. Ralph norman last night said it was an insult to the American People. Jonathan you are not fired up about this one . Annmarie i am not. Jonathan moving onto this, the hits keep coming for boeing. The Justice Department raising the possibility of criminal prosecution. Stretching back to a deferred prosecution agreement after two fatal crashes in 2021. The alaska air incident happened two days before the deal was set to expire prayed if prostitute is determined they failed to comply they could bring criminal charges against the company. This is more bad news prayed this raises the question of whats going on at boeing to do a deep dive investigation into what went wrong culturally and what mishaps there were and what sort of oversights or negligence there was at a time when they are dealing with employee confidence. Employee retention prayed it sets up a whole number of questions i would like to ask. Tk did a fantastic job of this, the cultural issues inside the company, weve seen some Personnel Movement but ultimately looking to the top of this company a lot more over the next few weeks and months. Lisa especially given the commentary. It was unclear safety requirements that they changed on a regular basis, that kind of confusion is not great. The report commission talked about this disconnect between the factory floor in the csuite. Issues going on the factory floor are not getting to the executives that are miles and miles away. The faa talked about this stopping short of some of the harshest measures they could have had on boeing which were basically mean holding the production of 737s overnight. This is a huge headache for the faa. Heres the latest other out in china. Investors bring the government will do more to backstop the economy ahead of the National Party congress prayed big rebounding stocks in china pushing to the best february since 2015. The 300 up by more than 9 . Global investors saying the country is headed for the great reset. Wonderful to hear from you because you are constructive on this part of the world and i struggle to find anyone else who has been written can you tell us why apart from the fact this is really underpaid listen, you have the headlines and the changes taking place in china where president xi jinping is really building a common prosperity economy and thats a new concept given the demographic profile, the development that china has achieved, this is something that is well understood. Whats happened given the volatility is many foreigners have left the market and 90 the market is now held by domestic investors. I think in that context any good news, any labeling if you want to bad news is a source of a potential rally. We like innovation, we do not by china as an etf. We do so as an active battleground where you find a lot of very Interesting Companies in green tech and med tech and bifurcation of the worlds standards given the new order means that a lot has to be rebuilt in china. And semiconductors, etc. Theres a lot of super innovative and Interesting Companies prayed how do you shape your view on china with their banning on certain types of trading, certain quantitative traders who may be did the wrong trade. Virginie it is an emerging market economy and we know some emerging markets have that uncertainty linked to it. However it is a very large market and you really dont want to have a topdown etf kind of view. You really want to work with from the bottom up with Quality Management team and understand the Business Models and really have that longterm appreciation of the potential of a company but also very focused on valuation and quality of management. Is this a trade or is this Something Like a return especially given the inconsistent policies from the top . Virginie i think they are consistent within the chinese perspective in terms of again thinking about that longterm common prosperity approach. In terms of a trade versus longterm i am in the long term camp because i think it is the second largest economy in the world if you look at the wealth creation, the potential for innovation, if you look at the transformation of the economy and the global south and chinas influence. I understand for some people it might be a trade if you have that in your portfolio today given how well the markets have done around the world, in the past 18 months, maybe that is something people would want to look at on a trading basis. Annmarie President Biden puts out a statement saying im announcing today unprecedented actions to ensure cars on u. S. Roads from countries of concern dont undermine her National Securities directing how do you deal with longterm view on china when you have this acrimony between beijing and washington. Virginie that is part of the risk very clearly. Geopolitics will play you know my views on new world order and geopolitics will continue to play a growing role in the markets as the world is becoming multipolar. And the Trump Administration clearly continue to create some pressure. When you look at these companies you have to take a very conservative assumption with regards to development in markets such as the u. S. And even potentially europe. Only given very conservative assumptions you still think there is oversight potential given earnings profile on a three to five year basis then you would get into those stocks. It is stock by stock decision, framing within a longterm time horizon with an awareness of shortterm risk. Annmarie you mentioned what would happen if we saw another Trump Administration but do you think trade policies, export controls, penalties would change whether or not its trump or biden . I think they will probably come up in different formats if you look at the current negotiations with just took place we had to a certain extent a lot of inviting. Again a common understanding the relationship for the u. S. And china is important to the world, it is important to china and the u. S. So i think you have to have distracted noise of political talk with what is going on in the background and we know in the past 18 months theres been a lot of touch points between the two administrations if you want. I think that this will prevail independent on who is in power in the white house but the noise will probably be louder so you want to be very conservative with your valuation assessment and understand the geopolitics will continue to have a growing role on markets. Jonathan thank you. Statement from the president addressing National Security risks to the u. S. Oil industry. I will quote some of this for you. Imposing restrictions on american oil owners operating in china prayed why she connected vehicles from china be allowed to operate in our country without safeguards. Today im announcing a president ial elections to ensure cars on u. S. Roads from countries of concern like china do not undermine our National Security. Ive directed by secretary of commerce to conduct an investigation into connected vehicles and to take action to respond to the risk. As president i vowed to do right by autoworkers and middleclass families that depend on the Auto Industry for jobs. With this and other actions we will make sure the future of the Auto Industry will be made in america with american workers. You can decide whether you want to put these events together. We understand in the last 20 minutes or so we will not be hearing from the u. S. Trade representative this hour. We wouldve liked for her to respond to the statement from the president this morning. How much heavy lifting are they doing. A lot of people up and expecting this prayed how will you create a moat around the u. S. Auto manufacturers at a time when chinese manufacturers are doing it cheaper and faster. What are some of these provisions . Is this tariffs, how far does this really expose to the potential for challenges . Jonathan weve got to throw in the 2. 5 tariff as well per you wonder where this is going. And if this is about getting in front of what we could see from former President Trump on this campaign trail. How much is there daylight. To me between the two candidates, theres a real question for you brought this up, what does this mean in terms of u. S. Auto manufacturers whether they are allowed by the u. S. Government, whether they are prohibited from buying certain goods from overseas countries because that could harm National Security. It raises a lot of questions. Jonathan lets get you updated on stories elsewhere. Heres your bloomberg brief with dani burger. Another Government Shutdown may be averted. Congresses leaders struck a lastminute deal to provide one more week of funding under saturdays deadline. It will keep parts of the government funded through the end of september. Other agencies like defense and Homeland Security face a march 20 third shutdown deadline. Speaker mike johnson plans to bring the measure to the house floor today. Shares of snowflake are plunging premarket if this loss holds, 23 it would be the biggest decline on record. They delivered disappointing Sales Forecast and announced the ceo is stepping down and will be replaced by the Company Senior Vice President of ai. Who once worked for google advertising. Amc theaters is cutting the pay of its ceo by 25 . Fourthquarter profit fell short of estimates despite a sales boost from concert films. Amc stock has fell in the last year but its pecks revenue to drop as much as 9 this year because of a limited film release slate. Thats your bloomberg brief. Up next on the program, a trade tensions between the Worlds Largest economies. Americas fundamental economic strength means that we have nothing to fear from healthy economic competition with china or any other country. That conversation up next. This is bloomberg. Get help reaching your goals with j. P. Morgan wealth plan, a digital money coach in the chase mobile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan Wealth Management. Hey you, with the small business. Whoa. Youve got all kinds of bright ideas, that your customers need to know about. Constant contact makes it easy. With everything from managing your social posts, and events, to email and sms marketing. Constant contact delivers all the tools you need to help your business grow. Get started today at constantcontact. Com constant contact. Helping the small stand tall. Jonathan live from new york city, equities down by one quarter of 1 . Yields up by four basis points. Under surveillance this morning trade tensions between the worlds two largest economies. As ive said before americas fundamental economic strength means that we have nothing to fear from healthy economic competition. With china or any other country. I end other u. S. Officials have repeatedly stated that the United States does not seek to decouple from china. The Biden Administration weighing the fear of tariffs among ongoing tensions. The decision as competition ramps up for Raw Materials, electric vehicles and artificial intelligence. Vonnie quinn is in abu dhabi and she joins us for more prayed and you frame for us that tension playing up where you are right now. Vonnie lets just put it in the words of paraguay which put out a statement saying rich countries that are not wanted poor ones to redo subsidies and lower trade barriers are now being called on their own governments to reduce trade barriers and they dont specifically cite things like in europe the carbon border adjustment mechanism or in america the subsidies for Semiconductor Manufacturing and for electric vehicle battery manufacturing but thats what paraguay and those who support the statement are saying they are essentially calling out the hypocrites as they would see it for subsidizing their own Domestic Industries and telling the less developed countries to not subsidize theirs. In a case like india for example which has been seen as a holdout, india is trying to protect its fishermen and anglers trying to subsist on very low wages and other countries are trying to do the same for their populations but also electorates. There are a lot of elections this year. Do you feel are people getting split into camps where there countries are forced to be choose between china and the u. S. And to sit with those people at the table and ignore the others . Vonnie to a certain extent there is a great worry that is great word only used at the wto, pluralateral. You could have a multilateral agreement but only amongst those that agree with each other. You dont hear this anywhere else. I spoke to the irish trade minister with a good insight into how conversations are going. He said this a lot of pessimism around and on the ecommerce tariff moratorium extension which is being held up by potentially india, indonesia and maybe south africa he said what will end up happening if these countries dont agree to extending the moratorium is you get this agreement with all the other countries that do in these three or four countries will be left out. He said that would be a shame and a difficult decision to make and he hopes it does not happen but thats what he was hinting would happen. A split down the middle with some holdouts and they are not getting the concessions that perhaps they would like and the other countries banding together and deciding they wont give those concessions. Talking abut the National Security risk to the u. S. Auto industry. Weve seen subsidies from china when it comes to evs, you talked about this race for the subsidy race, priscilla talked about this saying its the elephant in the room. Those kind of countries, what will they do to remedy that . Is there going to be trade remedies to try and combat some of the subsidies . I think the answer there is they will continue subsidizing their people as long as they get reelected again and dont forget they are also in conjunction with the wto meetings happening they are also conducting negotiations on free trade agreements so india is in active discussions with the u. K. Australia and the European Union on free trade agreements. None of them of actually come to a conclusion. There have been several rounds of negotiations with each individual country. There seems to be sub stumbling blocks. I spoke with the India Congress minister who arrived late because he was campaigning for likely elections in april. He maintained all of these things are separate that they should not be combined but of course we know they are combined. You can negotiate a freetrade agreement without coming to terms of the problems wto members are trying to come to terms with prayed the director general early on today was optimistic and said she hoped there would be an agreement and there would be a shares taxed at the closing ceremony. Since then in the last hour weve been told that closing ceremony has been postponed to at least midnight tonight. Jonathan appreciate the hard work over there, thank you for joining us. Chinese evs pose National Security risks. This is where its going. This is where its going. The fact that they are saying its a National Security risk because they are in cars they can see you and then they say we will protect american jobs. So which is it . Is it truly a National Security concern as we seen with the chips or is this something more in terms of protectionism . It sounds a lot like protectionism. What we heard from senator hawley he was talking about whats going on in mexico. China is going in on mexico big time and it comes to evs. His concern is this is a backdoor for American Consumers to get access to these vehicles. So going around some of the National Security concerns but also these cars being made in mexico and they are price point wise much cheaper than the evs the United States is offering prayed mcginnis of the committee for a responsible voucher. Dime brent ceo all of that in the second hour of bloomberg surveillance. Live from new york city, inflation day prayed equity futures negative. From new york this is bloomberg. Inflation is not in a last mile mode on its way to 2 . The inflation data will get much more bumpy. The data can switch rapidly. The fed is beginning to open the door for a change in policy. This is bloomberg surveillance with jonathan ferro, Lisa Abramowicz, and in re hord turn. And annmarie hordern. Annmarie the second hour jonathan the second hour of bloomberg surveillance begins now. I am jonathan ferro. Equity market pulling back. 2 . We can talk about pce. Inflation data 90 minutes away. We can talk about washington, d. C. Avoiding a Government Shutdown. We should talk about protectionism and electric vehicles. The fact that the president of the United States believes that chinese evs could pose a National Security risk. Lisa if that is the case what is the logic behind tiktok . What is the logic behind a host of other things. We are seeing it with this new statement with respect to electric vehicles. The next paragraph is talking about protecting u. S. Jobs. Jonathan we are still waiting for the policy. This is where the policy is currently. 25 tariffs on chinese evs. Another 2. 5 on top of that for the tax duty on top of an imported vehicle. How much higher will that number go . Annmarie and who will buy a car when there is a 25 plus tariff on them. We could see the number go higher. What we know from the president s they are announcing actions to ensure their cars do not underscore National Security interests so they directing the Commerce Department to conduct an investigation. What we get is the big question. We have seen this administration ramp up their concern about National Security in china. Remember the cranes at the port . If they will not allow chinese cranes at ports, why would they allow americans to get the car . The big issue is american jobs. Jonathan but with this issue look like in five to 10 years. We talked to pierre farragut about whether this would descendant a state sponsored National Champions protected by massive tariffs. I ask the question this morning. Is the ev market struggling because of chinese competition or struggling for other reasons . Lisa people will say if the cars were cheaper you will have greater ev adoption. People say you allow everybody in and get to where you will go much quicker but you do not protect u. S. Nationals, which is one of the main issues. Annmarie china has the biggest told because they have the ingredients to make the ev. They have access to the Raw Materials and 85 of the processing to make that battery. When i talk to people, they say chinas long game is not just selling the cardi United States, it is you cannot have this in less you buy the part that is attaching this. Jonathan i was thinking what emojiis elon musk might use this morning. Maybe a cigarette again after what he said about apple. If china starts to say we do not want you operating in our country, than some of these western manufacturers have a big problem. Lisa there is also this issue of how they develop their own inhouse technology. Theyve have already kind of won when it comes to electric vehicle battery manufacturing. When we talk about chip sales from the u. S. , from the netherlands into china, some of these executives are saying we will not sell the chips but they will create their own. That will create parallel systems. Jonathan that is latest from the president. Lets turn to the price action and get you set up for pce data. Equity futures on the s p 500 negative. We are down. 2 . Yields higher four basis points. Coming up this hour, wei lee of blackrock on how she sees this researching. And winnie cisar as Corporate Bond sales hit a record. 90 minutes away from the fed preferred inflation gauge, the core pce inflator. Wei li writing falling policies have been pushing inflation down we think inflation will resurge due to stubbornly High Services inflation but we expect that only become visible later this year. Wei li joins us to talk about it. Why we have to wait until later this year for this to play out . Wei goods deflation is dragging inflation down. Just based on that alone we think inflation could meet the target of 2 later this year. After goods deflation runs its course we cannot extrapolate indefinitely because that is due to pandemic mismatch. Some of the Structural Forces like persistent wage pressure could push Inflation Higher and fragmentation you talked about earlier on could push Inflation Higher. We believe that means inflation will go through a roller coaster path, going down before it rebounds next year. Having said this, the last few prints of ppi and cpi have surprised at the outside. Even as we go down itll be a volatile ride. Clearly all eyes on that. Lisa how do you stay bullish on u. S. Equities despite the fact you expect inflation to be sticky and bond markets reflecting that. Wei markets generally focus on one narrative at a single moment. For now we believe markets are focusing on the narrative of immaculate disinflation and earnings being strong. What has happened so far this year is on the one hand rates markets are moving closer to where we think things should be. Now that is moving closer to three cuts. On the other hand earnings are really strong. Look at the first quarter. The latest earnings season reporting is twice as strong as the expectation at the beginning of the reporting season. If you think of risk asset being discount rates and cash flow. Earnings are going up as well. We think this combination could go on for a while before markets move on to the inflation roller coaster and that should become clear later this year rather than right now. Lisa when the shiny object shifts direction maybe everyone will look over there. A lot of what youre talking about people say has been priced in. I get headlines with the line fomo oh no. It was said it is impossible to call a stop to this euphoric market. Is there key moment for you that is the shift where you start to adjust . Wei in terms of the positive sentiment hitting a wall and turning more negative than what we just talked about in terms of inflation roller coaster becoming clear is such a catalyst and we are paying close attention to wage pressure and participation rates to monitor that. In terms of markets priced in for perfection, i observed that whilst earnings are baked in to be positive for this year, when it comes to rates we are in the middle of the range. Markets are pricing into three cuts for this year which is just one more pot versus the october pessimistic pricing. Because we think inflation could surprise on the downside in the coming months and quarters stop goods deflation is very powerful. We can see rate pricing swinging wildly. As markets wake up to maybe three cuts, it may be more, maybe less, that could create further volatility momentum on the upside, although ultimately we think 3 is where we will settle. Inflation falling to target is currently underappreciated by markets. The two your breakeven is that almost 2. 8 , the last time it was at this level was in march 2023 when inflation was comfortably above the 5 . Markets are fixated on the last mile of inflation being difficult to achieve. We think because of the powerful goods deflation we could get there. Then the focus will go to the inflation roller coaster. Jonathan this sounds like a mess for the rest of the year. I want to talk about the rest of the world, never mind the United States. The nikkei 225 is up 8 , the csi in china is up 9 . These are big monthly gains abroad. Alltime highs in france and germany. What you make of what is happening abroad . How sustainable do you think this is . Wei our biggest connection in International Markets is the japanese market. We upgraded it twice last year. We continue to stay overweight in this market. The first wave of japanese performance was driven by markets getting excited about the exit from decades long deflationary mindset. From here on we think that will be catalyzed and driven by micro development, earnings are strong. We think this year will be the year where the bank of japan starts hiking rates. They will be careful as they do that because they do not want to accidentally make the policy mistake of killing this exit from deflationary mindset which is why we think Market Pricing is a little too aggressive. They will not move too far from zero, which is still a very supportive Monetary Policy environment. You talked about china, the valuation is very cheap. There are catalysts in terms of policy support coming through, but the fundamentals are very challenged with real estate overhead. We are talking about the aging population which is when we balance these factors together there could be some bounce from this low bottom of valuations. We are not overweight to chase this rally. We think it is a better option elsewhere. Lisa what is your pushback. We just heard from evercores Julian Emanuel that he is bullish on china because i cannot go much lower. What would make you more bullish on a country that is the world secondbiggest economy and has lived in left for dead by a lot of the biggest stock traders. Wei we are neutral. We are not underweight. We have recognized the valuation is compelling and there is near term policy support the high the more bullish calls. From the whole portfolio perspective we are talking about riskadjusted returns. Even looking backward to what the market was able to deliver the last two months on a riskadjusted basis, still less attractive than what we can get from japan. Neutral is not too bearish or bullish from a portfolio perspective. We think there are better opportunities elsewhere. Overweight japan, overweight u. S. We think that delivers continued runway. Jonathan this will sound so specific. I want to know what happens to the nikkei if the dollaryen drops. What happens if we drop to 120 specifically . Im joking, but what happens of the japanese yen picks up . Wei that is a very important point that allows me to qualify. We like japanese and currency on a hedged basis. While 150 off the back of policy, there is room for that to come back. Even the fact that japanese tends to be negatively correlated with the currency, there is an auto correlated we are not making in this japanese equity call. Having said that we do think japan next meeting is not alive want. They will be very careful not to make the mistake to queue this early exit, these early signs of exit from the inflationary mindset. Markets think it will start hiking and create significant policy divergence versus Central Banks because they are cutting and the bank of japan is hiking. Divergence may not be as high as markets seem to be expecting. Bank of japan will be very careful. We are talking about decades long deflationary mindset. They want to be so protective of this. Jonathan this is been a long journey. Wei li of blackrock. Lets get you a update on stories elsewhere. Here is your bloomberg brief with dani burger. Dani republicans in the senate have to decide how loyal they want their next leader to be to donald trump. Mitch mcconnell is stepping away. His successors are known as the three johns. John thune of south dakota, john cornyn of texas, and John Barrasso of wyoming. All three have endorsed the former president although john thune held out until this week. The sec is investigating the wall street journal reported regulators are looking at internal columns by the Ceo Sam Altman related to his ouster in november. Sources familiar with the probe say the sec subpoenaed openai in december and told senior staff to preserve internal documents. Openais board chair says the company will continue to strengthen governments. Amc theater is cutting the pay for it ceo by 25 after about 2023. The Fourth Quarter profit missed estimates despite the sales boosts from taylor swift and beyonce concert films. Amc sees a 9 revenue drop because the slate of films being released is so limited. Jonathan up next, guess what washington is doing . Kicking the can down the road. The American People deserve better than this. You would not run a peanut stand over how congress is trying to do the national budget. Jonathan a lot of people might agree with that sentiment. This is bloomberg. J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. Something amazing is happening here. Retailers are moving inventory quickly and securely. Thats because cdw designed and built a solution with cisco security. End to end protection, defends against attacks and makes better decisions in real time. So warehouse and Customer Data stay protected every step of the way. Make amazing happen. Cisco and cdw. Jonathan inflation data one hour and 11 minutes away. Equity futures negative. 25 . Yields inching higher across the curve. Under surveillance, kicking the can down the road. The American People deserve better than this. You would not run a peanut stand over how congress is trying to do the national budget. The fact that we do everything to avoid a shut down. The government is going to experience a national shut down if we keep going with the debt that is accumulating in america. We look at one crisis to the next. It does not have to be this way. Jonathan congressional leaders reaching a deal to avoid an imminent Government Shutdown. The house had to vote on the deal today which would provide one week of reprieve, pushing the deadline to fund some agencies to march 8. A second deadline would be two weeks later. Maia other committee for responsible federal budget joins us. I will ask you a question, how unsustainable is the path we are on right now in washington . Mia we have kicked the can so many times on the situation there is no way will be able to fix the debt threat we are facing without major shifts. As we can see when the government is talking about small changes, which is what is going on in this deal, they are basically unable to make choices and stick with them. I did not like to exaggerate about this, but i think we are headed to something very bad on the fiscal front. It does not just come from our huge debt, deficit, all of those things. It also comes from the massive crisis in leadership we are seeing at this point where nobody is able to talk about this issue honestly and make the changes we need. We have already waited so long it will clearly be difficult to fix. Annmarie looking forward to the november election, trump has thrown around he will pay off the debt. That will be impossible in four years. Are you seeing anything that would make any implications any improvement in our government deficit . Maya let me hone in on that trump point. It is so impossible to pay off the debt in four years. You would have to double revenues, cut all spending and then some. Those numbers are just pulled out of nowhere and make no sense and that is the kind of discussion that is not help. The other kind of discussion is everybody promising all the things they will do. Republicans do not want to raise taxes. Democrats do not want to raise taxes on 90 of people. None of the leading candidates are talking about the real need to fix Social Security and medicare. The Biden Campaign and in bidens budgets he has talked about a number of revenue increases. There is no question about it. We need higher revenues to close this gap. We changes in everything. There is something he has talked about. The Trump Administration and in the campaign, they did talk about adding tariffs that would raise revenue. Netnet that might not make any difference. To your main point nobody is talking about this as a big issue. Nobody is putting forth the policies that would really make the changes. When it comes down to this, i would say the biden budgets have included revenue increases i think there is support for. The risk is will they turn around and spend them on bigger spending programs . Annmarie the heart of the u. S. Budget is entitlements. Is anyone willing to go there . Maya absolutely not. Here is the truth. Social security and medicare have trust funds that will become insolvent in a decade or show. Instead of talking about all of the reasonable measures that we have to put in place and we shouldve put in place years ago we have the major candidates not promising to touch those programs. When you have somebody like nikki haley or Chris Christie says we should consider these issues, but you have to think about raising the retirement age for younger people, not things that affect retirees or people down the road, they immediately get attacked for it. We have very little Political Leadership on what is 100 true. If we do not make changes to Social Security there will be very devastating automatic benefit cuts to everybody on the program. Those will harm current seniors. This void of leadership is leaving people who depend on these programs even more vulnerable and says even more about how broken our political system is that people are not willing to level with the voters in the big competition between the two parties is i will give away more and you can give away, which brings us back to the unsustainable debt path we seem to be stuck on. Lisa i can feel your frustration and i hear you. I wonder if people still take your call. Do people even take your call anymore . Maya behind closed doors there is a lot of activity. Not only are they taking my calls, they are giving calls. That is true for members of congress and folks on wall street. The markets are starting to worry. I am hearing this much more from financial leaders. There are members of Congress Focusing on this a lot. Theres a group in the house called the bipartisan fiscal forum. They have a group of colleagues who meet monthly to talk about this. There is a lot of effort to try to put in place a Fiscal Commission that would look at all sorts of things. Normal opponents from special interest groups, the aarp, the no new tax pledge crowd, none of them want to make changes. There are members of congress who say this not just weakening our economy, this is weakening our country. They are starting to work on this. The question is when we can get enough people in the political leaders to be willing to have an open and honest discussion about it. Jonathan i have a feeling will be talk about this for a long time before they do anything. Maya with the committee for a responsible federal budget of which there is not one right now. I am so negative on them ever doing anything. It is a major problem in the treasury market. The moment they talk about doing anything, that gets used as Opposition Research against the person talking about it. Lisa nikki haley talking about raising retirement age. Why you hate people. Annmarie the Trump Campaign took our interview with her about raising the retirement age and made ads. Jonathan not going to get fixed. Up next, john payton. This is bloomberg. I think hes having a midlife crisis im not. You got us tmobile Home Internet lite. After a week of streaming they knocked us down. To dial up speeds. Like from the 90s. Great times. All i can do say is that my life is pre i like watching the puddles gather rain. Hey, your mom and i procreated to that song. Oh, ew i think youve said enough. Why dont we just switch to xfinity like everyone else . Then you would know what year it was. I know what year it is. Jonathan getting a secret omelette recipe right now. Im not sure he meant to share that. We will not talk about that. I might start doing that. Equity futures negative one third of 1 . Down. 25 on the nasdaq. The data one hour away. Into the bond market, two year, 10 year, 30 year. 4. 6871. Yields higher into that data. Up five basis point. Lisa the whispered data for this metric is it will come in hotter and this is on the heels of what weve already seen which is hotter cpi and hotter ppi. Whether people consider this data a tradeoff we shall see. We will hear it is just one data point. Jonathan lets talk about bringing in the bank of japan. Dollaryen, better yen strength out there. Breaking 150 on dollaryen briefly. Back to 150 now. Weve not seen a close below 150 in two weeks. Bank of japan board member talking about the possibility of rate hikes down the road. Lisa this is what talking about the possibility looks like. Oh my goodness, they will hike. People have been fed this line before. Jonathan wei li of blackrock talked about how long this journey has been. They will move slowly. The data point weve been waiting for a week, the core pce deflator two out at 8 30. We will also get jobless claims in personal income and spending data plus more fed speak. Already heard from president williams and the last way for hours. Based on the dot plot they put out in december, lets park the News Conference with chairman powell, ignore that, lets go to the dot plot, they talked up three cuts and they still basically at that. Lisa you think they feel good . You guys are working it yourself into a frenzy in the market and we are staying in one place. Jonathan fortunately for them if you did have to market their views every day maybe they would change a bit but they do not. They been right so far. Lets see how far this gets pushed out. Lisa especially considering the fact there is still enough financial easing that potentially foster further inflation is something people are worried about. Jonathan latest news on the politics. Illinois barring former President Trump from appearing on the ballot over his role in the capital. The third state to ban trump from the ballot. Will have a few hearings over the next few weeks. Annmarie he is already appealing one out of colorado so the Supreme Court will look at this and make a final decision. More importantly the Supreme Court yesterday says they will take up the case involving trump in terms of immunity involving the january 6 case in washington, d. C. Regardless of what the Supreme Court does it was a win for the Trump Campaign because this is a delay tactic. What he does not want is to have this trial happened before the november election. Our polling shows that if he is convicted of a crime he will lose votes. Jonathan lets get to that polling. The former president holding a fivepoint lead over the incumbent with perceptions of improving National Economy failing to translate to any significant increase in support provided. In support provided. We are in support provided. In support for biden. 80 describe biden as too old and 80 describe trump as too dangerous. Annmarie the too old after the documents the too dangerous come after trumps comments on nato. Part of the comments, that if he is convicted of a crime, he will lose votes. Jonathan another read on the u. S. Consumer coming at 8 30. Dime brands will be taking a closer look at the data. The owner of applebees reporting fourthquarter profit that Beat Estimates thanks to an aggressive promotion strategy. The ceo saying this. During the year we found just limited their discretionary spend in response to economic pressures and this value conscious pressure continued in the Fourth Quarter. While this creates challenging and Dynamic Market conditions but allows us to leverage our expertise to create exceptional value. John peyton is with us around the table. We should continue this conversation. When walker hayes put together that song, did they talk to you about that ahead of times . How did that work out . John walker hayes wrote the date night it applebees song two summers ago and it was a gift from above. We did not know it was coming. It was he was an actual applebees fan and he wrote about date night with his wife at applebees. He has been an amazing partner. That led to the commercial, tiktoks, he did over 100 commercials with us. Jonathan free marketing. How many people are doing date night at applebees . John we just had our date night event where we had a coupon available for 200 that enabled you to eat at applebees every week for 52 weeks is a 15 discount. We made that available at midnight a few weeks ago and it sold out in a minute. Some commentaries said we broke the internet. Not quite that. We added server capacity, we added customer support. Our sites might have slowed but it was so popular we did it again and valentines day. 1000 date night passes. Lisa what are you seeing with respect to where people are coming from . Is it the same crowd that has content applebees, or do you see people that might have gone elsewhere, may be more expensive coming to applebees are going to i hop for an omelette that is very fluffy . John a couple of insights about the consumer. We get asked that question a lot. Her people trading in or out of the category . Quarter to quarter we will see people in at a higher income level, a few people at a lower income level. Over time it is fairly consistent. Our gas from a demographic perspective our guest from a demographic perspective earns 50,000 to 75,000 a year. Our guests are families with children, older couples that have retired and tie hop every day for breakfast. What we see from a Consumer Behavior standpoint is throughout 2023. You see from our data they are eating out one or two times fewer per quarter than they did before. When they make their choices they are looking for full service dining. Prices are up almost 20 in restaurants versus 2019. If youre going out to eat once they find us once they find us they are very value focused. The percentage of our tickets taking advantage of our limited time offers and the value portion of our menus are up from where it was before. Lisa how do you maintain margins at a time we keep talking about the fact that people are demanding higher pay, there is a question about worker retention. There is a question about the input prices of a lot of food. John pier 1 hundred percent franchised so the impact of labor costs affects our franchisees. We are doing everything we can to drive the topline through creative promotions and value offerings and we work with them on reengineering the bottom line. Last year, working with our franchisees took out 50 million in costs and focused on things sustainable and repeatable. Technology process improvement. One example is we are putting in automated beer dispensers which saves hundreds of thousands of gallons of beer a year by having more accurate pores and less waste. That is why we are trying to automate things and help them manage their costs. Annmarie yesterday wendys received a ton of blowback when they said they would do dynamic pricings. They said they would not do that in busy hours. Could you see yourself doing that, mixed prices based on peak and offpeak hours . John i come from the hotel industry. As you know with airlines and hotels, no two people pay the same price for the same hotel room or the same ticket depending on what channel they purchased it, when they purchased it. We have looked at it for restaurants but we do not think it applies to us or our customers at this time. Jonathan clear hearing the word price gouging a lot in washington, d. C. How difficult is it to bring prices down to where they were a few years ago . John it is difficult to bring prices back down when labor costs have escalated and labor is sticky. The cost of goods and food into the restaurants has stabilized. We are predicting deflation and the cost of goods into the restaurants for applebees in 2024. Flap to plus one for i hop. When you translate that to pricing, it is our franchisees who make the pricing decisions, typically, pre2019, everything is pre2019 these days, our franchisees raise prices 2 to 3 year. These years it has been more in 5 or 8 . What we see with the stabilizing of labor and cost of goods, we think they are back on a path to that 2 to 3 over the next couple of years. Lisa i want to talk about the automatic beer dispenser, not because im actually interested, but it highlights the amount. We talk about eat a little bit less is one way to manage. John it is not a little bit less, it is inaccurate for. Lisa you can just make an accurate pour of little bit last. How much of that is going on along the margins . John never ever. Our definition of value is great food and accessible price. Applebees and i hop and now fuzzies, applebees and ihop have been around 50 and 65 years and have cemented their reputation as the value oriented brand in both their categories. I am a former chief marketing officer and i am talking about brands, people go to brands they know and they trust. You can trust applebees and i hop will always have an abundant portion. Jonathan a point should be a pint. I am talking english measures. John a pint is always warm which ive never understood. Lisa in europe they have lines on all of the wineglasses. Jonathan i have saved this for the end of the conversation. This will sound rude. I am just blunt. How dependent are you on 40 of this country remaining obese . What happens of ozempic does something about it, what happens to this organization . John the response to that is our menu has something for everyone. If you went to i hop years ago it did not have proteinbased, it did not have egg white omelettes, it did not have glutenfree pancakes. The same is true applebees. What is important for us is the no matter what the dietary orientation is of someone in that family is we have something for everybody. Lisa right now are you factoring any kind of shift for that type of change given the fact there is a rapid adoption for these weight loss medications . Jonathan way of john we have not seen impact on our business. Our focus is on the menu and ensuring that whether you or any of the three brands there is something for anyone depending on how they eat. Annmarie because of this craze feel you are pushed more into being healthier on your menu . John that push proceeded ozempic. The way americans eat has been journeying slowly towards more Healthy Eating over time. Annmarie have the portions changed . John are portions have been the same. It is more about what we are offering. Lisa one more question about technology investments. Do you think we will always have service in the form of a human . John i do. I use the phrase that we are not a Technology Company that happens to serve food, we are a food company that embraces technology. For example at ihop we have just rolled out a new pos across the whole system. With it came handhelds for all of our servers. Our servers love it because they are turning tables faster, they are making more tips. Our franchisees love it because we are turning tables faster. We are also raising the check because servers are attaching beverages more often. Sometimes you forget to put the soda on the check when you are busy. It is Technology Like that we are using to enable the experiences. We are also using guests via our app, they can do that. It is more about how they want to interact with us. Jonathan this was great. I promise to never share the secret ingredient in the omelette. John i have no idea what youre talking about. Jonathan john peyton. This was great. Heres your bloomberg brief with dani burger. Dani the u. S. Labor department caused confusion and senate email about rental inflation. The message was to super users and suggested a surge of singlefamily detached home inflation caused by adjustments to some components. The pop in owners equivalent rent was a large factor behind the strength of january cpi. Bls is looking into the data. Shares of paramount up in the premarket. It predicted to give good Earnings Growth this year. Investors overlooked a 6 sales drop with traditional tv ad revenue falling. Paramount says its streaming service will be profitable domestically next year. Apple resellers in china are slicing the price of iphone fifteens. It is an unusually long slump in demand. It is the weakest performance in years due to economic difficulty and while way competition. In january apple offered a rare price cut on their website. Jonathan not looking good. Up next, Corporate Credit in focus. Credit spreads are so incredibly tight. Not just investmentgrade but highyield as well. That is a canary in the coal mine for me. Jonathan that conversation is up next. Live from new york, this is bloomberg. How am i going to find a doctor when im hallucinating . What about zocdoc . So many options. Yeah, and dr. Xichun even takes your sketchy insurance. Xichun, xichun, xichun youve got more options than you know. Book now. Get your Business Online in minutes with the power of ai. With a perfect name, a great logo, and a beautiful website. Just start with a domain, a few clicks, and youre in business. Make now the future at godaddy. Com airo get help reaching your goals with j. P. Morgan wealth plan, a digital money coach in the chase mobile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan Wealth Management. Jonathan Economic Data 42 minutes away. Equity futures negative one third of 1 . Higher on treasury yields four basis points. Under surveillance, a record month for bond supply. We have to watch credit spreads. They are so tight. Not just investmentgrade but highyield as well. That is a canary in the coal mine for me. When we will start to see those white announced. Jonathan u. S. Corporate bond sales setting a record of 172 billion dollars as falling yields drive investors towards debt co. s take advantage of Lower Borrowing costs. Winnie cisar writing we are still positive on the longterm outlook for Corporate Credit. We have been surprised by the relative resilience of credit spreads in both ig and highyield during this most during this move higher in rates. Winnie cisar joins us. How tight are things on a multidecade basis . Winnie things are very tight but there are caveats to that. We still have wide ccc distress spreads in the market. The higher parts of the market are trading through the 2021 we had at the height of pandemic fueled liquidity. In the investmentgrade market we are trending towards those mid 2000s type. You still have financials lagging and that is what needs to get giddy up. Jonathan there is scope for the spreads to get tighter . Winnie there is scope. We have been cautious on that. We feel like this year is almost repeat of last year. We had goldilocks data and surprises to the upside, yields moving higher, credit spreads tightening, and then something happens. There is always something that happens. The big catalyst was the fed being more hawkish at the january meeting. That has manifested and yet credit spreads are super resilient. That speaks to the technical backdrop where investors have been under allocating credit risk and now theyre having to play catchup. Lisa the yield has basically flatlined around 7. 9 . Spreads are offsetting some of the fluctuations we are seeing. How much would be a negative for spreads . Spreads widening, if you get rate cuts, if you get indication the economy is weakening. How much is this correlating to the strength we have seen in the economy. Winnie that is a great point. The fed is threading the needle. If you have dramatic rate cuts because the fed is chasing inflation lower or deep nation and we go from 5. 5 to 2. 5 on fed funds. I think we can assume highyield spreads will widen. There would be cash coming out of the front end. Lisa this raises the question of refinancing risk, whether this economy is fine with 5. 5 benchmark rates. These rates are not too high to restrict growth and inflation. Is this a problem come a default risk for companies borrowing at these new higher rates . Winnie it is a problem for some companies. We have had this distressed cohort in the highyield market. About 10 of the market has traded at this distressed level, indicating the market is saying enough is enough, your Capital Structures are not sustainable and we are not lending to you. That number has not moved much over the past 12 months even though spreads have tightened considerably. You also have private credit markers moving into the credit market because there is higher demand. Investors are pretty constructive on the lower rated parts of the market. Lisa is this the zombie washout. Youll see the ones that will not work out, something weve been talking about for the last 20 years . Winnie i did not they we get a fullfledged zombie washout. There is too much liquidity. Jonathan you have disappointed lisa now. Winnie it takes a long time for the zombies to get killed. Lisa more than a decade. [laughter] winnie we have these waves of energy, telecom and media. They are the new zombies but it is taking a long time because theres so much cash in the system. People need to put the dollars to work. The new mantra is stay alive until 2025. What is interesting to me is the zombies are thriving. Some of them. The cruise lines. We talked about the cruise lines been zombies in spring 2020. Look at them now. Last year some of the top performers on the s p 500. Lisa look at the icon of the seas drawing in thousands of people. It is the reason people have so much spending power. Jonathan 40 c difficulties . Where do you see difficulties . Could they see widening based on the struggles we have identified . Winnie we have been positive on financials. The reality is that will take a while for spreads to recover. People do not have a good handle on what the new issuance requirements mean for valuations. People do not have a good handle on cre exposure and asset impairments. These things take a long time to work through. Lisa are we seeing jonathan are we seeing much fragmentation dispersal based on cre . Winnie . Based on cre but big bank versus the bank. Jonathan regional still struggling . Winnie not struggling but not tightening to the level they were before. They used to trade inside all of the g cvis. People would be buying the suntrust in the truest. Jonathan regional banks used to trade inside large banks. Massive change in the last 12 months. Winnie yes. Lisa they used to be the ones who sold less debt than the big guys. Now the big guys can do no wrong. Jonathan you always see the monsters come out and do massive bond issuance. Lisa we still see that but people are willing to suck it up because theres nothing else that is been sold. Jonathan winnie, this was great. Winnie cisar. Interesting to see how tight credit spreads are. Lisa this is commensurate with his idea of a hawkish fed. This is a fed that sees a strongerthanexpected economy then you have investmentgrade buyers and higher bond buyers that can lock in 7. 9 returns over the next three to five years. Not so bad, not so shabby. That is what people are looking at in the recent things of contents. Jonathan pretty impressive. Bramo has been waiting four years for this zombie. Youve been writing about it for more than a decade. Lisa wrong every time. Jonathan coming up, emily roland, neil dutta come in bloombergs ira jersey. Fantastic lineup. Pce data 34 minutes away. Looking around corners warning people about downside risk. You have to consider this. Lisa have already got messaged, what should i consider now, the shutdown is not happening, what is next . Jonathan there is always something to worry about. From new york, this is bloomberg. Is it possible to count on my internet like my Customers Count on me . It is with comcast business. Keeping you up and running with our 99. 9 network reliability. And security that helps outsmart threats to your data. Moaire dida twoo . Your data, too. Theres even roundtheclock customer support. So you can be there for your customers. With comcast business, reliability isnt just possible. Its happening. Get started for 49 a month. Plus, ask how to get up to a 800 prepaid card with a qualifying gig bundle. Dont wait, call today inflation is not really in a last mile mode on its way to 2 . The inflation data is going to get much more bumpy. The data can switch quite rapidly, which in turn can have a rapid effect on financial conditions. The fed is beginning to open the door for a change in policy. This is bloomberg surveillance. Jonathan inflation data 30 minutes away. Live from new york city this morning, good morning, good morning. The third hour of bloomberg surveillance starts now. We have had upside surprises. Lisa this is going to be a key driver if we get three for three in terms of hotter than expected inflation prints. Does that do to Market Expectations . Not only fed rate cuts, but also in general . Jonathan everyone seems to be really relaxed around the fed call now. Cuts are not urgently needed. We have priced out the timing of that cut, we have reduce the magnitude of them for this year. What is left . Lisa do you start thinking about the jim beyonca view of the world, which is that rates have to be higher for a substantial period of time . I dont hear anybody else talking about that. I just here momo, fomo, or oh no. Jonathan that is your favorite line, isnt it . What is it . Lisa he is basically talking about the momentum rally. Jonathan thank you for that. Super helpful. This about the data. After this morning after a 35 all we are going to be talking about is next friday and the payrolls data. We have joked that the next payrolls report is the next important run since the last one and before the next one. This is super important. January was a mega blowout monster upside surprise jobs report. If you get a repeat then never mind pushing down rate cuts, maybe jim beyonca its a few more phone calls, because we are talking about the possibility they need to do more. Lisa for they need to not cut it all. And how does that affect risk assets . Because all of a sudden people have to reset if this is truly the new normal. And you have to think about, this is the new reality and this is survival. Jonathan i will give you a sneak peek of next week. Median estimate, 180,000. The Unemployment Rate is expected to stick at 3. 7 . Citis demand just dropped. Annmarie the Unemployment Rate is going to be key because this administration loves to talk about the past two years unemployment has been at 4 or below. This is something huge they want to run on. If you have consumers thinking inflation is still hard for me, not seeing the prices i was prepandemic, i know its coming down, but it is the rate coming down, not the prices i remember, they need that strong jobs numbers. They are concerned about their prospects for jobs, which they were not in the past. Lisa im so frustrated with this data. It is always so confusing because people say you see cr acks. You could see that with just anecdotes. And then the data, strong, strong, strong. It never falters, so what data are we looking at and how do we understand the fact that the data is not reflecting any of the anecdotes we hear every day . Annmarie but sometimes depending on who it was that lost the job and where the job was and what caliber they may not be able to apply for some of these claims or apply for job insurance. It potentially could be a bifurcation, who is using what jobs . Look at ups. They showed up this huge deal for Union Workers but they lost some people in the backend. Jonathan sometimes i want to applaud brammo. This round was better than the last round, and that came 30 minutes in the program. Lets get you set up for the next 60 minutes or so. Yields a little bit higher, up by four basis points. Euro a Little League a little weaker. Coming up through the hour, emily roland on the road ahead. Ira jersey pushing ahead to key inflation figures and responding to them. Neil dutta breaking down the data and potential market implications. We begin with our top story, wall street racing for the feds preferred inflation gauge. Emily roland saying this. It is like the fed gave the last call of the party to end last year him and now it is time to stop serving. But no one is leaving. It is frustrating when that happens, right . This sentiment is likely priced into markets. Millie, why arent people leaving . Emily im sure you guys dont ever remember staying too late at the party. I have to go back in the vault for this analogy, but it is unbelievable. We talked about the pivot Party Last Year and the fact everybody was invited to it, especially after we saw that. 1 cpi mass, and a more dovish powell come out in the november and december meetings and we were off to the races. The fed has pulled back on that. Talked about some of the speakers we have heard from over the course of this week im a but markets do not seem to care all that much. They are fighting the fed and winning, and especially the fact we are seeing the riskiest parts of the market, the momentum trade, it is all the same thing, right . So, risk is really the name of the game today, even though the fed is pulling back from this messaging. Again, the pce report is going to be critical to see if there is a challenge to that narrative and maybe people start to exit. Jonathan lets talk about the price of the story. We have been told repeatedly we are priced for perfection. We have continued rallying. We have had a 9 move in china, an 8 move in japan. It has gone global. Emily it is unbelievable. Valuations have not meant much to this market. We are trading at over 40 times forward earnings on the s p 500. It is amazing to see the poor Economic Data coming, especially in europe. Meanwhile we have these markets at record highs. Momentum sentiment is driving this market higher and it is pretty hard to find at this point. Lisa so are you leaving the party . Emily we are not. But we are sort of sipping on a coors light instead of reaching for the tequila right now. It is about embracing quality, looking for companies that have great balance sheets. Too many drinking analogies . Companies with great balance sheets. Tons of cash. A limited need to tap the Capital Markets in order to grow. Of course the poster child for quality is mega cap attack. We still like mega cap tech. We need to think about diversifying away from that, given the fact that tech is trading at about a 40 premium. We are looking at midcap equities which are trading at a one standard deviation cheat to their longterm average. They are trading at the cheapest level to largecap since 1999. We talked about the benefits of on shoring and how that is impacting that space. An area that is benefiting from fiscal spending that we are still doing. One reason that the soft landing narrative continues to play out here is because we are pumping about 2 trillion into the economy at a time where it is growing 3 . This is pretty wild. Lisa lets talk about the anatomy of this party. He had jay powell basically endorse the idea of cutting rates. People have gone to the races with that. What is to say this party will be stopped, even if they cut rates fewer times than expected . What would it take . How high is the threshold at a time where the fundamentals, people keep saying to us look pretty good . Emily there is a dark side to this improvement we have seen in Economic Growth and this modest acceleration in inflation, which is that the longer rates stay elevated the more likely it is we have some type of financial accident or something breaks, or even that it starts to put more stress on the economy. The good news for the economy is translating it to this potential bad news on the rate front. Maybe it takes a while to get there. We are still living in this late cycle environment, but ultimately higher rates should tip us into contraction. It is hard to see any signs of that right now. Lisa given that, and this is something we were waiting for at the outset, how much are we looking at a gym bianco jim bianco scenario . Emily it is becoming increasingly likely that we have no right cap to share. Our base case is that three cuts look good, given the level of inflation. But if the party keeps going and Economic Growth continues to reaccelerate globally maybe none. Jonathan what evidence is there that higher rates are hurting this economy . Emily it is all anecdotal. I had a chat with my stepdaughter, who is in her early 20s about credit cards. Im talking to her and saying, credit card rates are 30 , you want to be careful. By the way, you can earn income as a bondholder. She was like, what . [laughter] it is thinking anecdotally about how it is impacting the consumer. Or you wake up in the morning and there are more layoff announcements. But it is not translating into the hard data yet. Take a look at initial claims. We were heavily advised revised in 2008. I think there is one keenness to the data here as we kind of think about it. We have to take it with a grain of salt. Annmarie what about delinquencies . We are seeing them rise. Emily we are seeing a lot of use of by now, pay later. They are using leverage in order to continue spending. I dont think it is a dire situation for the consumer as long as everybody still has a job and feels fairly confident about the labor market they are going to continue to spend. But the leverage is there. I think it is a concern. Jonathan how difficult is it to get a 22yearold to buy bonds . Emily that generation is actually pretty conservative, believe it or not. Jonathan meme stocks, bitcoin . Lisa that is my 14yearold. He wants to buy an nft. Jonathan what is that conservatism come from . Emily annmarie they do this thing called loud budgeting. They go on tiktok and explain to their friends what their budget is going to be and their friends hold them accountable. Jonathan that is actually happening . Lisa not in my house. Jonathan emily, you are sticking with us, i hope . Emily is sticking with us. He was your bloomberg brief with dani burger. Dani the sec is investigating whether openai misled investors last fall. The wall street journal is reporting that regulators are looking at internal comms by sam altman relating to his ouster in november. Sources say the sec subpoenaed openai, asking senior staff to them to preserve internal documents. Openais board chair says the company will continue to drink and governance. Weight watchers shares following after Oprah Winfrey said she would leave the board. The stock would be trading at a record low. Weight watchers is trying to stay relevant in the ozempic era. Oprah winfrey says she will work with the company and elevating the conversation around obese is obesity. She has served on the board since 2025. Republicans in the senate have to decide how loyal they want the next leader to be donald trump. Mitch mcconnell is stepping away from the leadership position after novembers election. Is most likely successors are known as the three johns. Jon thune, john cornyn, and John Barrasso. Unlike mcconnell, all three have endorsed President Trump. That is your bloomberg brief. Jonathan lets pull up ww again. 25 is unreal, isnt it . Lisa this is the other part of the story. It was reported in december she is taking a weight loss drug as a maintenance tool, and basically said, im done with the shaming. It raises this existential question of meal planning and these other types of tools if the poster child is also using the weight loss drugs. Jonathan what is a maintenance tool . Lisa to maintain your weight lower. Im not sure. Annmarie i think it is either exercise or ozempic. Jonathan sort of microdosing ozempic, is that it . Lisa Oprah Winfrey, we welcome you to join us to talk about it and the trends you see coming. Jonathan and about losing weight. Lisa and the use of medication as a maintenance tool. Jonathan counting down to the data point of the week. Lisa you are disgusted with me. It is fantastic. It looks like the market got ahead of itself. It said, this is over, lets throw in the towel, rates are going to go lower, time to buy yields. Jonathan you just walk 30 minutes a day on an incline on a treadmill. It is the secret weapon. Incline, 30 minute walk. [laughter] high taxes can erode returns quickly, so you need a taxoptimized portfolio. At creative planning, our Money Managers and specialists Work Together to make sure your portfolio and wealth are managed in a taxefficient manner. Its what you keep that really matters. Why not give your wealth a second look . Book your free meeting today at creativeplanning. Com. Creative planning a richer way to wealth. J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. Jonathan a lot of controversial points in the last 20 minutes. Perhaps the most controversial, coors light, quality beer. Respond. Discuss. Equities right now, negative. 3 on the s p 500. Yields up by four or five basis points. Counting down to the data point of the week. What has happened in the bond market is a looks like the market got ahead of itself. It said this is over, lets throw in the towel, rates are going to go lower, time to buy yields. What has happened is we are not there yet, and thus we have seen a very Strong Movement in yields upward, which is consistent with this idea that the market went too far and got too excited. Jonathan here is the latest. The pce deflator just moments away. The stage is set for the data to jump. Bloombergs ira jersey joins us now. What are you expecting in 12 minutes time . Ira youre expecting. 3 , but we are going to be looking at a lot of details. Wheres the inflation being generated from . And of course some of the Core Measures the Federal Reserve will be keying in on very closely. So, we get a. 4 and we are probably off to the races, looking at 4. 5 on 10year yields pretty quickly. Jonathan we have priced out rate cuts pretty quickly as well. How much space is there to continue on doing that . Ira i think its possible. More importantly, even away from whether the fed is going to cut rates the options market, when you look at options on shortterm Interest Rate contracts are actually pricing for some chance of a hike this year. That is a massive seachange. It wasnt long ago we were pricing for six Interest Rate cuts with zero chance of any hike, and actually almost a zero chance of one hike one cut, rather. The fact that we are starting to think that maybe the economy is going to be Strong Enough and inflation high enough that the fed might have to not only pivot to know cuts, but actually be thinking about hiking is a really big seachange. Right now it is mostly tail risk hedging, but at the same time that has had significant effects on the front end of the market. So you look at where 2year yields are, to you yields getting back to 5 when not take much. Pressing in one more cut would lead us back to 5 on 2year yields. Lisa i want to sit on what you just said. 4. 5 is seeable if we do get a hotter than expected core pce print. Can you talk about what that means with respect to positioning and whether you see the selloff potential as greater in the long end . Ira that is an interesting question because of because a lot of the positioning data we have seen is closer than was. You look at some of the survey data, of Portfolio Managers who manage Duration Risk and they are short. So, while we think that this very tight range look, in the last three weeks or so we have only been in a 14basis point range. We havent seen that for the better part of about since 2021. So, with that type of tight range of means there is going to be a lot of people with stops and people who are longer going to stop themselves out, probably when we get above 4. 35. At that point i suspect you will have some short covering. You will have people saying 4. 35 is an interesting place to get into the market. That is an important stopping point. It is also on the technical chart, someone of our market technicians here helped me with a note that came out this morning, looking at that 4. 51 is a very interesting target. Above that you are talking about getting back to 5 on 10year yields. Jonathan that is very specific. Thanks for that. Appreciate your time. Ira jersey on the bond market. 4. 31 is where we are right now. On a twoyear the prospect of maybe getting back to 5 . Emily roland back with us. Lets talk about that, the prospect of going back. You think the equity market can keep looking past that . Emily i think that would create a challenge for stocks. There has been such a tight correlation until recently with rates and equity markets, and i think you are going to start to see that challenge. Talk about 5 . I dont think stocks would like that much. There are some parts of the market that would do fine. Again, Higher Quality is an area that can survive that, but you really want to think about leaning into fixed income and an environment and grab a hold of those yields. Jonathan what has insulated equity so far . What has been working . Emily it is just sentiment. It is incredible just to see the parts of the market, like we talked about earlier, that have done so well looking at things like bitcoin and unprofitable companies. There is kind of an everything is awesome mentality permeating the market on hopes of this not only soft landing, but no landing, which is not really a thing. Or we would never have Economic Cycles. I think we need to remember that Economic Cycle analysis does matter, it just doesnt exist today. Lisa i want to go back to what you said. That you think you could see quality hang in there. This raises a conundrum for big tech because that has been the quality and earnings, and yet a lot of people say those valuations are so inflated because of rate cuts being baked in. How vulnerable do you think they are if they are both quality, but also a little elevated . Emily i think the entire market would be vulnerable, but we have to look for those pockets that may be more insulated. There is a challenge there and i think we are past the point of reasonable, especially on a few of those mega cap names. That is a reason we think diversifying into areas that are cheap which, by the way, the rest of the market is pretty cheap. It is falling off a lower part of the staircase rather than from the top. Jonathan six minutes away from that Economic Data. Mike mckee, lets talk about it. What you looking for . Mike we are looking for a slight increase, but for slightly different reason. That may play into what happens. It is interesting one ira said about the market going up, at least bond yields going up if we see a bad print, because that could help ring inflation down. One of the funny things about the pce numbers is that they are influenced heavily by trading on wall street. Portfolio management rose 5 in the last pce number. Because there has been so much trading, and wall street is making a lot of money. I call it the pogo problem. We have met the enemy and he is us. Lisa we have about five minutes and 15 seconds. Emily, are you trading on this number . Emily no, we dont think about things on a shortterm basis like that. Over a longerterm basis we are positioned you will know we have been leaning into bonds. Every backup will be an opportunity to grab hold of that income. Even if we see some chop in rates over the next couple of months i think the fact that we now have income in bonds and we can kind of add that back in, even if there is a potential challenge on the duration front, to us that makes the asset class very attractive. Jonathan love this. It is good to see him in person, which i think is the first time in a long time. We caught up with each other every month for four years i cant remember the last time i have seen you. It is great to see. In millie roland. Michael mckee is going to be sticking with us. Going into all of that, equity futures on the s p 500 shaping up as follows. The s p 500 negative by point 1 . 1 . Neil dutta breaking it down too. That is next. This is bloomberg. Jonathan Economic Data, 20 seconds away. Michael mckee is going to break that down. Neil dutta is going to respond. The scores look like this on the s p 500. Equity futures down. 3 on the s p. In the bond markets, 2year yields higher by five basis points. Just short of 4. 70. With your Economic Data, here is mike mckee. Mike anyone want to know what is happening with pce . Computers are being attacked by wall street, but jobless claims move a little bit. 215,000. It was two last week in the revised numbers. Here come the income and spending numbers. Income up 1 , significantly higher than anticipated. It was a. 4 gain anticipated by economists. Spending comes in as anticipated. Now the numbers everyone has been waiting for. Winners are pce deflator up. 3 as forecast. The yearoveryear up 2. 4 , which is basically just math. That is no surprise. The court comes in as forecast. Doubled last month at. 4 and the core deflator is up 2. 8 , which is going to be a little bit of good news. It was what was forecast, but there was some fear he would get pushed up to 2. 9 , same as last month. I can tell you the core for last month was revised down to. 1 percent. It does look like we are seeing a little bit less of the bad inflation news that we saw in the cpi, but we will have to take it apart to get the full data. Jonathan i can tell you so far the winners are economists on wall street. In line with estimates. Equity futures totally unchanged on the s p. We reflect a little higher on the nasdaq, now higher by. 2 . In the bond market yields were higher by four or five basis points, now up by just a single basis point on a twoyear. In Foreign Exchange the euro is stronger, the dollar a little bit weaker. Lisa im looking at some of these numbers and i have to say that they are all pretty much in line except for one, and that is personal income. That comes in with the biggest gain since january 20 23. You either dismiss this as a relevant or a fat finger, or you start to say, people are earning the money to keep spending and that can keep this going for a longer period of time. To me that is interesting. Jonathan you just turn to mike mckee and say, mike mckee, what on earth was that . Mike we have to look, and i havent gotten the breakdown of income yet, but we have seen fairly strong wages. That is what im trying to figure out here, is where is this coming from . It is also january when we get usually some additional transfer payments from the government into peoples bank accounts. So, that may be it. Give me just a second. Jonathan you take a beat. I know neil dutta is itching to get into the conversation. What have you seen, neil . Give me something. Neil i wouldnt be surprised if there was some upward momentum behind Dividend Income and were the month over the month. Didnt meta, wasnt that a shock that they announced a big Dividend Payment . May be that showed up in dividends, which drove the gain in income . Lisa this is what we were hearing from mike, that traders are skewing some of these types of numbers ok, you look skeptical, but basically changing the scenario because of the earnings you get on wall street is not typically what people think of when they think of income going to a job in getting a wage game. Doesnt matter from an Economic Perspective . Neil i think there is a lower propensity to spend stockmarket wealth than wages and salaries, but, you know, the numbers are what they are, and to me what is important is that disposable incomes, transfers are moving up and to the right, and that very much mitigates the risk of recession. Mike we do have a winner. I have the numbers on personal income now. He hit the nail on the head. Dividend income up four point 1 in january. It had fallen. 2 in december, so a big swing there. Wages and salaries up. 4 . That is lower than the. 5 percent in december. And also transfer payments up 2. 6 . I finished second. [laughter] neil i want a stuffed bull. [laughter] jonathan consensus wins this morning, with the exception of personal income. You wrote that consensus needs to wake up. Why do you think consensus needs to wake up . On what specifically . Jonathan in neil in my view the consensus continues to revise up growth. If you look at the Bloomberg News consensus i think gdp expectations have been moving up over the last number of months. The data has generally been better. But i do think there is a lot of currency in the long and variable lag idea. When you look at mark to mark the first quarter, there is still a big slowdown expected in the next quarter. This idea that any day it is going to kick in and there is going to be this weakness, i think there is only so long you can keep doing that. That is why i think the consensus has been perpetually surprised to the upside. We are seeing an upturn in cyclical manufacturing, so i think it is unlikely that growth is going to slowdown meaningfully between now and the Second Quarter but think what the consensus has lost sight of his inflation. Yes, january was a setback, but to be the overall story is still the same, which is we have a period of disinflation in front of us. When a look at things like the employment cost index the inflationary impulse from the markets are fading and we know that productivity is picking up. Labor costs have come under some control. To me that kind of sets the table for the direction of inflation. So, january was a bad month, but talk to me in the spring. I wouldnt be surprised to see things like core inflation come in weaker than expected. Jonathan you said last year the Federal Reserve started echoing the view the labor market is no longer a reason for the fed to be hawkish. What do you think is holding them back from reducing Interest Rates . What you think they are concerned about . Neil part of me thinks they were surprised at how quickly inflation was falling in the back half of last year. She told someone sixmonth annualized inflation would be below 2 , if you told him that last year there would be surprised, but that is what happened. I almost feel like they didnt set the table to kind of communicate march, and i think prickly, even the last statement, it is basically a hodgepodge of language to get some of the hawks on board to lay the groundwork for cut. So, my sense is that the may probabilities in the market are underpriced. I think the markets, as i look at them, 10 , 15 chance for may cut, i think as the inflation data come in over the spring or march, april, those probabilities may arise. Lisa so you can hold your stuffed animal and im going to hold the bear stuffed animal for a second. Neil shocking. Lisa i know. I hear you talking about disinflation and how it was a blip, but how much of this is commodity driven . How much of this is that people are not shelling out more when they go to a restaurant and get omelettes with some secret ingredient checkup there is this feeling that there is some sort of sustainability. How do you not see that coming to the four if we get higher gasoline prices . Neil it is interesting you mention higher gasoline prices. Natural gas prices are down substantially, and that is going to bleed into household utility bills too. We know that Agricultural Commodity prices are down. You are probably going to mention chocolate, but when you look at the broad range of Agricultural Commodities they are down. And that is going to bleed into what people pay at the grocery stores. I think whenever you have things like this it is important to go back to first principles, right . Do we know . Inflation expectations are down. The data came out yesterday. 12 Month Inflation Expectations are down. Short run expectations for businesses are down. And ultimately compensation growth equals inflation and productivity. If compensation is running for percent and productivity is running 2 , we are there. That is sort of how i am thinking about it. Lisa you also sent out an email saying Everybody Needs to wake up because this is a good economy and Everybody Needs to get on board. It looks like everybody is on board. How much more can you lean in after what we have seen . Neil in my experience momentum is an important driver of equity markets. People talk about valuation and things like that, but there is, you know, no safety in low multiples, and valuation is a better a very poor timing tool. If everyone is saying it has gone up a lot means it cannot go up a lot. In my experience it means it can keep going up. Jonathan are you may guy then . Neil im on the side that inflation is still slowing and probably slowing more than the consensus thanks, so that leaves me in a position where i believe they will go sooner. Things could be sloppy. There could be some residual seasonality, that it is about first principles. Inflation expectations, if you survey households they are going down. As i mentioned, the labor markets are much more balanced. I think those two things give me confidence that a lot of this setback we have seen on inflation after several months where it has come in better is probably temporary. Jonathan do you think we see they drop rates but the long. Has to come up . Neil i think if the economy is growing the way i think it is the likelihood is all you can expect is a recalibration of policy, and, you know, one way they could potentially signal that neutral is higher is by taking away some of the cuts they have in place in 2025. Lisa lets talk about chocolate. It was a businessweek story about how chocolate makers are using less chocolate. Part of this is droughts and things of that nature, but there is also a question of policy. In certain ways people want to jonathan potentially it is european policy. Lisa i wanted to bring a policy and how that is going to factor into this inflationary outlook if we start getting tariffs, if we start getting protectionism, if we start saying that chinese auto manufacturers cannot come here. Does that factor into inflation for you . Neil it does, but think about what would happen if they started announcing a lot of tariffs, right . Would that be inflationary . Yes, but it would also be negative for growth. You would see if see financial conditions tightening because the stock market would drop. Saw the play out in the previous administration. Tariffs are inflationary. What did the fed and up doing . They offset. Annmarie what are your domestic and geopolitical concerns . Neil im not a geopolitical person. I take that as a given. Its something everyone always talks about when the economy is going well. Annmarie there is two hot wars, though, and we have the who sees houthis regularly hitting vessels in the red sea. Neil at the same time corporate Profit Margins are higher, so the fact that supply chain disruptions have gone up potentially, it could lead to a situation where maybe firms are more willing to not pass those prices on because their margins are somewhat higher. It is not the same situation was a year, year and a half ago. I think in the aggregate supply chains are in a much better place. You know, everyone kind of knows me. I do think there are risks, but things have a way of working themselves out. Jonathan and they often do. It is good to see you. Neil dutta breaking that down for you. Online is the new eat when it comes to inflation. New beat when it comes to inflation. Just to give you a flavor of the bond market, yields are up at the front end by four or five basis points, now positive just two. If you are looking at Foreign Exchange, the dollar a touch weaker. That currency pair negative by. 006 . Lets get you an update on stories elsewhere. Here is your bloomberg brief with dani burger. Dani shares of paramount are up. The company predicted significant Earnings Growth this year. It helped investors overlook a 6 sales drop. There is shrinking ad revenue on traditional tv channels. The company said subscriber growth Beat Estimates on its paramount plus streaming service, which it does expect to be profitable domestically next year. An illinois judge has barred donald trump from appearing on the primary ballot. It is the third state. He has until friday to appeal and is already peeling a similar ruling from colorado before the u. S. Supreme court. Another partial Government Shutdown is a step closer to being averted. Congressional leaders struck a deal to provide one more week of funding after the saturday deadline. He keeps parts of the government funded through the end of september, but other agencies, including the defense and Homeland Security departments, would still face a shut down deadline of march 23. Speaker mike johnson plans to bring a oneweek extension to the house for today. That is your bloomberg brief. Jonathan theyre coming after the chocolate. Did you see that . They just want you to be miserable. Lisa the fact that they are using less chocolate in recipes at mars, what are you buying . Jonathan they are coming after the chocolate. Up next, President Biden turning up the pressure on chinese evs. When you look at the intense price competition, that is not sustainable for any company. We are positioning for where gm has to be to compete in a very different market. Jonathan we will talk about that very different market next. Live from new york, this is bloomberg. When im not selling hot dogs, i invest in a fund that advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Jonathan in line is the new beat on wall street, that is for sure. Pce coming in at. 4 . Equities up a third of 1 on the s p 500. Our performance on the russell, the small caps. Greatsensitive. Lets look at rates. In the bond market treasuries, yields were higher by four or five basis points on the front and. Now two points on the twoyear. On a 10 year, unchanged. Under surveillance this morning, President Biden turning up the pressure on chinese ev. When you look at the intense price competition in china that is not sustainable for any company. We are positioning for where gm has to be to compete in a very different market. You do need a level Playing Field. I believe in our portfolio if there is truly a level Playing Field we have a strong portfolio and we are going to do well. Jonathan the Biden Administration calling for an investigation into chinese evs. President biden saying, china is determined to dominate the future of the auto market, including by using unfair practices. Chinas policies could flood our market, posing risks to our National Security. Im not going to let that happen on my watch. Craig trudell joins us. We have tariffs already, 25 percent on chinese evs. What next . Where are they going with this . Craig i think what we are learning is that there is no losing in washington will right now in terms of the race to be hawkish on china. It is the one thing that is sort of dividing everybody in washington, and i do think that the fact that the chinese have come on so strong in the last few years, where, you know, the dwight d surpassed tesla as the biggest ev maker last quarter, you know, we have seen china overtake japan as the worlds biggest car exporter last year, i think the amount of fear both here and in europe and in the u. S. About this threat that the chinese pose, whether it is to the u. S. Car industry, germany, france, everybody is concerned about this and sensitive to it. I dont think this will necessarily be a rare occurrence in the months and years to come. Jonathan defined threat. To the economy, National Champions of this sector, or National Security . Which is it . Craig i think maybe all of the above. Even elon musk, who is never one to shy away from talking big game is just in the last few weeks talking about this idea that, you know, the chinese are their most intense in serious competition, and elon musk talking about the idea that unless trade barriers are put up that the chinese will beat up on the rest of the industry. I think he would like to think that tesla is very much primed to compete, and i think of course on a global stage tesla is still very high up there in terms of leadership, but even ford recently talked about the amount of market share that each of these companies have at risk as a result of the fact that the chinese are just so much better on costs and so much out in front of the rest of the world in terms of lowering battery prices and being able to offer evs that are actually price competitive relative to Combustion Engine cars. Annmarie we see china trying to make an inroad in mexico. Is there a way they can circumvent what the u. S. Has on the books now . Craig i think that might be a big part of why we are seeing this latest action that was formally announced this morning, is basically trying to slam that back door shut. To the extent that was potentially a path a company like byd was looking out for them to get around tariffs on chinese imports, you know, mexico, of course, has a freetrade agreement, where perhaps there may have been an opening their. If we see the u. S. Look at chinese vehicles on National Security grounds it would be a way to get around the fact that a company like byd is looking at mexico, is building a plant in hungary as well, and globally really sort of setting up all over the place to move beyond just being a major player in its home market. Annmarie china have export controls when it comes to raw Material Processing technologies, which the gm, stellantis, teslas will need if they want to make their own batteries. Do you think we could see a titfortat response from china if the u. S. Was to take this in a more aggressive direction . Craig i think that is absolutely something the industry worries about. We saw that come to pass just in the last few months when the European Union started taking a look at chinas subsidizing of its Auto Industry. You saw some moves on gallium and graphite, and various ways on the margins china seemed to be sending a message of, it would be a shame if you were to crack down on us, because look at all of these ways we control the supply chain, and if we were taken to turn the screws it would make the transition all the more difficult for u. S. And european carmakers that have really struggled with gaining traction in this transition. Aside from tesla a lot of these companies outside of china have talked a big game, but have not been able to sort of get traction with scaling up they are ev and battery business, whether you want to talk about volkswagen or General Motors or ford. These Companies Set very high targets, big ambitions, but really have not hit the mark yet. Lisa were talking about electric vehicles in the u. S. , but there was never the word electric vehicles, or the phrase put into this letter, the statement from President Biden. He was talking about connected cars. Was talking about the importance of the big three to the u. S. Economy and dynamism of outgrowth of manufacturing. He was talking about protecting u. S. Jobs. What is the ultimate goal here in terms of u. S. Support for the big three in detroit . Craig i think thats a good question, and i would go back to this idea of, you know, this titfortat. If we want to pan back a little bit and think about what china has done even just in the last couple of years the fact that electric vehicles increasingly are connected devices with cameras in them, just in the last couple of years you saw actions taken in china to prevent teslas from being around military bases in china. So, the fact is this has been a concern that did not just start this morning in washington. It is something governments have looked at closely, and they think it is absolutely, perhaps a novel way to look at the ways to protect your market for an industry that is so important that provides so many jobs for people and good paying jobs. This is about industrial basis that economies have looked to protect for many years and will for years to come as we make this transition. Jonathan good to hear from you. Craig trudell of bloomberg. This is going to become, ultimately, a statesponsored industry. If you want to make that transition and this administration is desperate to make that transition they have to provide subsidies to do that. Did i want to do that and have a foreign manufacturer benefit from a checkup a foreign manufacturer with a massive cost advantage . That is before we get into National Security issues. If you want these three to thrive in detroit you have to put the walls up. Lisa but we also have to figure out what the technology is that is essentially going to be the new carve the future, because that is still in the works in terms of tweaking around the edges. As you were talking i was thinking this is such a complicated thing to achieve, to put the walls up and have a successful industry. I want to see a comprehensive plan to understand all of the implications. Annmarie im looking to the statement and all i can think is this feels like he could be a blurb out of lighthizers new book. Why should connected vehicles from china be allowed to operate in the United States . Whether or not you get trump or biden, this is the good direction you are traveling. Jonathan tomorrow we will catch up with steve whiting. And lara reim of fs investments. Live from new york city this morning, equities doing nicely. It is a rally going into the opening bell. The opening bell just around the corner. This was bloomberg surveillance. Get help reaching your goals with j. P. Morgan wealth plan, a digital money coach in the chase mobile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan Wealth Management. When i was your age, we never had anything like this. What . Wifi . Wifi that works all over the house, even the basement. The basement. So i can finally throw that party. And invite shannon barnes. Dream do come true. Xfinity gives you reliable wifi with walltowall coverage on all your devices, even when everyone is online. Maybe well even get married one day. I wonder what i will be doing . Probably still living here with mom and dad. Fast reliable speeds right where you need them. Thats walltowall wifi on the xfinity 10g network. From new york city, im manus cranny. This euphoria in equities will not be interrupted. Inflation behavior and is even revised lower for december. We are counting down to the open. It kicks in right now. Announcer everything you need to get set for the start of u. S. Trading. This is bloomberg the open, with jonathan ferro
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