Transcripts For BLOOMBERG Bloomberg 20240703

Jonathan lets get your morning started. Live from new york city this morning, good morning, good morning. This is bloomberg surveillance. The s p 500, bouncing back from a strange day of losses, positive by zero point 6 . We said this yesterday after chairman powell spoke, the presser ended almost as soon as it started. The top line headline, restrictive with nothing else seemed to matter. Lisa taking off the prospect of rate hikes took away the tail risk of them becoming even more restrictive and repeating that they are on the right path. That was the entirety of what was accomplished. It seems like this puts it back to where it was before. It is in the hands of earnings and it raises the question of on the long end, how much will this reaccelerate . Jonathan the fed will cut as soon as the data allows. Bank of america, hes in a wait and see mode. Deutsche bank, hard to say it was a dovish meeting, but given the recent inflation print, it could have been more hawkish and its difficult to disagree with that take. Annmarie it absolutely felt dovish. It felt very british. Keep calm, carry on, wait for the confidence. What he did mention was pretty much that hikes are very unlikely. Doesnt seem like the fed sees a path to hiking rates. I love what Stephen Stanley said, maybe it was me but did you see the press Conference Today setting an alltime high for awkwardness and alltime low for information content. He thinks the questions were good and precise, but that powell was obfuscating. Jonathan im pleased that stanley said it. I know that some people said that at the beginning. The Media Exchange in the early part where he was asked about being restrictive, pointed to evidence of it in the labor market. This will be interesting tomorrow morning. Threemonth average for payroll 670,000. The estimate tomorrow is 340. I can pick a bank after big bank where its 250. Its hard to see it in the headline numbers for tomorrow morning. Lisa take a look at the beige book and the quick rate, they are more important than the labor Market Report for tomorrow, that was the tone that we got. You mentioned citigroup. They still see 100 points of cuts this year. Raising the question to your point, jim reed, was it less hawkish than it could have been in terms of not necessarily pushing back . Or was it a dovish position with an excuse to cut . Jonathan dovish action at the peak of the News Conference, it fades going into the close and we are down by 2 10 of 1 . Not just the equity market, the Foreign Exchange as well, the time was 4 a. M. In tokyo and suddenly dollaryen is aggressively lower off the back of what we now believe is more intervention. Lisa 22 point 6 billion where they try to take advantage of a window where they saw a reprieve on the u. S. Side where they thought they could come in. What does it look like . Staving off currency weakness . They didnt succeed. If its about blowing the shorts around how far you can push against japanese authorities, they might have won. Jonathan coming up this hour, fantastic conversations with oppenheimer as jay powell six to a dovish script. Apple earnings on deck. Those earnings are coming later this afternoon. Andrew han horse saying that the fed could still deliver rate cuts this year. Top story, bond yields easing as jay powell calms the fears of another rate hike, saying that the operative phrase is for rates to remain at current levels for longer than expected rather than moving higher for longer. John is with us around the table. Good morning to you. Is the fed alive and well after that . I think it is, at least for now, and that can change from day to day as the market keeps digesting yesterday. We werent surprised. Like everybody, we werent expecting a change in terms of rates, but there was greater clarification and if anything we are at a point now where the market is beginning to get it. It is normalization of Interest Rates. There will still be the argument that the fed is still too tight in terms of the economy. But that usually would be coming from highly leveraged players that are still in shock from the change from an environment where the benchmark rate was 0. 25 and now five and a half. Jonathan Mohamed Elerian was on yesterday and he pointed us towards what chairman powell was saying, emerging in places like mcdonalds, corporate america, walmart, starbucks. You can pick individual reasons as to why they are struggling, but are you seeing that . John more like whats happening now is reflective of whats been happening for the last two years, leading to an end of the tightening cycle is where we are headed. So, the other side of this will be some relaxation. Still, we dont think that rates are going back to where they were during emergency standards for the last 15 years between the gmc and the financial crisis with the pandemic and the fallout of that. But it is a normalization process and we have talked about it a lot. The perception around what a high Interest Rate is and what really is a realistic Interest Rate where bond buyers get something in return and bond issuers have to pay for the privilege of our owing money. Sounds healthy to us and we are stock guys. Lisa ok but youre basically endorsing long variable lags, seeing it work through in the form of commentary that you have heard from these companies. Does that make you less optimistic about total returns, or do you see this as the market waking up to what you have been saying all along . John i think the mayor market is waking up, which is highly flattering, but you dont want to get too positive. The market will always show you its like being a tiger trainer, dont turn your back on the tiger, avoid hubris at all costs. Lisa so after the bell we are looking for apple. Later this month, theres a real question about consumer facing types of tech names. We have seen real distress, more disproportionately in the likes of amazon. How much of a water ship moment will the Apple Earnings be given the angst . John as you know, they dont let me talk about specific stops stocks at oppenheimer. Lisa but what most people use . John they are caught in a transition of going from a major part of their sales now beginning to disappear as a result of ideological differences in the country in many ways. Policy in china. That is a natural thing, but they are led by tim cook, who has been shown to be a remarkable business leader. Steve jobs really picked the right guy for the job. If a company has an understanding of innovation and how to foster it, we have come to think that you dont jump to fast negative conclusions. Annmarie you say you want to look at industry sectors, less stock specifics, but you still like cyclicals . John we do and we think you need to be exposed to technology, its the big story here and it is one that is not only secular, but cyclical and can help all the sectors. Annmarie when we see moments of pullback, is that a moment for you to say by more and go deeper . John we are not big buyers of the dips, but we are big buyers of babies that get thrown out with bathwater. We like technology. Garp growth is the companys deeply embedded in the lives of the consumers and business. We are all on the upgrade cycle. Whether we resist it or not, i just found out that one of my phones would no longer adapt to the Delta Airlines app, so fortunately annmarie why is that . John two old. Jonathan got to upgrade. You are the problem with Apple Earnings. John i have a 14, 14 for business. For personal i had a 6s and i being forced to upgrade. Jonathan oppenheimer pays for the newer iphone. I can see what kind of guy you are, john. [laughter] you said Something Interesting about the other 11 sectors. Want to talk about that. The difference between ai enablers and ai adopters. When do we start to focus more on the latter at not the former . John that change is imminent. Ai as it exists today is already helping Companies Navigate the tough transition environment. Jonathan can you give us an example . John when you see value stories that adapt ai suddenly become more attractive to investors and you begin we have already begun to see value beginning to perform better. Its not just on the defensive position. Its the benefits of the growth aspect of the market within sectors and what it produces is beginning to help value. Jonathan this is banks making more money with less . John it is and like any adaptation of technology, it will be new jobs that are needed. Humanity, think of the primitive ai we have today, anytime you call in to an Insurance Company or any kind of a provider to get information, you have to fight the auto voice that tries to tell you how much they value you and tries to sell you all kinds of stuff. Jonathan we wont know the difference between a robot and a person . John when you get to the person you say thank you for being there and tell your bosses that the person who called remains a customer because of you, not the robot that tried to keep me from talking to somebody. Lisa i feel like we are getting an intimate look at your personal struggles. Jonathan this was the tool with delta yesterday. Lisa why wont you let me upgrade . Im sorry, you are not high enough of a level to talk to us as a human. You have been working and talking to clients, not taking any time off at a time when people say that nothing has changed. What is keeping you so busy . John i want to be assured that nothing has changed. Im always looking for surprises. 40 years in this business, this will be my 41st year, it just teaches you that you never know whats coming around the corner. I will never forget when jonathan asked me, it was 2020 singh looking back what did you learn and i told him that anything can happen. Since that time, i have added that the power of a negative pitch book can be significant. Remember, 2022, we didnt have a huge surge in unemployment. We didnt go into our earnings recession. We didnt see all the things that the bears were talking about. We just got through things. Jonathan 22 was a big year tough year for big tech. Much better year, 23. John, good to catch up with you one day after the Federal Reserve decision. S p futures right now, positive. Getting you stories elsewhere with your bloomberg brief. Tensions remain high as propalestinian protests continue on college campuses. Police are taking action to clear up encampments and clear outbuildings, as demonstrators ask for schools to cut ties with israel. The Associated Press reported 1600 arrests at 30 schools since the protests began at columbia in new york two weeks ago. Novo nordisk raising its annual profit outlook as more patients get on their weight loss drug. The drugmaker saying more than 25,000 patients are starting on the treatment each week in the u. S. Compared to 5000 back in december. Shares fell during trading in copenhagen but have surged more than 25 this year. Shares of carvana, surging. They posted a net income of 49 million. Analysts expected a loss of 160 million dollars. Vehicle sales grew for the first time in six quarters. The results could be a signal that the once nearly bankrupt company is moving past their Restructuring Plan and into growth. Jonathan thank you. We will catch up with you in about 30 minutes time. Plenty of conversation around this task about novo nordisk. Dovish . I think the evidence shows clearly that the policy is restrictive. Demand is still strong, the demand side of the labor market in particular, but it has cooled from a few years ago. Jonathan live from new york city this morning, good morning. Wealthchanging question are you keeping as much of your investment gains as possible . 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. Jonathan ive rebooted. I think. Equity futures positive by 0. 6 percent. Yields lower by a single basis point. The u. S. 10 year under surveillance this morning, one gear dovish. I think the evidence shows clearly that policy is restricted. You can start with the labor market. Demand is still strong. The demand side of the labor market in particular, but it has cooled from a few years ago and you see it in job openings and today in the jolt report. Still higher than the pandemic, it has been coming down. Jonathan treasuries climbing across the curve with jay powell saying that treasury is restrictive, downplaying the possibility of a rate hike. Saying that with an extremely high bar for tightening policy, there is value of owning the front end, value in real yield in the u. S. Around 2. 25. Christina joins us for more. What did you make of that News Conference yesterday from chairman powell . I think he closed the dale on hikes very clearly. He didnt want to entertain it. The scenario that we stay on hold longer and these are the conditions in which we ease with a closed door on the other side and it is relevant for the value on the frontend. We will be speaking from to andrew from citi later this morning. How low is the bar and we reintroduce a conversation around rate cuts . Kristina the bar is higher, powell said that they didnt want to react to just one or two data prints, but with a few full quarter they needed more to change and i think there is still more focus on the inflation front. You have three inflation fronts before july, but i think you have to have overly convincing evidence the other way. Ken september be on the table . Yes. But they have lost their confidence in how quickly they will be able to get there. Again, i dont think that there is a case for hikes. We think that the next policy Movement Really globally, except for boj as an outlier is to ease policy. Its delayed until they have the confidence. Lisa were the hikes something that people thought might be warranted, given the Inflationary Pressure under the hood . Kristina it feels like a bit of the first. Markets get excited about swinging from one extreme to the other. A lot of the conversation, if you hadnt been here and listened to the fed rhetoric and all of this and we bought into what he sold us in december and looked at the data, its hard to come up with a situation why they would need to ease as much as the market was pricing in january. But im not sure the case goes the other way. Lisa the reason i ask is we were playing around with the idea of taking off the aspect of a rate hike within easing bias, despite the hotter than expected data, does it create pleasure for the yacht pressure for the long end of the yield curve . The feeling is that the fed wants to cut rates even if inflation is running hot, raising questions about the premium you have to charge. Kristina that has been our spot on thesis for the last six months to nine months. That is the point of the rates market that has been mispriced and there needs to be more premium in the long end. The curve has been so inverted. The market has given tremendous credence to the fed and its ability to fight inflation, but inflation has been stickier and we need to see higher long end yields and part of the argument about the steeper curve as we subscribe to the market is that it is not just the fed easing with a super curve, its a repricing of long end yields needing to be higher with value at the frontend because we do not see that case. Lisa yesterday he talked about being an aggressive buyer but not thinking it will go much above that and that it will frankly hover around there and at that point it creates restrictiveness in the economy. Is that how you view things . Kristina i think so. I think in the fall the bond vigilantes got excited talking about 6. 5 , but i dont think there is a case for that. We can reprice a bit around 5 . Thats where you have more balance in the market. You also have to take into account that there has been a tremendous amount of flow into fixed income products keeping a lid on yields, even in spite of fiscal spending, inflationary concerns, all of very tight corporate expense with money put to work there. Jonathan Balance Sheet runoff, its amazing the cutie comes up and people have barely talked about it. Whats going on . Kristina i think that that is by fed design in many parts. They have worked hard on both where the primary policy tools are policy rates and its what we want going on in the background. They are famous saying this is watching paint dry. The adjustment is a lot more about fine tuning so that we dont have Balance Sheet issues the way we did that september in terms of stressing the market and trying to ease it. Jonathan i struggle with qe meaning to be bullish and cutie isnt, but some people then say that capping it off is bullish again. I cant figure it out, what is it meant to mean . Kristina i think that if you go back to the economics conference a few weeks ago, you had was that he and a few other people doing that on the impact of qt across these markets. The conclusion is that qt has a 3. 25 point basis impact. But that is by design. They talk about the point of waller spoke after, but they talk about when we do this, we only do it when we think it will have no impact on the market. That is their goal in many ways. Jonathan largely psychological, thats what we are saying . I we are perceiving it to be based on camino casing from fomc communication from lisa lisa fomc . Your confusion reflects that of quantitative easing on the market. People have been trying to make this mystery makes sense but it is the reason why you havent seen liquidity draining from the system. It hasnt shrunk consistently enough. Jonathan we will get a ton of fed speak for the next two days. Do you think that chairman powell represents consensus on the committee, or do you expect to see differences in the days to come . Kristina we have seen a lot more divergence in fed speak and powell has positioned himself as one of the more dovish members. Even yesterday you were talking a lot about looking for a hawkish fed. But we already moved that way. We had taken it out and there was nothing hawkish about the message. Saying that this was the day for mark to market and i think that the speak we get Going Forward from other members will be a little bit more hawkish than that. Jonathan kristina, thank you. They are from invesco. Hawkish relative to what . From the last meeting . Kind of. High pricing . That was a high bar, absolutely not. Lisa this from the fed president that came out and said yeah, no, we are confident we are on the right track. Jonathan big earnings story later this afternoon from apple. Alex webb catches up with investors and earnings hitting a soft patch with difficulties in china. That conversation, next. This is bloomberg. Jonathan so, here are the scores posited by 0. 6 on the s p. On the russell, small caps are up. I asked lest see if it sticks because yesterday the s p 500 was higher by 1. 2 and into the close it was negative one third. Lisa did you understand why . Jonathan nope. I could make up a nice little story about people going short after listening to him speak, but that would be bs. [laughter] i have no idea. Lisa im so glad, i was looking for a reason and i couldnt find one either. Maybe it was the bank of japan stepping in . Jonathan i will tell you the inconsistency, its this year in the bond market. If that had faded as well, ok, something is happening. But yields being lower in the session, they are lower again this morning. Lisa strange on every level. Annmarie what we heard yesterday was that the bigger risk was to the long end of the yield curve. Lisa its not too stocks. Stocks are where they were before the press conference. The tail risk was where it was before the hike. It was taken off the table. Bonds, if they are potentially more easy than people thought, what does it mean for longterm inflation . Jonathan alan ruskin, you can make that five now. Lisa the most since the last fed meeting, thats what people were looking at and it gives you a look at what jay powell can do. Jonathan we said it yesterday. The fx market look like this. Dollaryen, 150 532. Yesterday was just amazing, 4 a. M. To 5 a. M. Tokyo time, staying up late, may be getting up early. Pick one. The market moved bigtime, gapping lower by 3 at one point, closing lower by 2 . The biggest move we have seen on dollaryen lower all year. What we understand is that it basically counts for the boj with more intervention. Lisa which was them saying that jay powell is a dove, lets go, lets take this opportunity. What were they trying to achieve, though . If they were trying to stave off weakening, thats not going to work with that intervention. If they are trying to squeeze out shorts and create pain to possibly threaten them from doing it again, maybe that is what they were trying to do . Jonathan under surveillance this morning, treasuries gaining as jay powell sticks to a dovish script, saying it may take more time for current rates to lower inflation with traders looking ahead to payrolls from rules be tomorrow. Weve got more data coming this morning, by the way. Tomorrow morning, pain loss. Lisa i am more interested in the data and less in the fed speak. I dont know what they could do to change market perspective. I want to understand the actual wage increases, not just the headline numbers. Get the internals to understand if this is just lower quality jobs being added . Annmarie im more interested in what michael had to say to you yesterday at this table about if they see Unemployment Rate 4. 2, 4. 3, it could potentially be enough for the fed to say we need to go in and make that cut. Jonathan there was a headline estimate of 240 in our survey. Bloomberg reported that the ftc is set to approve exxons purchase of pioneer. People familiar with the matter saying the decision could come within days, creating the largest producer in the permian basis with Chesapeake Energy showing large takeovers under review. Shocker, they might get a deal approved. Annmarie and in the oil and gas industry, hostile, coming down to the fact that exxon saying they wont allow scott chef yield on the board. If our reporting is correct, ftc found evidence that he sought to communicate with opec members when it came to oil pricing and output. If he is not going to the on the board, it set the path for green lighting the deal. Lisa i wonder if the administration is hostile on the surface but under the hood very happy and excited about production, as it has offset geopolitical concerns. I wonder how much it is deliberate and not in spite of hostility. That it is because they are not hostile behind closed doors, they are being bailed out. Jonathan thrilled about it, the secretary Walking Around with a big smile on their face. Wont talk about it. Annmarie she didnt mention it to you at the white house Correspondents Dinner . Jonathan we didnt talk about that. What are you so happy about . Not going to tell you. Lisa but it has to do something that rhymes with wineoneer. Jonathan for your favorite number, lucky 13 . Its amazing. 30 Million Barrels of oil per day in america. More than saudi arabia. No one in the administration likes to talk about it. Annmarie they dont like to talk about a front facing in public. Behind the scenes some of them like to. Lisa in Davos John Kerry said something honest, saying that this was a policy of necessity, not a policy of desire, which is a coherent message. If they really put it out there, people could get around the fact that there were certain sack certain factions that dont like it. Jonathan they wont say things that the average person in america say that makes sense. They just want to entertain the fringes. Lisa yeah, behind closed doors. They are smack in the middle. Race becomes a question of what are we doing right now. Jonathan we are going to talk about apple, lisa. Keep up. Investors looking for investments in ai and details about iphone sales. This morning will be fun, right . Demand in china, to. The First Official report on the vision pro. Alex got himself together to join us with more. Going through the Earnings Report later this afternoon, alex, what are you looking for . Alex china is what this is going to be all about. Expectations are pretty low about whats going on. There were reports a little while ago that unit sales had fallen and that the overall global unit sales might have fallen by 10 . That doesnt correlate with earnings, of course, as apple is often able to get higher sales price per units they sale cell. There wont be any commentary around unit pro, not expecting to sell many units just yet. Investors would love comments about ai, most likely they would issue generic comments about big ambitions in the space. Real timing being at the Worldwide Developers conference. Lisa lets stay on that with the theory that samsung its a leg up on the impenetrable market because they wont be coming out with an arlette artificially intelligence infused phone this year. Do you think that apple has to give a timeframe to get people enthusiastic about the growth . Alex usually if they are announcing things at wwdc, you will usually be seeing something around whats coming september time. Depending on what we learned there, there will be a clear sense of whats coming down the pike. Bloomberg news has for order that apple has been in conversations with google about using its ai functionality in syria, in its smartphones, hired wired in, a tacit admission of their own defects in that space, were it to happen. I dont think necessarily in this one that they will be such a slow mover, they might have thirdparty agreements. Lisa i dont want to draw too many parallels between apple and tesla, totally different companies, but they do both rely on china in significant ways. Is it a signal from elon musk that he snubbed the indian Prime Minister and went over to china to talk with jean jinping to appeal for Better Business opportunities there . Do you think that tim cook will take the same approach at a time where he has been expanding production and talking about potentially targeting that market . Alex the challenge with talking about india, including tim cook and the market of tremendous promise, that promise hasnt been delivered. We are a good few years behind where china is right now and price sensitivity, avenue you have intimated, is incredibly high. Right now if they are looking for immediate earnings, china is a far more important market for them. Clearly, apple is making slow inroads into india and gradually expanding production there. You know, apple has been in china making iphones since day one, since 2007, with a huge ecosystem of suppliers that dont exist in india. There will be gradually more leaning towards india, we were expecting that, but right now china is the market that matters. Annmarie qualcomm said that china was a bright spot and we heard from the ceo yesterday that they havent seen signs of weakness in the android premium market in china. How much of a harbinger of bad news is that for apple . Alex the real opposition is from huawei and other companies that run their handsets on variations of android. Therefore, the comments from qualcomm suggests those sales are doing better, as we have noticed already from the estimates and these market share gains globally in the order of 30 from xiao mi in particular, its a growing sense of patriotism towards the devices you are buying and you are probably seeing that in the ev market as well. Annmarie all pointing to the fact that the demand is there but they have a brand issue in china. How do you fix that . Alex its really challenging. Dont forget, this has happened to apple before, 2016, 2017 was a similar resurgence in patriotism, apple saw big chunks coming out of their market share. Samsung at that time almost completely left the Chinese Market and did a huge pivot to india in what most people recognize as the Biggest Smartphone factory in the world, sam son factory, now in india. So, maybe it is just a question of patients . Maybe they need to keep innovating and make sure that the market sees them as having one of if not the best smartphone on the market, but it may be a matter of patience, writing it out . Jonathan the stock is down year to date and there is one big reason that makes it difficult to bet against the name this year, what did they unveil in september . So many of us including myself, lisa, annemarie, who havent upgraded frequently. Is that going to come in september . Alex look, we are watching for our colleague has reported on, a real cynic when reporting this stuff. With iphones right now, we are not really expecting significant hardware jumps. Its hard to find the big innovation anymore. Things that people would like to see are really in the software where they are paying attention, which is why the conversation is around ai. That is what consumers are looking for. It is also a way of generating more services revenue. Depending on the Business Model. We are used to models where you are fresh every three or four years, but then they try to get more Service Revenue out of you, recurring spending, on the whole a highermargin, which is how even as iphone sales decline, they are somehow able to prop up revenue and profit. Jonathan alex webb, thank you. You look smug. Have you upgraded . Lisa i broke my phone, i had to get a new one. Not upgrade. Jonathan you got a new one. Lisa its not a status symbol anymore. Remember when it was a status symbol have the newest thing and more cameras . Jonathan lisa lisa a luxury. Now its not. Now its not about showing people i have this. Jonathan are you saying that because everyone already has one . Annmarie at least we are not having a 6s, poor john. Lisa he has the capability to get another one. Jonathan stubborn. Sound of fear around this name. One of the reasons i mentioned it, in september if you come up with a big upgrade and you mentioned the words ai, does that get people to upgrade . We have been sitting here for the last two years saying there is this big stack of individuals with old iphones that are ready to go, this super cycle is coming and im still waiting. Lisa if john is the example, hes not going to buy a phone for ai, fighting robots that call him. Jonathan thats all in thinking about coming out. Fighting robots. Yahaira . Yahaira bloomberg reporting that huawei is secretly funding cuttingedge research at american universities through an independent washingtonbased foundation. Documents and sources saying they are the sole funder of a Research Competition that has awarded millions of dollars and attracts hundreds of proposals from scientists, including those that top universities banning the researchers from working with the company. They are currently blacklisted by the u. S. Commerce department. Unsealed doj documents show alphabet paid apple 20 billion in 2022 to keep google as the default Search Engine. It is the focus of the antitrust case against the two tech giants. Regulators alleging that google has illegally monopolized the market for Online Search and advertising. Both firms had hoped to shield the payout from being made public. Doj and google will make closing arguments today and tomorrow with a decision expected later this year. Tesla is making more costs cuts, this time with interns. Ev maker rescinding summer internship offers weeks before students were set to begin. This coming as tesla undergoes massive job cuts in sees a handful of executives leave the country. Its unlikely to save them much money, though, with glassdoor showing interns typically make 18 to 28 per hour there. Jonathan i find that story really sad. Arguably highly qualified individuals that may have had two or three, some of them might have more offers than that, they chose to go somewhere, probably to go into work for elon musk at a place like tesla to find out that the job is not there anymore. Lisa as for the why, maybe because the top Human Resources executive just left. Turn off the lights when you leave. Annmarie could be a huge talent pool down the line. Jonathan ive find it dreadful. Lisa who will manage them . There isnt anybody left. Jonathan i hear you. I hear you. That is the latest on tesla. No hint of i. A hike. No hint whatsoever of a rate hike. No hint that its not going to work. He basically said we got it. Jonathan that conversation is up next. Andrew says he thinks we get four hikes this year. When you own a Small Business every second counts. 120 seconds to add the finishing touches. 900 seconds to arrange the displays. If youre short on time for marketing constant contacts powerful tools can help. You can automate email and sms messages so customers get the right message at the right time. Save Time Marketing with constant contact. Because all it takes is 30 seconds to make someones day. Get started today at constantcontact. Com. Helping the small stand tall. Jonathan equity futures on the s p 500, positive by. 7 . Yields are higher by 460 on the u. S. 10 year. No hint of a hike this morning. We are going to keep rates here, unchanged, until we are confident that inflation will get down to 2 . No hint whatsoever of a rate hike. No hint that its not going to work. Market reaction i think was pretty appropriate, given what he said. He basically said we got it. Jonathan we get it. The fed, keeping rates unchanged. Jay powell sang the next move is not likely to be a hike, but avoided offering a timeline for rate hikes. Andrew gives us a base case for cuts in 2024, more than priced by Interest Rate markets. Andrew, hello, lets go straight to it. Forecast into 2024, not consensus. Andrew the fed cutting this year, it was clear from chair powell yesterday that the next move is a cut and the way that they get there is the inflation data gives them the opportunity. I dont think it will go to 2 , but it will be slow enough to let them cut and the label market will begin a weaker. We heard that from chair powell, saying that the trend is towards a weaker labor market. Jonathan this is your signature call, the weakness of the labor market. Do you see it now . Andrew what we heard from chair powell is that with the dual mandates in the better balance, in their words, inflation has come down. Not 2 , but it has come down. When they look at employment, he highlighted these things, look at the climate board. You people see jobs as plentiful or hard to get . They see it as hard to get. If people are more worried about keeping their job, they are more worried go to the Small Business survey that is coming out today at 1 p. M. , you are seeing Small Businesses saying they are not excited about hiring. The indicators are all going in one direction. Lisa at the same time we have seen the signs of a crack for a long time. They did last year, this year they didnt, so at what point do you have conviction that is different . Andrew i think the calls were not wrong but more premature and the cycle has extended longer thought. What we went to market kind of normalization. Was a kind of normalization with an incredible need to hire people and restaff. We worked through a lot of that. Take the quick rate from the jolt report. Thats a decade low. But that is telling us is that this is not just normalization at this point. This is people in the last 10 years that havent been this worried about holding on to a job. Lisa raising a question about tomorrows payroll report and how high numbers will be and how i numbers have been. This is a robust labor market. Are you saying that those numbers inaccurately represent the numbers that are sorted by immigration and other features that might mask a real level of weakness. Andrew thats right. U. S. Economists have an incredible range of data to draw on with Something Like that data to draw on. Payrolls, those have been strong. Looking at other labor market indicators, they range from slightly weaker to a lot weaker. Take the household survey, over the Unemployment Rate comes from. Its been moving up. Its been softer. The Business Employment dynamics survey, the numbers just came out from q3, 9 million firms accounted for in this. This is the official date on what firms were doing. We lost jobs in the Third Quarter. Im not saying it happened, but looking at the data points, you plot them together to try to figure out the trend. Jonathan hard landing versus soft landing, the stew that in the air for you, been a long night. Soft landing over here, hard landing over here. Etc. , etc. With recovery, sounds like you are somewhere over here. Is that fair . Close to a hard landing . Andrew thats fair. Markets have moved away from the soft landing idea. Its clear from inflation data that we are not getting the soft landing and if activity holds up, we might have more of an issue with inflation. The reason i think the fed will see enough to cut is the hard landing end of the spectrum. Jonathan Market Pricing echoing the conversation we had with bernstein over the last week, do you see the pricing of one rate cut this year as a weighted average of one possibility and not the most likely outcome . Andrew thats right. Chair powell, with his multiverse of outcomes yesterday, they could not cut at all, they could be cutting, what is important is the asymmetry of the reaction function. We dont need both softer inflation and a weaker labor market, just one of the other. Lisa its fascinating to me that you expect 100 points and no soft landing. You think the damage will be done enough that 100 points of cuts wont be able to give a surge of stimulus into the economy soon enough to stave off a real downturn . Andrew this happens every monetary cycle and there is no good reason to think that this one will be different. Higherthanexpected, even in the First Quarter, keeping policy rates higher for longer, the higher for longer stage of the policy cycle. After that its a weakening of the labor market, getting sharper after that. That is what is playing out now. Jonathan how united is the committee on the fomc . Andrew a lot of people around the table right now and powell is a master of bringing together enough to do the press conference yesterday. Jonathan andrew citi, i think hes on the dovish end of the spectrum. Lisa a lot of elements. Gender, race . Jonathan so weird that he responded that way. Talking about groupthink. The risk of groupthink and the lack of dissent on the fomc for the last several years. He starts talking about gender diversity on the fomc, and find they dont have groupthink at the euro reserve. Lisa hes a smart man. He didnt want to answer,. That was the ark unit awkwardness. Annmarie i was taken back by that pivot. Jonathan it was a long News Conference. Based on how the show has started today, i cant speak. [laughter] in the next hour of bloomberg surveillance, stephen englander. From new york, [speaking another language] from new york, this is bloomberg. The all new godaddy airo helps you 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 her uncles unhappy. Im sensing an andunderlying issue. Ss. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. I think theres a lot of relief here, the chairman staying true to what we have seen from this chairman. He held back and that was good, we had seen acceleration but we have to see where we are going. Dovish, the Market Reaction was appropriate to what he said. Its really good for the markets. This statement is something the markets will like, something marcus wanted. This is bloomberg surveillance. Jonathan the market liked it for five minutes, yesterday, likes it more this morning, apparently. Wrapping it up nicely there with a statement around easing bias and powell believing that policy was restrictive. This is good for the market, lisa. Lisa basically taking the prospect of a rate hike off the table was the key aspect that came out of the press conference. Given what was priced in, the bar was high for a hawkish pivot. Jonathan i like this from perkins over at lombard, an exercise that we can go through for the next one he four hours. On twitter, x, whatever, central markets taking a lot of comfort proving that rules are tighter around a second wave. The News Conference echoed that. The only problem, i think, i can explain most of that rebound without reference to Monetary Policy, which is what most have done for several months. Lisa supplyside in terms of immigration filling the jobs that would have had to have been filled with people in the qs who would charge more money and you would see more wage inflation. It creates the question what is Monetary Policy doing. Jay powell has asked this, wheres the cons that its restrictive . Wheres the confidence that it is restrictive . Annmarie immigration is fueling the rebound in rich economies. Thats what they boiled it down to with the supplyside labor market. Ubs has pulled down the talks on inflation, how the fed talked about their progress in that year of 2 target. Then he says, its higher to know what higher for longer is supposed to achieve in terms of medical inflation and the labor market folks have become more important. Jonathan more claims eastern time. Heres the estimate, previous week 207. Going into tomorrow, 240 is the estimate in our survey. The previous number, the threemonth average, 370, 280, we are looking for another 240 tomorrow. Lisa i want to think about what he said more. The higher numbers in terms of the jobs created, masking whats going on underneath. Its a lot of weakness that could move quickly and force the fed to 100 basis points. Staving off a serious downturn. Its counter consensus with an incredible logic that explains the surveys weve been getting. Jonathan walmart, starbucks, mcdonalds, how much weight do you put on that . How much weight do you put on the idea that the consumer in america is starting to struggle . Lisa not only starbucks and mcdonalds, it could be the protests, shifting caveats, competition is a dollar lattes, but competition over amazon and other companies saying its clear that consumers are being pricesensitive. It seems like a theme, if you look at the beige book. Annmarie all of these consumers on the lower end of the socioeconomic scale moving from the shadows of the economy into the sun to get burned by inflation, that is what the corporations are talking about. Jonathan that is where the are, positive by 0. 7 . Yesterdays rally faded on the s p 500, ending in negative territory. Bond market yields pulling back in yesterdays session, down by two or three basis points. Coming up this hour, we will catch up with Asset Management as jay powell keeps the door open to rate cuts. Standard chartered, more speculation on yen intervention. And also well talk about the high bar of the yield reaching 10 . Sticking to script, jay powell maintains a dovish bias. The principal asset manager from pencil prince will Asset Management they write that its been fueling market optimism, also supporting a broadening of the market rally as rate cuts come closer into site. Lets go straight into that. Broadening the market rally, we heard the small caps got smoked in the month of april. Why does it change this month . I dont think it necessarily does this month, the key point is that as they come into sight, for small caps to have a sustained rally, you need to know that rate cuts are around the corner and are certain of that. Powell was dovish yesterday, but as you look at the strength of the economy, they cant have real confidence that rate cuts are imminent by any means. It will take a couple of months after what we expected for the smallcap to broaden out in materialize. Jonathan lisa mentioned this, talking about embracing the hard landing and not a soft one, andrew said. Why the latter and not the former . Seema i believe that there are cracks warming and there are two places you can look at for them to come through. One, as you said, on the lower income side of consumers. Coming through in a lot of the earnings discussions. Dipping into that credit card data as well. On the small side, typically for a broader, we can see those cracks forming, so we expected downshift, but nothing below trend. Still a soft landing for 24 and 25. Lisa if andrew is right and we get a protracted weakening, what does it do to your thesis . Seema it changes entirely. At the moment we are expecting the unemployment rays to rise rate to rise slightly, down to supply. If it rises to a 5 level, thats a worry. If you see the spike the way andrew is talking about, you would get aggressive rate cuts. That is not our scenario at this point in time. Lisa the economic picture, highly uncertain and there is that question around which data is relevant or comparable, but it is not clear how to hedge against certain Downside Risks with higher inflation and recession. What is the best hedge for you . Seema at this point in time what we have seen in the last couple of months with inflation data, is a timely reminder for nesters across the portfolio not saying plug everything into it, but they need to take significant, or at least a of your portfolio. Stuff like real estate, command, doing well in high inflation years. There has to be mitigation to have downside protection. Annmarie its not just the u. S. Hitting record highs. Where else do you like around the world . Seema its interesting, typically we believe in u. S. Exceptionalism, but right now at the u. S. There are a lot of uncertainties and we dont know the rate profile. The Growth Profile is not really looking at upsides, we are looking for downside surprises. And valuation is expensive. At this point in time there are increasing opportunities outside the u. S. Valuations are fairly attractive, you know that there are upside surprises coming. We are fairly sure on rate cuts. For example, looking towards markets, latin america is attractive to us as well as places like india, also japan. Annmarie how much has the fed in this prolonged potential cut made it difficult for these other economies . Seema you have to be very certain of their economic strength with a strong dollar. An economic impact, you have to be somewhat selective. There are segments of asia that have stopped their rate cutting process, slowed it down, we want to avoid those. Ideally, you have some exposure to drivers keeping momentum going. Jonathan good to hear from you, looking forward to catching up in new york the next time you are aware. Breaking down the Federal Reserve and what it means for markets. Speaking of cracks in the market, peloton cutting in half. The ceo is stepping down. They are cutting Global Headcount by percent. The outlook for earnings, the fullyear adjusted loss is 5 million to 20 million, 62. 9. Annmarie its a lisa its a total beat, there. Heres the question, is this a postpandemic user . Basically everyone got the bikes during the pandemic, needed exercise and could leave home. They ended up, who was it, mr. Big came out and said jonathan heart attack . He died on the peloton . Sex reboot . Annmarie the reboot. Lisa the branding, it failed. Jonathan peloton failed or the reboot failed . That failed, too. Lisa i have used developed on, i enjoyed it. But theres a real question of whether this is representative of a broader trend or a specific story. Annmarie you went out and got one question mark i didnt do that. Lisa annmarie i did not. Sounded like you did. [laughter] feels like they are unwinding. A lot of people thought this would be a big winner when life got back to normal. They are also reducing retail showroom. Go to the stores to attract new customers, try them out. That seems to be unwinding as well. Lisa 15 of Global Headcount, right . What goes first . You cut jobs. How Many Companies are there like this that tilt up with much bigger footprints than the Business Model could handle . Its the washout russian of do you get more of this the washout question of do you get more of this . Jonathan for the tech session, and the other firms as well, throw in the debt. Mindful of the timing around banks with refinancing strategies Going Forward from here, we will hear a lot more of that. Annmarie its the reason lisa its the reason if you have companies building up on cheap financing, what survives until 25 . We are not talking about wholesale downturns or a wave of defaults as much as simply seeing a greater pace of defaults of companies that cannot survive. Annmarie now i know where you may have tried one, they announced an agreement to put them in hyatt hotels. The ones they cant sell. Jonathan i wish john was here to tell us that he has an ipad tied to a bike, he wont get a peloton. Lisa not ipad. Iphone the success. Iphone 6s. [laughter] jonathan peloton, positive bike for percent. Heres yahaira. Yahaira unsealed doj documents show alphabet paid 20 billion in 2022 to keep google as the default Search Engine in the browser. Its the focus of the doj antitrust case against the tech giants. Google illegally monopolizing the market for Online Search and related advertising. Doj and google will offer closing arguments today and tomorrow. Google reporting that the ftc is looking into an acquisition of pioneer. People familiar with the matter saying the decision could come within days, making the largest producer within the permian basin. Chesapeake and permian still have large takeovers under review. The u. S. Meat supply is safe according to the department of agriculture. All samples of retail ground beef collected from u. S. States tested negative for the h5n1 influenza virus. Taken from retail outlets in states where dairy cattle had tested positive for bird flu. Jon . Jonathan and just like that, that is what the reboot was called. Annmarie i like to the clothes. Jonathan no worries. Up next, tension for the jeep boj. Either it is not as strong as it sounds or Monetary Policy is the better move, and more likely its the latter. Jonathan more signs of intervention overnight. That conversation, up next. Life from city this morning, good morning. Sandals jamaica sale is now on with rates from 199 per person per night. Visit sandals. Com or call 1800sandals jonathan you just missed three minutes on Carrie Bradshaw. Thats a good thing. Equity futures right now on the s p, positive i. 75 . A break of 4. 5996. Under surveillance this morning, tension at the boj. There is tension between the boj governor coming out to say that Monetary Policy is not driven by the exchange rate. Either the policy statement isnt as strong as it sounds, or the intern intervention isnt ultimately going to work. I think it is more likely the latter. Jonathan adam sitting down with dani burger for a fantastic exchange earlier this morning. A second round of currency intervention this week, the yen sees a sharp gain. Moments after the News Conference with chairman powell, under Standard Chartered they wrote that they may have trouble retaining the gains. Boj rate policy adding support to the intervention. Can we start with the intervention, steve . Whats the strategy from japanese authorities and the ultimate objective . What do you make of the approach so far . Steve they may have thought that they were going to catch the market on the hop with the dollar weaker already, slightly more dovish than expected with the fomc meeting. The meeting, the yen was moving at 4 p. M. New york time, its a thin margin. I think they were experimenting with trying to see whether they could create a Market Dynamic by having people who serve suddenly , say they bought the yen at 1. 56, p l in the red, cutting positions. Taking profit, there intervention would create a Market Dynamic taking the yen further down. Overall, i would say that the reviews are mixed to slightly negative. Maybe 4. 5 on the Rotten Tomatoes scale. Jonathan i wanted to get into that deeper. How do you think the scales identified success . Steve they would have defined it as having the yen stay at the lows, see some market followthrough in terms of investors and others saying that we had a good run, time to stop it. I dont think thats the case. I think that there are some who think that this is a good level to purchase dollaryen at. Lisa is there an idea that japanese authorities are trying to punish a little bit the shortsellers that might have gotten squeezed out and hurt a bit in the overnight action . Potentially one of the goals at a time where it doesnt seem like they can achieve price stability or true strength . Steve these are big boys who know what they are doing and know what the bank of japan has been saying. If you go short on dollaryen sorry, long on dollaryen, you have to be prepared for intervention and have a risk strategy. Something that says i will get here and out here and be the better for it. I dont think the punishment was overwhelming. They might have been overwhelmed by four or five days of profits. Normally, i would say this isnt enough for a lasting impact. Lisa alan ruskin of Deutsche Bank just put out a note that they are speaking towards the intentional consequence here of the actions of the bank of japan in terms of creating extra volatility, which is what makes it difficult to do the carry trades moving against the yen. Is there some truth that, a japan that would like to see more volatility in its currency in the u. S. Dollar some plea to prevent speculative trading . Steve you know, i think they can create volatility any day of the week. Whether they can keep it going for an extended amount of time, which is what would matter for the carry trades, thats a different question. You often find that investors intervene yesterday, probably wont today. You see things drop. That might not have been the case overnight, but the key is whether they can keep the volatility higher for a short time. I think the market will not buy into that list acs in practice, meaning repeated episodes of intervention. Jonathan unless the boj goes on a rate hiking cycle the likes of which we havent seen for a long time, do you think they will get to help anytime soon . Repeating the conversation we had this summary here from this morning for andrew was looking for four cuts in 24. Certainly against the grain and whats priced by consensus. What are you looking for from chairman powell and will it be sufficiently good enough to help the likes of japan and the japanese yen . Steve we are looking for two cuts, we are not as far on the dovish side as andrew is, but we think that basically what the chair was saying yesterday was he would like to cut if he could and is perfectly happy, you know, if he doesnt have to, if he can keep stable, and is terrified of any mention of raising rates at this stage. You know, we think that there is a good enough chance that inflation will slow down in the Second Quarter as it did last year. A cut three and a cut in q4, but it is not guaranteed. There is more uncertainty around whether inflation has plateaued or if it was just seasonality and you cannot get out of these inflation numbers. The rest of the year will be more friendly. Jonathan are you prepared to say 106 is the peak on the u. S. Dollar . Steve no. We think the euro is going to 103. Not so much because the fed will be hawkish, but everyone outside of japan seems determined to cut rates as much as they can. The implied commitments of the ecb and other Central Banks are much stronger than anything the fed said on the others. Dollar, stronger through the end of the year. Maybe by 2025 we get some catch up. Jonathan stephen, appreciated. Eurodollar, 107, ultimately looking for 103 on that currency pair. The ecb seems to have more conviction against the Federal Reserve. Lisa dramatic moves. 103 breaks out. Jonathan will take it. Lisa it speaks of the moment we are in, nothing has changed dramatically. No action, people are looking for a compass. Its a bold call. Jonathan when you had to europe this summer and you i offer you 103, you will take it . Lisa no doubt. Though i would go short euro, Long Airlines fly to europe. Jonathan traits. You are sharing your trades . [laughter] coming up, modernity reporting a narrower First Quarter loss than estimated. The companys no catches up with us in just a moment. From new york, this is bloomberg. And theyre all coming . Those who are still with us, yes. Grandpa whats this . Your wings. Light em up gentlemen, its a beautiful. Day to fly. Hi, im tali and i lost 85 pounds on golo. upbeat music i started golo because i was unhealthy due to my weight. The minute i started taking the golo release, i knew it was working. I was not hungry, and i did not have any cravings. Since losing weight with golo, im healthier now than ive ever been, and my doctor is thrilled. Golo is so much more than weight loss, its gonna give you your life back. Jonathan stagflation comes up in the News Conference. I think you nailed it when he said this is what chairman powell is can to do, laugh and say there is no stag and very little flation. David rosenberg i almost felt like it was verbatim what he was saying on the program, it was like a repeat of that in the News Conference. Lisa just pulled up the sheet. Jonathan no stagflation of the fomc. Equity futures now on the s p 500 positive by 0. 7 . Next stop for the nasdaq its apple after the close. The russell positive by one full percentage point. The twoyear backing away from 5 . We are down three basis points on the session. Lisa this is the prospect of a hike was taken off the table. Im looking at fed fund futures and you can see only about one rate cut fully being priced into the market for the remainder of the year. To me this did not really reset the bar and terms of how much they would cut. It took away the tail risk of a hike. That was what yesterday was about and maybe thats what the price action was about for about five minutes of the News Conference. We got a bounce this morning. Dollaryen right now we are positive by. 2 . Weaker japanese yen again after the stronger japanese yen later in the session. What is there to say of standard charter. Is that what he said. I dont watch movie unless theyre above a 60 . Unless its a cult classic. The worse the rating the better the movie for jonathan ferro. I dont go on Rotten Tomatoes. And then i filter it out. I go to the movies and watch it. Sometimes what i enjoy, you know the film critic whos got big ideas of what a movie should be. I just want to relax. With the same plot and its highly protectable and you know whats can happen. At the end everyones happy. Enough surprises on the show. Fed chair jay powell downplaying the chance of rate hikes. Traders turning their and the u. S. Payrolls report. Calling for a print of 240 k. Before we get there we need to talk about this, apple reporting after the closing bell. Investors looking for details on iphone sales which have been slowing particular in china it will also give a first look at sales of the vision pro which debuted in february. The stock is up by 1 on the session on the year we are down 12 . Youve got the china question and how much theyre able to expanded to china given the competition for domestic brands but just generally how much are consumers pushing back against 1200, 1300 phones. Its not worth it to pay that if there isnt a material hard work hardware upgrade. Annmarie qualcomm is saying they see a robust market in china. The issue is brands and whats happening in china is this nationalism patriotism towards their home owned brands. So qualcomm saying this will slowdown in china. Then it goes to what will you do about that, how do you fight that. Jonathan is it Consumer Preferences just the strength of the consumer. Starbucks saying it was the latter and not the former. Did apple really want to get on the call leader and Start Talking about the Chinese Consumer they do not like u. S. Brands anymore. Tim cook is a massive ambassador and thats what weve been saying. An ambassador between the u. S. And china. Elon musk ditched out on a meeting in india to cater to the chinese officials. Do you see a similar tone from tim cook at the time to trying to expand into india. People will be looking at this like a similar diplomatic address at the press conference. That report coming later but out already and narrower than expected firstquarter, costcutting offsetting a steep decline which they were expecting to receive. An rsv vaccine in the coming days. Wonderful to catch up with you. The stock is just about positive in the premarket. You talk abut how your balancing cost cuts here with investing and innovation given whats in the pipeline. Good morning and thank you for having me. Very pleased to report we tried to focus on how do we drive sales, how do we prioritize opportunities we announce we are stopping and search in the team. If you look at the portfolio we are looking at all investments and a thing about those vaccines is if you think about covid we see that success from covid but the investment has gone down a lot. Rsv we are anticipating a launch this spring. We can still have a lot of new studies going on, reusing the capital used in the other products before. We are in a 5050 profit share with mark so they are we are investing a lot you mightve seen last week with openai we have more than 700 gpts growing across not only science but productivity in manufacturing, so thats how we are doing this. Lets talk about something our colleagues are focused on and thats your rsv shot. Some data is showing maybe it doesnt last as long as others in the market. What were hoping to know is whether thats questioned by the promise of your net technology. If you look at the data they are very similar so i dont think its correct to say one of the vaccines doesnt last as long as the other ones. You look at the data. This will be debated at the cdc meeting. This doesnt worry me. If you look at duration the duration of vaccination is induced and if you look at the cancer product the only reason it works is t cells, not antibodies. They are going and attacking the cancer. If vaccines have a good t cell response im not worried that all about duration. Pretty much every time we speak i ask you have weaker cured cancer yet. Its been one of the big questions, the hope for the mrna vaccines. You have this melanoma vaccine in the works, what more do you have to do to get it set up for the approval process to apply, are you using Artificial Intelligence to expedite that . Stephane if you look at cancer treatments in melanoma we have said we need to look at three things about an accelerated approval. So the data we shared on the show several times weve seen duration if you remember in december it was better than the twoyear survival so the difference between people that are just getting around is getting wider. This very strong evidence the drug is working so thats number one. We need to be substantially enrolled. So we are working very actively two months earlier than planned. So when we are substantially enrolled it could be later this year and we need to file in the restriction dossier more information about the manufacturing process. It is allowed to go, that has been beat but it is working nonstop. A bit like during covid in the pandemic. So anticipate potentially sometime next year if a regulator was willing to look at the accelerated approval it would be available because one into people benefit would know this is coming back compared to the best drug available on the market. Can you give us a sense you talked about Artificial Intelligence. Everyones talking about Artificial Intelligence. Could you talk about how much that could expedite some of the drug production we are seeing and how much that could get us to achieve that cure for cancer, that cure for als, i sit around and worry, im just wondering is this going to be in our lifetime and the next couple of years because of some of the Machine Learning. First is i think Machine Learning with social apps in industry will accelerate the understanding of the human body. If you think about alzheimers and other complicated diseases we do not have solutions for yet as society its because we do not understand the biology. We do not understand how the disease evolves so we are trying things and some work but very few work. Most of them dont work because we are trying and guessing. Then the industry has actions to deal with this. Ai will accelerate and be fundamental. Ai is already used to accelerate discovery once you understand it. We have different chemical matters generated by our ai system. To accelerate the work humans are doing. And then theres a huge chapter on productivity. If you think about its basically doing experiments getting the data, doing more experiments and when you have studied on, my point is its all about data. Hundreds of business processes and i think many of those if not most of those would be able to apply ai to go faster. The example we shared, the team wanted gpt to help us do the selection. Phase one you try several doses and then based on the data you get in the clinic and decide which ones go into your face. By people in meeting experts with the data. With cheat gpt they basically get all the data in the Clinical Study and suggest thats already blocked or used of the company. Thats just one example. If you put that on the hundreds of different processes for the clinic, the analyzing of the data. I think you can save a lot of time. Only history will show us in the next few years can you shave 40 , 50 i think its good to be very significant. Weve got to leave it there. Amazing to listen to you talk about the efforts taking place at moderna. Trying to bring up sex and the city with the modernity ceo. You want to spring Carrie Bradshaw into the conversation. When i was a kid i didnt have the tv. This explains a lot. Lets get you an update on stories elsewhere. Heres your bloomberg brief. The Arizona Senate voted 1614 to repeal an 1864 law that would make nearly all abortions a crime. The statehouse has already approved a repeal bill and the democratic governor pledged to sign it into law. Once it is officially repealed women in arizona will be able to have abortions until 15 weeks of pregnancy. Shares of shell are higher, the Energy Producer saw the profit, and above fs estimates. The company said it would repurchase 3. 5 million of shares in the Second Quarter break and amounts in the two previous reporting period. They believe the share price is not currently reflect the full value of the company and buybacks will continue until they feel it does. Shares of palatine gaining in premarket trading. Barry mccarthy is stepping down. Plus headcounts will be cut at 15 or about 400 workers. Peloton missed on revenue and Digital Subscribers in the Third Quarter and guidance for the full year was also narrowed below the average analyst estimate. Thats your bloomberg brief. Jonathan up next on the Program Chair powell stayed true to form. This a lot of relief here belief year the chairman stayed true. Reiterating the key points around an asymmetric response function. Jonathan Jeff Rosenberg pretending he did not know. Lisa you think that was just a day . Jonathan absolutely. You can write to bob and tell how to pronounce his name. Its next on the program. From new york, this is bloomberg. Jonathan equities right now on the s p positive by 0. 6 we are up. Bouncing back from the losses yesterday. 45990 six. So try to work out what they were talking about before. In the fx market. So dark. Thinking about the pandemics, we were talking with the ceo of moderna. It worked. Under surveillance this morning chair powell staying true to form. I think theres a lot of relief here that the chairman stayed true to what was in from this chairman. Has been one sided looking at the Glass Half Full and reiterating the kind of key point around an asymmetric response function. Treasuries climbing. The two yields dropping for the fifth straight term after a fed decision. Fed chair jay powell keeping hope alive for rate cut and leaving the timing on certain. With the fed squeeze, the bar remains high for the treasury yield. In a scenario where inflation is sticky but is not meaningfully accelerate from here. So patrick good morning to you. To chairman powell just put a ceiling on yields here. Thats been our view through the years that the frontend will struggle to get about 5 because the market is pegged to fet expectations. And the long end as well because of the fact you dont have any clear catalyst for selloff or pushback in the markets and in an environment where the expectation is the fed will keep policy higher for longer you should start to see that growth and inflation that would mean you are longer yields. Forgive me for having such a short time horizon. If we get an upside surprise on payrolls how would you respond to that across the curve . I think you see a bit of a selloff. The market is not going to lean towards hikes, but the amount of selloff you see on the strong front is going to be a lot less then the rally you are going to see even a slightly below consensus weaker print. The bias at least in this market is asymmetrically skewed towards the downside. Lisa to follow on what john is saying maybe thats the case in the frontend. What about the long end. Do you see that being more significant if theres more than the economy the mary admitting. One question that ive been asked at least in the last couple of weeks heading into the fomc meeting is what would cause the fed to hike and to me one of the things i would be watching is the rise in Inflation Expectations. If the market pushes back on the fed narrowly because it is sticky or trying to accelerate you will see that with higher Inflation Expectations means higher long end yields with the frontend. Thats something im watching again that powell dismissed any notion they would hike so the focus is very much on when they will cut not if they will hike. Lisa is this conversation framed wrong . This is something where they said this is a fed that is still pretty hawkish. They will only cut once, thats whats based baked in. And they can really get ahead of a slowdown thats already in place that could lead to a high increase in unemployment. Is this market underpriced for a hard landing at a point where everyone is coalescing around goldilocks. If they do have meaningful slowdown in growths the fed is locked and loaded. I do not see them being concerned about cutting rates across the board if they need to. I think thats a good problem. The concern is if you see a 70 style issue where inflation starts to rise because the fed has kept policy easier if they eased too soon that i think is the biggest. Coming into this year the end of last year powell pivoted from a persistent financial conditions at the november meeting to an easing bias. That added to a significant easing of financial conditions and that in my view lead to some of the Services Side inflation we are seeing. So i think a premature pivot or premature cut adds a bigger risk for the fed then if they kept policy tight and then cut aggressively because it they want them to cut. The easing of financial conditions contributing to the upside surprises weve had so far. Chairman powell did not appear to in the News Conference. How do you gauge his view and the relationship between whats happening. Powell for some reason seems to be concerned financial conditions are tight, he is just completely dropped the discussion of financial conditions and everyone else has been asking for. They only seem to be concerned with financial conditions are tight and its easy they basically ignore the narrative on inflation conditions. My view is rates where they are, of the twoyear around 5 , the 10 year 5 will eventually feedthrough. Thats what they want to see happening. Higher yields will impact equities and other risky assets. Jonathan where im confused is thats they think where it already is. Last year its been a supplyside rebalancing but yet they keep pointing to the labor market as evidence they are sufficiently restrictive. What do you make of that. I find it somewhat interesting because there is an influx of participants coming into the workforce whether it be people from the sidelines into the workforce or immigration so there are some positive momentum in the economy in the workforce. Also looking at an environment where theres a decent amount of fiscal stimulus in the background that still helping the economy. Consumers are extraordinarily resilient. So you know they need to see a meaningful change in the job market or slowdown in the job market for a slowdown in the economy. You are just not seeing that as it stands. How does that push against the rest of the year in terms of an investment thesis. I think unfortunately for the bond market it will be a sideways trade to we have some sort of clear indication that theres a slowdown in the economy so my bias is still towards no yields. I think the data is going to be somewhat sideways and its going to be a bumpy road for the rates market not just for fed policy and inflation but also when we see a lot of this backandforth with the data but really the trajectory towards lower yields especially given the fact that there is an election we will see a little bit of a bid to quality. I dont want to be too critical of chairman powell but we know thats a big tradition on wall street. What was interesting yesterday was whether the disinflationary process the chairman had believed to have started whether it stopped, how disrupted it is. They didnt really address that in a material way. He seemed to be saying we are on track and doing just great. Its just working a little more slowly. It didnt seem to make them question any of the broader paradigms in terms of inflation, in terms of whats going on with the labor market even when he was asked to entertain or not talking or the terminal rate. Basically that was the presumption. Does he not want to talk about it or is he so convicted he has the absolute right approach. And it will take more time. He had to come out and answer why has it only been bumps. Why is this turning into a trend. Why are you not seeing this disinflation. I know every single word is so closely scrutinized by People Like Us and that was a challenge for the chairman maybe its not the appropriate form to do it in. I just keep wondering whether he has any hawkish bones in him. I feel like he might be one of the more deaf jonathan this was great, good to see you. Third hour of bloomberg surveillance up next. The future is not just going to happen. You have to make it. 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And you want people to be saved and to have a better life, then you dont stop. The idea that we have saved five Million Peoples lives, its overwhelming. Its everything. I think there is a lot of relief here that the chairman stayed true to what weve seen. The fed at least in the present manner said lets be cautious here. That was good to hold back. Pretty appropriate given what he said. This is really good for the market. I think thats the right message. This particular statement to something the markets will like. Its exactly what the market wants. This is bloomberg surveillance with jonathan ferro, Lisa Abramowicz and annmarie hordern. 30 minutes away from jobless claims in america. Just a flavor the estimates for you. We will have a report for you. The estimate in our survey 241,000 across the street a pretty big number. Jeffries 280. Goldman sachs 275. The likes of Standard Chartered 270. Big numbers in the mix going into tomorrow. Not to be too theoretical but does it matter how big the number is and this is what andrew was talking about. Is this sort of distorted by other trends notably immigration in a way that makes this headline number masking Something Else happening elsewhere. Just had a wonderful conversation from socgen. Risk asymmetrically towards a lower yield. The Federal Reserve is more likely to respond to weaker data than stronger data. Based on what they said which was if we get an upside surprise the move higher will be much less than the move lower getting a downside surprise. This is a fed that wants to cut rates and is not concerned that the policy is unduly easy. This raises the question at one point is the risk on the others that inflation concerns pick up. Is there a fear especially if you get easing financial conditions which is what happens when you get those bonds and stocks how much do you end up sort of fostering this inflationary cycle. Annmarie john authers tals about this in his column. The fact that in hindsight it was prices paid that was a window to that inflationary scenario we saw in 2020 and 2021. Powell did not seem to even entertain the idea there could be a scenario in the future for a hike. He said there is a path to cutting and holding. We will have to wait for the data. Theres no path at the moment to hiking. Apparently bring up stagflation in the News Conference they are laughing around the room. I was alive in the 1970s. This, no stag, no flation. Jonathan just a whisper last week. Annmarie i did not call it that. Other people are saying the same thing. Weve got slowing growth and inflation that still is sticky and coming in faster than expected. But its not a great recipe. Thats what they are getting out. Stabilizing around three versus stabilizing by two. The estimate, the previous number two of seven. Getting to all of that. Equity futures on the s p 500 looking like this positive by 0. 6 percent. Yields are lower by a basis point or two. Breaking that level earlier. Coming up this hour we will catch up looking ahead to payrolls, Frontier Airline ceo as the low cost carrier reports earnings and lower rate of Fs Investments have continued calls for surgical rate cuts. Chair powell downplaying possible rate hikes would the view rates will not be high for longer. Chair powell struck a dovish tone in his press conference at least relative to Market Expectations but will need to gain greater confidence on the path to 2 . They expect it will take longer than previously expected then by taking out other possibilities of an early rate cut. Do we need that rate cut this summer to be constructive on equities . I dont think so. I think theres enough in Earnings Growth and we had enough evidence from the fed that there isnt could be a hike this year barring something atrocious on the inflation front. I think equities are in a really good place fundamentally we have a strong economy, fundamentally a strong consumer so far slowing but still in a good place. Earnings so far as we have seen especially in the largecap and the highquality parts of the equity market are doing well. So we dont necessarily need to see many rate cuts i think if we get one or two that will be fine for the equity markets. It does not mean every single day we get a rally but over the next seven to nine months. Youve been constructive for a while and the growth policy mix. I want to understand more the growth part of the equation. You the Federal Reserve chair laugh at the possibility of stag and the amount of flation weve got great are you starting to see growth deteriorate. When you look across companies, are there signs growth is deteriorating . Chair powell did laugh at the word and i think it was a bit bold to laugh for sure. But lets talk about the stag piece. If that means growth below potential we saw that in q1 already. For you if that means growth at zero they know that. So i guess it depends on what you determine stag to be. Are we near recessionary levels absolutely not. Are we seeing a bit of a slowdown from what was a very strong q4 yes. I think that is to be expected. When we move over the companies and what we are hearing from earnings calls and looking in earnings transcripts i thing there is a divergence when you look at some of the smaller more Debt Laden Companies versus some of the Larger Companies able to pass on Pricing Power. You are seeing that play out in the markets versus largecap. There is a slowdown in certain pockets of the equity market. When you look at the Higher Quality parts of the equity market i think that continues to do well as well. It sounds a queue like largecap but the broadening out tray doesnt work here especially if youre concerned about rates remaining here and growth slowing all. We were riding our q2 outlook thinking about what should we need to see for the broadening to happen. One of the things that we thought about was really the fed actually surprising with more rate cuts. Sort of the regime we saw in october november of last year when inflation was surprising to the downside. Growth remains betterthanexpected and inflation comes in lower than expected. Now it looks like the path is getting even narrower. So further broadening to take place in a meaningful way. I think we need to see inflation continued to decelerate even more so than with the market is expecting and as of right now we havent necessarily seen that. I think investors are looking for something thats outside of the largecap parts of the market. And the two areas that we like our japan and india for exactly that broader access to other parts of the markets. Im glad you brought up japan. We are looking at a country really struggling to get it under control. The story is broader than whats been happening with the yen over the last two weeks or so. I think the bigger story there is most u. S. Investors and i would say most International Investors have been very under allocated to japan for the last decade. And for good reason because there is a country where you havent seen inflation havent seen Pricing Power and now we are beginning to see inflation, back as the yen begins to weaken we have inflation continuing to come back and rates begin to move up. All of that bodes well for equities again. Not a shortterm buddy much more structural play and thats what i think investors, i do want to underline an underscore this is around investors not at all being allocated so its a question of being underground versus getting back to usual. Annmarie you say japan and india are diversifiers when it comes to markets are they away to fill the gap of individuals and investors who dont want china anymore. Gargi it can be one of those weve been talking about investors moving to e. M. Is another way of diversifying away from largecap and quality which are our favorite allocations in the u. S. Market. I think both india and japan have stories that are working for them. India its an infrastructure story. Its a demographic story read for japan as we talked about is very much in inflation and rate story and i think those will play out in yields. Everyones been asking questions like whats fed chair powell going to look at that comes tomorrow to figure out whether they are on the right track or should cut rates. Im more curious about your reaction to actually some of this data. What would you have to say in the jobs report to become less constructive especially considering the fact we had andrew saying a sharp deterioration in the market. I think what we need to see in the labor market tomorrow but over the next few months is actually a stabilization. We can continue to see three or 400,000 jobs we need to see a stabilization and more than that i think we need to see wages thats the important part we need to see wages continue to be on the decelerating path that theyve been. The rates market and the equity market gets a little bit of confidence. I also think that even though jack ma dismissed the eci. I still think some of the other broader measures of wages, i will still look and continue to look at eci because i think those are very good indicators of how this broad vast economy is evolving. Finally cpi and pce are going to be the only determinants of what drives us at least as we think about her Interest Rate policy for the next 12 months. Jonathan im tempted to ask a really horrible question. Its difficult to answer. How bad with that number need to be tomorrow for us to be talking about cuts in june and july. Based on the conversation weve had were not could be talking about hike so how bad does that need to be. South of 100,000. Some sort of real aberration with wage declines or Something Like that. Employment rate Participation Rate coming down. You have to see the market in broader generation. Gargi for june i dont think it changes the picture because theyve introduced a new sentence in the fomc statement. For them to have to go in their next meeting so i think june is out. I think in combination of a weaker parol sewed somewhere below 125 and a weaker cpi and pce i think july may come back in the picture but i think theres no way in which june comes back because they cut that one sentence around inflation and that has to first get taken out otherwise it looks to wavering on the fence. Thanks for entertaining. Lets give you an update on stories this week. Tensions are running high on the ucla campus. Police are currently dismantling propalestinian protester encampments. Jim and sirs are asking schools to israel and planned amnesty to students for rule breaking bread ucla announced in person classes will be held online today and tomorrow. Bloomberg is reporting Chinese Telecom giant huawei is eagerly funding cuttingedge research at american universities through an independent washingtonbased foundation. Documents and sources saying huawei is the sole funder of a Research Competition that is awarded millions of dollars and tracks hundreds of proposals from scientists including those at top u. S. Universities that have been banned the researchers from working with the company. Theyre currently blacklisted by the u. S. Commerce department. Tesla is making more cost cuts. This time with its interns. The ev maker rescinding summer internship offers just weeks before students were set to begin. This as tesla undergoes massive job cuts and sees a handful of executives leave the company revoking internship offers is unlikely to save tesla much money but could impact its hiring point. Better bloomberg brief. Not in a position to advocate for anything but one of two things needs to happen there. Elon musk needs to rethink if this was his idea. Dont know if it was. Or some pretty savvy venue factor needs to come along. And offer them a job. Think about how desirable an internship at tesla would be to launch a career and a host of potential industries. Those are pretty qualified people. Jonathan imagine the companies they turn down to accept that internship in the first place. If you are one of them let us know and we will welcome them. , work on bloomberg surveillance. I can promise you its going to happen. But reach out. Up next on the Program Airlines wrapping up for summer travel. Demand is strong on the volume side. I would be reasonably optimistic that pricing would be up between five and 10 on last year. Thats up to larry. Theres no way to verify. Who did get it. I know. The travel industry and whats happening this summer coming up next. Jonathan those applications are pouring in. Equity futures positive by 0. 7 . Can you imagine in those two months. The world is going to end. Yields are lower by two basis points on the 10 year. Under surveillance this morning, summer travel. Demand is strong on the volume side. I would be reasonably optimistic pricing would be up somewhere between five and 10 on last year. Is a lot of demand people going back to the beaches of europe again. The winters been so awful people need a break. Heres the latest this morning. The latest low cost carrier beating firstquarter earnings estimates. The Company Making progress on simplifying its network focusing on growing its high fair and underserved markets. Joining is now the Frontier Airlines ceo. Wonderful to catch up with you. Thanks for giving some of your time this morning. Im sure its a very busy morning for you. Could we get insight as to how they are starting the conversation there. Are you seeing the pickup and acceleration going into this. Thanks for having us. We are seeing good demand and i think with all this inflation talk its important to understand while it may be off slightly overall we are still at value and the not anywhere near what youre seeing with this pricing. Its great value, consumer still very resilient. Its telling to me that you talk about the value as being really important. This is something you see is a theme in terms of consumers pushing back against price increases. Is that something you are seeing that essentially consumers are searching for value in a way you havent seen for a number of years. We are seeing that a little bit. Weve seen it for a while but airfare overall, in frontiers case are fares and our costs are down. We are bucking the trend on these costs. At the lowest cost in the country and we did that in the First Quarter. We were actually down 3 yearoveryear so those consumers are benefiting and so i think its probably the best value theyve seen in travel. Theres a question as a lot of Airlines Talk about all their costs going up and how they are actually maneuvering with bigger margins while also providing an experience thats competitive. Do you provide summing it isnt just a seat in a plane that gets you somewhere but actually is an experience people not to hate. We Just Launched our upfront product which is out of European Business class and so great interest in that. We also launched our premium economy seat so we have everything you can get short of a firstclass seat and we offer a great experience. The Biden Administration issued final rulings about automatically Companies Like yourself need to provide cash refunds or anything like a delay in the flight. How are you dealing with these much higher costs. We are very much largely compliant with what they are looking for. Weve refunded into that category. Well launch a new website and a new app and Distribution Capabilities for this year. We think there will be more transparent. Do you think the government is going too far imposing these new requirements across the industry. I think one of the big challenges with third parties, the technology is not there to do that exactly the way they could. But i think the industry is prepared and in most cases like ourselves already doing what they are looking for in general. It could be a little bit more accepted with the Technology Capabilities especially if markets are up. Theres a question around how feasible is it for low Cost Airlines to succeed and thrive in an environment where size matters. And theres been a real question around mergers and acquisitions and frontier spirit. How much is that going to be crucial for airlines that do provide value to continue to do what they are doing. I think one of the things that scale gives you with the frequent flyer programs. We have a huge opportunity over the next several years being able to increase our loyalty but in the size we are now we can overcome that revenue deficit on the frequent flyer programs thats why you have to be low cost. And we are continuing on that cost and continuing to widen our cost versus the industry. Is this the model Going Forward that they are credit card companys with the airline tagged on. If you look at some of the big guys i dont know if they would. They are an industry that has a lot of challenges. Jonathan congratulations on the numbers this morning. The Frontier Airlines ceo. That stock is up by 6. 5 . That is the European Business class model. If you fly across the continent business class. Lisa thats what you are seeing increasingly as you can pay extra to have no middle seat so its not necessarily changing up the planes that much. You can also sort of adjust in realtime according to demand rather than having it built out and shifting. Was it upfront plus model the idea. Annmarie you could pay more for more personal space. Jonathan to compete with legacy carriers. Gaining on their business. I think its fascinating this idea of how do you compete as a low cost airline if youre not a credit card company. We think of delta, american, united, they are relying so much on revenues to prop up some of their bread and butter strategies. It becomes tricky if you dont have that size and scale at a time when the government is on jonathan so youre just a commodity. The lowest price for people searching for a particular flight on a particular route and will go with the lowest price. And dont have the loyalty to say united, delta, american. If you dont have the programs that are quite is sticky, its much more difficult. How many people are price insensitive. If you are paying with points it is sort of funny money. Annmarie most people buy a ticket and upgrade with points. Jonathan are you talking about yourself . Its so personal with you two. Lisa not you at all. Jonathan its just deaf Consumer Trends guidance is just what you bought last weekend. Everyone is doing it. Coming up next, jobless claims for Fs Investments. They react to those numbers looking ahead, the estimate, to 11. 211. Lisa its interesting i was thinking about what they were saying which is what will it take tomorrow to shift the discussion. Is some of the discussion we heard from fed chair powell yesterday in anticipation of a degree of weakness weve seen in the market weve seen so far. Ill give you the massives Conspiracy Theory. This is not this is a Conspiracy Theory. Its like they knew tomorrows number would be super weak. Start slapping the dollaryen because theres going to be an open door friday morning for more of the same. That such a zero hedge story. A lot of people believe that so we shall see. Not sourced by anyone we should say. The kind of thing the tk would, on the show and say this happened. It didnt. The data is coming up next. This is bloomberg. And theyre all coming . Those who are still with us, yes. Grandpa whats this . Your wings. Light em up gentlemen, its a beautiful. Day to fly. Hi, im katie, ive lost 110 pounds on golo in just over a year. Golo is different than other programs i had been on because i was specifically looking for something that helped with insulin resistance. I had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult for me to sustain weight loss. Golo has been more sustainable. I can fit it into family life, i can make meals that the whole family will enjoy. It just works in everyday life as a mom. Jonathan 25 seconds away from Economic Data in america. Mike mckee will be with us to break down jobless claims. 211,000 is the estimate. Previous number, 207,000. A sprinkle of Economic Data going into factory orders tomorrow with payrolls going into that. Equities are positive on the s p. On the nasdaq, up by 0. 8. The two year backing away from 5 . Down two basis points. With Economic Data is mike mckee. Morning. Mike nothing new in the unemployment claim story. 208,000, a drop from the last week. If the revisions come through. Revisions are 208. No changes at all in initial jobless claims on the labor department. Continuing claims to come in exactly the same. What are the odds of that . 1,000,770 for two weeks ago, 1,000,774 this week. Right on. Nonforeign productivity is a bit of a disappointment. Up by 3 10 of 1 . The forecast was for half of 1 . Last quarter it was 3. 3 . Thats the quarterly rate. Unit labor costs rise four point 47 . Up from a 4 10 gain in the prior quarter. 4 was the estimate. So, what we are seeing there is some compensation wage pressures that would bother the fed. Trade balance, 69. 4 billion, basically in line with 64. 5 billion in the initial report on that. Trade balance narrowing a little bit. Good for growth in the u. S. , but jobless claims and activity numbers for the fed. Jonathan rocksolid. Wage pressure and wage growth tomorrow, yields are the appropriate time to have the conversation before we drown in the numbers tomorrow. The minimum wage hike in california for fast food workers, 20 per hour. The first month, that gets pushed in in april. Will we see shifts in april because of that . Mike generally we dont. It has been the case over the last couple of years that a number of states have raised minimum wage but studies show it doesnt push overall minimum wage levels up all that much, in part because it is the minimum wage. Maybe over time there is some marginal change because if you are raising the lowest wage rate, you tend to push up a bit on higher wage rates. In general, its not a big fake and we probably wont see much of a change for that. Jonathan i imagine you want to address the Conspiracy Theory that you have we have been entertaining, that the fed knew something about the numbers that we didnt and that there will be some weakness. Do you think there is credence in that, ahead fake of showing strength but seeing weakness tomorrow . Mike well, i dont think they are related. Jobless claims, layoffs, the numbers tomorrow, hirings, it doesnt necessarily mean that the two things will move in lockstep. We should see higher claims if we are starting to see lower hiring, but so far the Conspiracy Theory is just that, a theory. I heard you talk about how the japanese might be in on it. I do think that the japanese plan, their intervention yesterday for after the fed meeting, it is Interest Rate differentials driving the yen. If the fed did nothing and sounded dovish that they got a tailwind when they intervened. Jonathan time to start writing spy novels with that take. Mike, can we talk about your impression of the Federal Reserve yesterday . You were in the room with chairman powell. What stands out for you . Mike the biggest thing is that the fed is trying to live up to its mandate of employment and price stability, but they dont know whats going to happen and have much less stability on the trend over the next couple of months, so they dont know what they are going to do and jay powell is trying to walk a fine line, not encouraging people into thinking hes raising rates for cutting rates, because they dont want to be caught off side and push the markets one way or another, making the people in the markets unhappy. They want to know what the fed is going to do. Its hard to know if you dont know what they are. Jonathan we want tomorrows prices, always the way. Mike mckee, thank you. 211,000 was the estimate. The previous number was 208,000. Right in line with where we were last week, apparently, kind of odd. Price action is positive by 0. 6 , 0. 9 on the nasdaq 100. On the russell, bouncing back. The yield stays lower by a bit, but we are down a basis point on a 10 year. Lisa people really wondering what happens if inflation stays sticky. Im more interested in the long end today. The long end of the curve is actually seeing much more of an increase in the short end, pegged by the Federal Reserve. Jonathan i totally agree with you and that is what is interesting to me. The conversation that we had early this morning with seema shah, a back over it. The fed wont respond to strongwilled date stronger data in the same way that it will to weaker data. Got all of that. Ok. Scenario analysis for you, upside surprise on the payrolls report, two years higher. Downside surprise, a move from 10 to 20, that is just an example on the twoyear. The 10year gets more difficult. Its a Federal Reserve willing to let inflation run. Willing to ignore hot growth prints tomorrow. What happens with the 10year yield is less obvious. Lisa especially given the fact that we are just shrugging off 208,000 with continuing claims going down, we dont think anything of it. It doesnt register anymore because we have gotten so accustomed to just stasis. It raises the question, what are we missing that they are seeing . Jonathan our guest joins us to talk about investment. High bar. Your impression of what we got from jobless claims . Your reaction to moments ago . Lara if you put me on a Desert Island and said i would get one economic indicator, i would think its initial claims. Its hard to get too nervous about the health or state of the labor market. Looks like we are still looking healthy and the foundation for the economy is solid. One of the things the fed did not spend a lot of time talking about today is growth. They seem to be firing on all cylinders. Jonathan yet when asked about being sufficiently restrictive, he pointed to the labor market. A sense of that, please. Lara that did surprise me. The jolt numbers have come down, but i see that as we normalizing. We are far above where we were before the pandemic. We need to draw a huge distinction between the threenormal life re normalizing of the labor market. Even before the pandemic that wasnt a weak labor market. Its been a long time since we have seen that heavily, but to me that is not what is driving markets today. The data moving us seems to be the wage data. On the employment side, the payroll numbers, ors. Always a big show. Lisa what on the margins has changed for you . If you think that the strength of the economy is the one consistent thread through the year, are you on the margins not liking longerterm debt as much as you use to if you are concerned about the idea that inflation might be sticky . Lara for some time now, we are going to be this Holding Pattern of the fed funds rate where it is, the volatility is going to emerge in longterm Interest Rates. The problem with having no real consensus on when and where the next move is going to be means that every data point is a flashpoint to fill the vacuum. So, when i look at longterm Interest Rates, i still think that the 10 year retest, the 5 high from last year. When people ask me why you still have one rate hike why do you so have one rate cut priced in for this year, my answer is i think that the condition for that would have to include longterm Interest Rates rising more quickly than the fed is comfortable with. Under that condition, along with easing in the inflation numbers, would potentially cause the fed to do that surgical rate cut in the fourth quarter. Lisa weve been playing with this question and its the first one that he was asked yesterday, is this a sufficiently restrictive policy . How do we measure that . How do we know when we hit the trigger point and have conviction that at 5 you see it crack a bit more . Lara yeah, theres no thermometer out there that we can all look at. Equity markets, we are extensively valued and it reflects a lot of optimism about growth. That seems to have comfortably overshadowed the move higher in longterm Interest Rates. Its hard to look at financial markets, credit markets. You go around the move the room and say that things dont feel that restrictive. I would push back on the economy. Far be it from me to take the other side of Jerome Powell on an argument about the economy, but from where i see it things are not restrictive. They are still tapping the brakes and you see that in some sectors like housing. Listen, housing is under pressure for the supplyside and demandside. It is not just a rate story. Annmarie when are we financially going to see the truere normalization of the true re normalization of the labor market . Its 3. 3 Million People . Lara that is a key question with implications for labor as well. Its a different backdrop on labor supply and we have seen a lot of migration. Meaning that the skew of rages wages is different across the country then it looked prior to the pandemic. We are still navigating these things and seeing that normalization in the beverage curve. I dont mean to go too far down a rabbit hole, but some of the things that measure wage Pressure Versus the layoffs and labor availability. When i summit up, we know another big number has been below 4 for two years. Again, as the process of normalization continues, is hard to get worried about how it is all evolving. Lisa if you want to get worried, people look at the Conference Calls of executives and big businesses, layoffs and pushback around the edges. We talked about credit stocks. How much do you Pay Attention to these calls and see that they are actually reflecting weakness , giving you a bit of pause . Lara you have to Pay Attention to those calls. Corporate animal spirits have driven investment and as that changes, it takes us from a highgrowth situation to a medium growth situation. I also know consumer delinquencies. Autos, credit cards, they are pushing at highs we havent seen since sort of the end of the financial crisis. Our economy is strong right now. The labor market is healthy. This should not be the time households are having time problems playing their bills. Its something im watching closely. We have been expecting Consumer Spending too slow for a while. The worry is that instead of slowing slowly, it just stops and that would be much worse. Jonathan a whole lot worse. Lara, thank you theyre from Fs Investments, on the consistent contradictions in the economy. Just to have a single passage to say that delinquencies are their highest since the financial crisis but the economy is rocksolid . Can you make sense of that . Lisa this is the reason why we get two people on who have two different views on the economy. Andrew was on talking about rate cuts and a recession this year, a hard landing and the anecdotes pointing to that. We talk about this with lara and she says its hard to find. Putting those things aside, its a small segment of the society. Jonathan its been a long three hours. The opening bell is just around the corner. Updating you on the stories elsewhere, heres yahaira. Yahaira more patients are getting on the weight loss drug for novo nordisk, so they raise their profits. 25,000 patients are starting on a treatment each week, up from 5000 in december. Shares of novo nordisk have surged more than 25 this year. Shares of carvana are higher in premarket trading. The usedcar retailer posting a net income of 49 million dollars. Analysts had expected a loss of 116 million. Sales grew for the first time in six quarters. The results could be a signal that the once nearly crept company is moving past their Restructuring Plan and into a growth time. Apple set report earnings after the closing bell with investors looking for investments into ai and details on iphone sales as demand in china slows. It will be the First Official report showing sales of the vision pro. Revenue fell 5 for the last quarter, marking the fifth decline in the past six. Jonathan up next, the labor market is staying strong. I think that the evidence shows clearly that policy is restrictive and weighing on demand. There are a few places i would point to for that. Start with the labor market. Jonathan we will start with the labor market, next. The opening bell, 45 minutes away. Jonathan opening bell, just around the corner, 43 minutes away. Equity futures positive by 0. 3 . The labor market, staying strong. I think the evidence shows clearly that all is he is restrictive and weighing on demand. There are a few places i would point to for that. Start with the labor market. Demand is still strong, the demand side of the labor market in particular is higher, that is demand cooling. Jonathan apparently that is demand cooling. Futures are up on the s p. Jobless claims point to continued strength in the labor market. The median estimate a bloomberg survey, 240 k. There is a strong case to be made that there are better times ahead, but positioning is still defensive with teeth of us swinging from some stagflation and the forecast of the s p at 5400. Good morning to you. Which one is this . Stagflation . Hard landing . No landing . We are headed to a soft landing with a reasonable market environment and may better growth ahead than we are use too. Higher rates, higher inflation. Look at where we are. These are the levels we use to write about as the goldilocks levels. Its not not, its not 03, those are healthy levels. Jonathan it doesnt sound late cycle. Where are we in this cycle . Savita who knows. This cycle is asynchronous. We are still kind of coming off of covid. Service demand is slowing, tapering off, goods demand tapering. Tight employment with structural factors that are skewing the cycle call. We have a very tight employment market. One of the reasons for that is demographics, we are in an aging demographic scenario and on top of that we had a huge number of early retirees during covid. Unless we loosen immigration, we will remain in the tight labor market. Thats the other factor. We have talked about this. The consumer is in a different Balance Sheet set up than prior cycles where, you know, longterm fixed rate mortgages, those are different from prior cycles. Baby boomers are sitting on wads of cash. I just think that this cycle you cannot just map on the typical the fed is tightening, it is we are late cycle now. The fed is stopped and they will start cutting early. Its a different type of market. Lisa you used to the g g word, goldilocks. Its been a long week. Can we have goldilocks with 5 fed funds rates . Is it actually a new rate . Is it not actually restrictive and allowing for a broadening in a rally without rate cuts this year . Lisa i think savita i think so. Economists talk about this as well. We expect a cut in december. Maybe no cuts. Look, i think that 5 is a manageable number with corporations that have locked in fixed rate longterm debt. You have got and this is the s p, not necessarily small caps or other regions, but the s p has prepared for the moment. You have Big Tech Companies with gogo Growth Stocks initiating dividends. Theres an environment where the market has adopted to higher Interest Rates, giving us more cash. This is actually kind of a reasonable set up for equities. Lisa i dont want to be cynical. Theres a concern for large caps handling this going back many years. This idea that if a number of people just get loan out, fine, its ok. We can just go into luxury, big tech, the areas that will do fine, well be fine even if other segments are blown. How long can that go on . Savita its a key risk in the income gap has been widening for decades. What is happening now is potentially better for middle to lower Income Customers if you are in certain sectors. Look at manufacturing in the u. S. , still a very tight labor force. Real wage growth is positive. A lot of the layoffs are in white collar, not necessarily middle america, for you are seeing signs of the shoring boom with a long tail. You cannot build a factory in a year. This reassuring theme is a longterm theme that has legs over the next several years. That is where the job tightness is. That is where the real wage growth is positive. I think those are areas that are different from where we have seen benefits in the past. That is one way to stave it off. Higher oil prices are concerned, if you think about geopolitical risk. Today the u. S. Is in a better position because we are now a net exporter rather than importer. We have more wiggle room around oil then we did in prior cycles. Lisa when it comes to lowwage workers, getting jobs in manufacturing, i go back to what diane said, these individuals move from the shadow into the sunlight. Maybe thats a labor market, but then they get hit or burned by inflation. How does the fed think of these input individuals when they have no appetite for a hike . Savita now we are in an environment where we need to see Inflationary Forces subsiding. I think there are a couple of things going on that could actually continue to create a ceiling on inflation. Think about it, there are still demographics like aging population, less demand for stuff. Thats another, thats a sort of disInflationary Pressure. You have got disruption from ai, tech, automation. I dont see inflation going to the 70s levels. Its really untenable for your average consumer for secular disInflationary Forces at play that we have been talking about. Weve been talking about that for 20 years to stave off aggressive disinflation. The Energy Independence of the u. S. Is an important factor. Thats a benefit to the u. S. Most other developed economies do not have. Something we should be happy about. Jonathan something we have been focused on for a while, i remember you outlining this a few months ago. Still a big theme . Savita and its worked for maybe two months of the last 12. [laughter] jonathan i wasnt throwing mud, for the record. I was genuinely interested in the thesis. Savita again, i think we are in an environment where the broadening of the market is still a theme we talk about and it has started to happen in the last couple of month. Who is going to benefit, ai automation, these Old Companies get more labor like. You will see it over the next 12 to 24, few years. The areas where we are are the banks. Banks are very laborintensive. Another is a tool we can use for different processes. The for cecils possible streamlining or costcutting for these old Economy Service sectors that havent addressed Jonathan Jonathan it savita for quite a while. Savit, great to see you. Address for quite a while. Jonathan savita, great to see you. A lisa month or so to go. The good news a month or so to go. Lisa the good news for the people at bank of america, getting paid. Jonathan just a reminder, right . [laughter] tomorrow, the lineup we will catch up with Mohamed Elerian at queens college, ambridge. The perfect lineup for the jobs report. Payrolls, just around the corner. Lisa how much is setting up a massive rally, either way jonathan either way . Jonathan winwin, apparently. Thank you for choosing bloomberg tv. From new york city, this was bloomberg surveillance. We are set to open higher this morning. Next it is apple. The countdown to the open starts right now. Dani coming up fed chair jay powell keeps the rate cut dream alive. Investors look ahead to payrolls with Apple Earnings on deck. We begin with the fed holds again